Last week a client showed up looking for advice on how to work through a residential property purchase. He challenged us to come up with 2 approaches - aggressive and conservative that highlighted the basic for his partner! This particular client has seen the ups and downs of life, love and humanity and we knew that he likes information to be presented simply in an tabular form!
So we got to work…and in that process we uncovered some insights that we thought we'd share with our clients!
Please note that we are NOT recommending one approach over the other and acknowledge that the right answer for you will lie somewhere in the continuum. In working through the scenarios, given the purpose of this article, we consciously removed all impact of tax structures, available tax losses, different types of mortgage products available in the market today and your ability to negotiate any variance to those.
We've woven our insights into a story about John and Jane - see if you can pick them before you read the key insights part of the article!
John and Jane
The scenario is based over 7 years. Everything remains the same except in year 7
Jane, on the other hand
Please take your time reading these slowly trying to spot the insights
Challenge yourself to find a cash flowing residential properties that enables you to make a smallest possible down payment, get a longest possible term mortgage, and to top up as little as possible from your other sources, the costs of maintaining the property. As there is a whole continuum. this puts you in position to best manage the cashflows and equity gain in a way that minimises the impact of significant events over the term of the investment!
Overall the simple message is this. In order for key insights to become obvious, we've made some radical assumptions about the house price, deposit requirements, annual property appreciation rate, levels of maintenance, fixed period of the loan contract, no negative gearing or tax advantages, bright line test, your tax structures etc All of these impact your choices and have consequences on your tax position. If you have questions about yours check with your advisor at Core Business Services advisor about. S/he can outline what works best for you.
The above publication discusses income tax & other issues generally and is not intended to be specific tax or other advice. Whilst every effort has been made to provide valuable, useful information, Core Business Services Ltd, any related suppliers, associated companies & practices accept no responsibility or any form of liability from reliance upon or the use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only. Please do consult with your tax advisor or call this firm for information / advise specific to your circumstances before finalising any particular course of action.