Doing the sums, what would you do?
Mar 21st 2004, 10:11 am
#16
Joined: Aug 2003
Posts: 11,149
Re: Doing the sums, what would you do?
Originally posted by ADELAIDE BOUND
BP
I like your idea although how would the investment interest not be taxed if it was invested at source into bricks and mortar?
How does that work then?
I have been looking at realestate.com and you are right the interest accumulated would pay for a nice house under mortgage payments.
Although of course the initial money would not be worth as much in 10 years the house investment should have increased in value.
Im not to worried about pensions they are covered, I would however like to give the kids a good start in life when I can finally get rid of them.
Cheers.
BP
I like your idea although how would the investment interest not be taxed if it was invested at source into bricks and mortar?
How does that work then?
I have been looking at realestate.com and you are right the interest accumulated would pay for a nice house under mortgage payments.
Although of course the initial money would not be worth as much in 10 years the house investment should have increased in value.
Im not to worried about pensions they are covered, I would however like to give the kids a good start in life when I can finally get rid of them.
Cheers.
If you spent $400000 on buying a house you would save yourself 15600 a year in rent (assuming a $300 a week rent). That $400000 would have earnt you $20,000 gross in interest. If you were taxed at 48.5% that would leave you with $10,300.
So paying 15600 in rent earns you 10300 in interest.
This is assuming you are on the top rate of tax and that a $400,000 place attracts a $300 a week rent. You will have to do your own sums.
The other assumption I am making is that you will keep your house for a while so that the capital gains outweigh the up front costs.
Another point is that you will be losing money if you have a mortagage at a higher rate of interest than that being earnt in savings. Basically pay off all the mortgage you can. In your case mortgage free living should be considered.
For the other $400,000 you would need to look at your retirement options and income generation possibilities. You say you retirement is planned for but once you have your income stream coming in you may find there are tax advantages in putting it towards your future rather than investing for now.
Last edited by bondipom; Mar 21st 2004 at 10:17 am.
Mar 21st 2004, 10:35 am
#17
Monaco here we!!! oh no
Thread Starter
Joined: Aug 2003
Location: Bexleyheath Kent
Posts: 411
Re: Doing the sums, what would you do?
Originally posted by ABCDiamond
Remember, the Bank interest will be taxed at your highest rate
How about this thought....
Buy two houses, live in one and rent one out for an income, then use that income to pay a mortgage on a third house, etc
Then later down the track you can give the extra houses to the Kids
Consider houses price movements, and try to get it right. There is great uncertainty as to whether prices will drop, stay level or increase slightly. And different areas will also perform differently.
You will gain a lot from Somersoft Property Investment Forum well worth looking.
Remember, the Bank interest will be taxed at your highest rate
How about this thought....
Buy two houses, live in one and rent one out for an income, then use that income to pay a mortgage on a third house, etc
Then later down the track you can give the extra houses to the Kids
Consider houses price movements, and try to get it right. There is great uncertainty as to whether prices will drop, stay level or increase slightly. And different areas will also perform differently.
You will gain a lot from Somersoft Property Investment Forum well worth looking.
Hi ABC
Great idea. That way I would only be reliant on one of the two houses to be occupied with rent paying tennants to cover the mortgage payments of the third house.
If I am lucky enought to rent out both houses I should be able to make a profit. Then any increase in house values would be a bonus.
Will check this one out further, thanks for your advice.
Cheers.
Mar 21st 2004, 10:38 am
#18
Monaco here we!!! oh no
Thread Starter
Joined: Aug 2003
Location: Bexleyheath Kent
Posts: 411
Re: Doing the sums, what would you do?
Originally posted by bondipom
You could pay rent and tax on the interest of your savings or just buy outright with no mortgage. It does depend on the rent and house prices for your area.
If you spent $400000 on buying a house you would save yourself 15600 a year in rent (assuming a $300 a week rent). That $400000 would have earnt you $20,000 gross in interest. If you were taxed at 48.5% that would leave you with $10,300.
So paying 15600 in rent earns you 10300 in interest.
This is assuming you are on the top rate of tax and that a $400,000 place attracts a $300 a week rent. You will have to do your own sums.
The other assumption I am making is that you will keep your house for a while so that the capital gains outweigh the up front costs.
Another point is that you will be losing money if you have a mortagage at a higher rate of interest than that being earnt in savings. Basically pay off all the mortgage you can. In your case mortgage free living should be considered.
For the other $400,000 you would need to look at your retirement options and income generation possibilities. You say you retirement is planned for but once you have your income stream coming in you may find there are tax advantages in putting it towards your future rather than investing for now.
You could pay rent and tax on the interest of your savings or just buy outright with no mortgage. It does depend on the rent and house prices for your area.
If you spent $400000 on buying a house you would save yourself 15600 a year in rent (assuming a $300 a week rent). That $400000 would have earnt you $20,000 gross in interest. If you were taxed at 48.5% that would leave you with $10,300.
So paying 15600 in rent earns you 10300 in interest.
This is assuming you are on the top rate of tax and that a $400,000 place attracts a $300 a week rent. You will have to do your own sums.
The other assumption I am making is that you will keep your house for a while so that the capital gains outweigh the up front costs.
Another point is that you will be losing money if you have a mortagage at a higher rate of interest than that being earnt in savings. Basically pay off all the mortgage you can. In your case mortgage free living should be considered.
For the other $400,000 you would need to look at your retirement options and income generation possibilities. You say you retirement is planned for but once you have your income stream coming in you may find there are tax advantages in putting it towards your future rather than investing for now.
Thanks BP
My brain hurts with all this information.
Will need to sleep on it and digest it in the morning.
Cheers.
Mar 21st 2004, 10:42 am
#19
Joined: Aug 2003
Posts: 11,149
The sums on a personal property are simple. Wait till you get onto investment properties. ABC's idea is excellent as it is very hard if not impossible for first time buyers.
