Buying Bare land and Leasing

[AustinWong]

Does anyone know about the tax relief you can get if you say bought 10 acres of bare land and leased this out?

I did a quick calc but not 100% I am sure.


Say I borrowed $100,000 @8.5% for a 10 acre block.

Payment in year 1 $9662.76
Interst Paid $8453.62
Principal Paid $1209.14
Lease Income (10acres) $1000.00

So effectively what I will pay in year 1 is:

$9662.76-$8453.14+$1000 = $2209.14 = $84.97per fortnight


What am I missing here?

Cheers

L

[madness]

So assuming $9662.76 is total amount your paying back in a year,comprising of $8453.62 in interest and $1209.14 in principle replayments. For tax purposes your income of $1000 less interest expenses only of $8453.62 would creat a tax loss of $7453.62. So times this by you eligible tax bracket percentage and you have your tax relief. Ie @33% would be $2459.

However your actual cash flow replayments, if spread evenly over the 52 weeks, would be $185pw ($9662.76 / 52).

Or you could look at it as $138 pw ((9662-2459)/52) if you incorportate the tax relief at 33%.

[AustinWong]

oh..I see....

Not as flash an idea as I first thought.

Thanks for that

Lawrence

[AustinWong]

So any ideas on what happens if you say set up a business or trust that owns the land?

Thanks

L

[muppet]

Lawrence, you are procrastinating.

Regards

[AustinWong]

Well Muppet as usual you are pretty much on the nose.

But greater forces are now at work...


Irony

L

[muppet]

Hi Lawrence

Good Luck

Regards

[AustinWong]

Muppet,

Do you reckon that I can get a better tax break if set up as a business or Trust?

Cheers

L

[muppet]

Hi Lawrence

Good question.

There are points for and against whatever system you set up to buy property in.

I suggest that you talk to one of the experts on your team who will be better able to advise you than me.
Also read the available literature that is available. There are plenty of books around which summarise the different types of set ups available.

Alternatively set up a meeting with Andrew King (you will pay for it) but the advice he will give you should set you up for life.

Regards

[AustinWong]

Thanks Muppet,

Who is Andrew King by the way and how to I contact him?

I think in our circumstance we really need to get some paid help, I think it would good for both me and my wife to get a reality check I guess.

Cheers

L

[RentMaster]

I think procrastinating in this case is OK. In fact I think it is good. It sounds like you have too many unanswered questions to make a proper decision.

Maybe a few property investment books would be a good next move. Or keep asking questions here. Only when the questions have been answered can you make a good informed decision, which is more likely to be a good decision.

[Marcus]

I'm with Andrew on this one.

I would also suggest you and your wife do some reading up. This should help allay some fears your wife has, answer some questions for you both, and one would imagine spark a great deal more questions.

Setting up a meeting with >>Andrew King<< would not be a dumb idea either as he could asses how prepared you guys really are. If you already have a goal in mind (financial independence), perhaps Graeme Fowlers (Orions) mentoring group may be a good option. Either way you have to be prepared to put the time and effort into the process to get maximum benefits from it.

The finger is your to pull.

Regards,
Marcus.

[AustinWong]

Thanks everyone, I have read many books and asked heaps of questions in the last year.

My wife unfortunately has not of perhaps to be more precise is not interested in tenants.

I have done my best to try and convince her to reconsider and to read some books, but no luck.

She feels that where we are at the moment financially she would much rather use the money we have to raise the children as well as possible at the possible sacrifice if any of our future security.

I must say I do understand in part where she is coming from.

If something happens. ie maintenance issues, deliberate damage to property the money would have to come out of our own pockets and those costs could be quite high. Also I spend alot of time looking after children as my wife works shift and combined with other comittments my wife quite rightly cannot see how I can put time into a rental that may require time. Particularly as I would need to invest out of town for the returns.

So, I must admit that I will need to change tack abit for a little while anyway and look at land as my wife says she will be willing to look at rentals at a later date when the children are less dependant and we have more free funds. (Please don't ask me how I can justify buying land and not rentals...this will be an impossible task).

So we are off to Northland tomorrow morning to look at land at Coopers Beach which should have some potential growth in the sort term.

If not, I always did want a bach...albeit not 5 hours away .

Thanks again all.

If this trip tommorrow is not fruitful I will be encouraging my wife for us to have a chat with Andrew.

Please look at my new post about what conditions to put on a land purchase contract and see if you can help out.

Quite an urgent request.

Cheery


L
L

[Neo]

Austin

10 Acres @ $1000.00 per year lease is quite low.

We had 10 acres just south of Hamilton, initially we leased the land to our neighbour for grazing @ $2500.00 per year. After 2 years we found out about the profits of maize, so we leased our land to maize contractors and received $4000.00 per year, this amount can double if you have the contacts to grow and sell the maize yourself.

Food for thought.

Neo

[AustinWong]

Thanks