Property Investment in Brisbane Australia

B

barrowside

Guest
I am looking at buying 2 Investment propeties in Australia with equity release from my current irish home and an australian mortgage.

1.The rental income should cover the australian mortgage.
Do I need to pay tax on this rental income. ?


2.Can I use pension contribution to pay off irish mortgage on equity relase.?


3.In Australia loss made on property investment can be claimed against income tax. But not in Ireland. Can i use the accumulation of losses to claim against Capital gains tax when I sell property.?


Can any advise if this is a good stratagy for Investment. At the moment i hav no other pension.

The reason for Brisbane is I will be moving there in the next few years, depending on how long construction industry stays busy In Ireland.
 
Sorry I can't answer your questions, but just in case you weren't aware, non-Aussie citizens can only buy new build (i.e. never lived in) or land.
 

Are you aware the Australian Dollar is very high at the moment considering its commodity boom. Base rates are now 6.75% and the banks aren’t' that competitive compared to Ireland. You can expect to pay at least 7.75% before any pay back is made. The only place I know in Australia rising in value with good yields is Perth which is on the back of the boom in commodities with mines etc close by. I do not know enough about Brisbane though. I worry your venture will suffer negative cash flow as the banks increase margin and the rising dollar could affect your position further. Have you more details. It's a long way from home, who will manage it for you. Generally property agents can not be trusted IMO.
 
1.The rental income should cover the australian mortgage.
Do I need to pay tax on this rental income. ?
Click to expand...

- It is the profit on rental income that is taxable See [broken link removed] for a general view on rental income (what is allowed as a deductible and what is not allowed etc) and [broken link removed] for a specific view on foreign investments.
 
MichaelDes said:
I worry your venture will suffer negative cash flow
Click to expand...

Almost certainly. In Australia, any losses on investment properties (ie when the rent received is less than mortgage interest + body corporate fees + insurance + maintenance costs + letting/management fees) can be offset against other income for taxation purposes. Essentially the government subsidises investment in residential property by offering tax rebates to landlords. The taxation policy is called "negative gearing".

Unless you were going to put about 200 grand (euro) in as a deposit, there is no way you could make an Australian capital city property purchase pay for itself via rent.
 
xman,
Your statement is untrue.
If u had a 200k euro deposit would equate to $330k Aud at current exchange rates.
Average price of an apartment in sydney is $350k and house $550k so with this kind of deposit,u could buy average priced apartment outright in sydney and certainly in Brisbane where property prices are 20% lower.

I have 2 investment properties in sydney bought this year for $1.05m(australian citizen migrated from Ireland) which are giving me a gross rent of $70k(7% gross return),for smaller apartments u should get return in 5.5-6% return although your strata will obviously be cheaper(only talking about sydney market).

My Expenses are quite high due to both apartments penthouses($15k) but I'm cash flow positive due to negative gearing something obviously not applicable to a foreign investor.


Rents are increasing dramatically in sydney due to vacancy rates less than 1% and prices have started to move up after 4 years of negative growth primarily due to lack of new housing supply,tax cuts,migration etc.
Expect similiar factors in Brisbane although not familiar with that market.

On exchange rate,its' basically the same Euro versus Aud exchange rate as when I migrated in 2003 due to Euro/Aud movement correlation versus USD.

The only negative would be as non resident,u are limited to new builds and these tend to be overpriced due to other foreign investors chasing this market.
 
My wife is an australian citizen would this mean we are not restricted to new builds.

I have been in contact with an australian company
They are promoting new builds for greater tax allowances for deprication.

my plan is to buy 1 property initially with 100% irish interest only mortgage. The rental income would make the full repayments for this.
Then in 6 months time i would buy a 2nd property with australian mortgage. In addition to rental income i would spend €150 of my own money.

Are interest only mortgages to be advised.
 
I have interest only mortgages on both my properties which are fixed at 6.99 % for 3 & 5 years respectively.
Both my properties are only 3 years old and were 10-15% below what originial new build cost.

If u are Irish tax resident,then depreciation is no value to u as u can't offset depreciation against your rental income-for example I get $30k tax credit in Australia due to depreciation on my current properties.

My properties were purchased in this development which u can compare with yours www.meriton.com.au

If u are taking out mortgage in euros then u will obviously have exchange rate risk volatively although your interest rate bill will be a lot lower-fixed rates here in Australia are 7.5% to 8.0%
 
macbri said:
My Expenses are quite high due to both apartments penthouses($15k) but I'm cash flow positive due to negative gearing something obviously not applicable to a foreign investor.
Click to expand...

Hmmm, you're cashflow positive because of negative gearing?

To claim negative gearing your costs must be greater than your income - so by definition you must be losing money to claim it.

You said yourself Sydney property has been going nowhere/backwards since 2001, and you've just taken on over a million dollars in debt I/O. If you had done that four years ago when interest rates were around 5% you would now be facing a reset to 8% and the capital value would be below what you paid for it, and you would also have lost money on it every year, as the rent would not cover the outgoings.

The same thing could happen in 3/5 years time when your fixed rates expire.
 
Hi xman,
U didn't read my posts correctly.

I bought both properties in 2007 at fixed rate of 6.99% which basically matches my rental return from both properties.
In Australia,u can claim depreciation(non cash expense) against your rental income and if u make a loss against your rental income,u can get a rebate on your income tax as per example below

Cash loss $15k
Depreciation (non cash) $30k

Total loss claimed as tax rebate $45k

Tax rebate $20k
(assuming paying tax at 43.5%)

Cash flow positive $5k





My properties were only built in 2003 and I know from researching old sales price that originial buyers paid for, that they lost 10-15% to price that I paid to them in 2007.

This is why my rental returns are so strong as rents have increased strong while market has been in a downturn for last 3/4 years.

I see your point in interest rates going up in 3/5 years but I have considerable cash/equity resources($250k Aud) which will act as a buffer in case rates double/treble.
I would reasonably expect these resources to grow 10%+pa in a high interest rate environment.

Another example is as I'm cash flow postive,I can easily save $15k pa so that I can reduce principle when comes off fixed rate in 3/5 years time.

If property prices & rental market tanks,then I have made a bad investment decision,such is the nature of any investment decision but I'm comfortable in my decision as I researched area that I bought in for 2 years before buying this year.

My attitude to property investment is same as share market,reduce the risk as much as possible(equity portfolio has put options on it which again reduces risk) and this has served me well in the past and hopefully the future.
 
But being resident and paying tax in ireland you have to pay tax as though the property was bought in Ireland . See my previous post
 
Yes & agree but I'm Australian resident for tax purposes migrated from Ireland in 2003.

I have explined to op that he will not be able to negative geared his property as Irish tax law does not offset rental loss against earned income and depreciation on building not an allowable expense in Ireland unlike Australia.

Property investment in Australia is targeted towards Australian investor hence restriction on foreign investment to new builds.

Property prices have increased strongly in 2007 primarily due to strong migration,economic growth,rising rents,tax cuts,lack of supply.wage growth

Only negative is rising interest rates caused by increasing inflation due to food/petrol and funnily enough rent increases.

Perth prices have risen strongly up to end of 2006 and in fact are not far behind sydney now,however,they have plateau in 2007 unlike sydney cbd/eastern suburbs which have increased 10-15 % this year(I bought eastern suburbs 2km from city centre)
 
Hi barrowside,
U can check out the following Australian property websites which are simialiar to daft website in Ireland.

They give information on current property for sale,for rental and recently sold-hope it helps


www.realestate.com.au
 
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