Update on the Investment Property disaster

Dear Reader,

Today, I wanted to give an update on my investment property. Indeed, I believe there are some valuable lessons to be shared.

Tenancy issues:

I would not say that this has been a great success overall. I have heard some instances where investors had had their tenants for few years. We’ve had our property for two years and a half and we’ve had 3 couples as tenants already.

But, in the last one tenancy, it took me 11 months to figure out that the tenants had paid monthly instalments instead of weekly to the agency – the agency has always paid us monthly. This has resulted in the loss of 4 weeks of rent potentially that we’re trying to claim through the bond and that the tenants have contested… obviously…

We’ve had troubles with the tenants below my property who have dealt with drugs and police issues… resulting in my renters to ask for a decrease in rent… 7%! They have finally chosen to leave…

We bought in a recent building to help us with the depreciation… what we discovered is the recent apartment blocks have been built in a hurry, resulting to us with around $5 000 this year alone in repairs… Yes, still tax deductible…

And, to finish with tenancy issues, New Farm being flooded by apartment buildings, the rent has come down from $465 last year to $450 this year per week.

Agency issues:

Now, on top of the above, we have experienced some huge issues with our agency. Back 2 years ago, when we bought our apartment, I carefully chosen this specific agency among others because it was a boutique of previous property investors who had “enough” not finding the right property manager.

Fast forward, May 2017, I received an email from an insolvency company mentioning that my agency trust was ceased. In the process, I discovered that they forgot to deliver me a week of rent as all payments and expenses were audited. They also had a faulty registration and were not aligned with the current legislation. But I didn’t want them to lose my business, I knew they had fought hard to make this one happen.

So I decided to stay. At present, I’m still missing my rent from May and 4 weeks of rent that the tenants have not paid…

Lastly, a faulty water cylinder and leakage to the shower box is going to cost me close to $4 000 in total… so…

Shall I stay or should I go?

You see, I’m a long term investor but I’m also a value investor. I don’t believe that the bull stock market nor the aussie property bubble will stand forever. And moreover, we’re engaged onto a property, negatively geared – which means we’re losing money every month, even if  paying less taxes in the process! – And it might not align anymore with our mid-term investment focus, which is to come back to Europe.

I’m really in search for cash flow, and return ON investment, not OF investment. Why would I keep a property that is making me lose money every year where I could invest in quality shares that will deliver dividends every year…

Here is the question that I’m asking my self…

An honest review of meal kits and how it saves us $50 per week

Dear non-materialistic reader,

Today, we’re not going to discuss about investments, but more food… all related as food gives us health…

Here is my review of meal kits and our particular choice of Marley Spoon:

On the road to independence is also the quest for us to simplify our life, do as much as we can by ourselves without the compromise to quality. Because of that and the fact that we have two busy professional lives, the choice of meal kits tended to make sense.

We’ve chosen Marley spoon over hello fresh. And this just because we’ve done our own research and for $5 or so more per week compared to Hello Fresh you end up with more variety and quality of products. Marley spoon offers the possibility to modify your order when hello fresh does not. A big plus for us as we have fussy – who doesn’t!

My friends asked questions about the price paid weekly compared to our normal groceries/life style. It was definitely dearer if you compared it with groceries however the fact that you could organize the lunch boxes for the next day with the leftovers for two working professionals saves us around $80 additional per week… so it works out to be approximately the same on that front:

– Our groceries before for a family of 4: $175 per week approx..
– Our groceries after the use of Marley spoon are approx.. $85
– We save 4 lunch meals per week at $10 each for two people that we don’t need to pay for them anymore: $80 of savings
– Marley Spoon’s cost is approx.. $145 per week
– So that represents savings of approx.. $50 per week

On top of that we’ve witnessed and are witnessing a bunch of very good side effects:
– It’s really food at a restaurant: and mix of savoury is awesome
– Looking long term, your kids see you cook on your own and drives good behaviour from a young age
– Kids get to test more different foods, from different countries
– No need to plan meals anymore!
– We’re not throwing out food anymore and I realize how much waste we had in the past now
– Because dinner lunch is sorted I can concentrate more on healthy breakie and week end food for the kids
– Definitely more variety and more greens in your plate
– You get to try dishes from plenty of different country
– We never are missing out anymore on ingredients and have to do a last minute run at 9pm to Coles or Aldi
– You can still cancel and/or change the order with other types of food before delivery according to your preferences
– You will feel like a chef and really proud of giving healthy yummy options to my kids every night!

We’ve also identified some draw points, even if minimal in my opinion:
– We found that it takes longer to prepare than your “usual” meal
– We think there is too much packaging and it could be done better
– There are often spicy options and we’re not found of them – personal taste!

We’ll see in the long run how things evolve but let me finish with a tip. When you register on the website for Marley Spoon, give your email address as you were to order… but DON’T complete your order.
You will received a bunch of emails in your inbox in the next days, including a $49 discount against your first order… and guess what, you’ll be ready to order by then!

See Y’All!

New energy plan, tax time tips, and a handyman to help

Energy plan?

 

Hi Everyone,

A long silence… as I have been on leave and for those who travel, let me share some tips along the way!

1/ Quantas points and others are rubbish:

I tried to book my flight with my family using these famous points. I have almost 300 000 of them and here is the conclusion: Quantas would offer me to fly to France and back with a discount of $2 000 almost – not bad, from $8 500 for a family of 4, to $6 500..
The issue is that I could find better tickets and fly time through the excellent app flyscanner and get the 4 tickets at $6 100. We even have add the flexibility to stay in Hanoi with Vietnam Airlines and spend a whole day there for less than a $100 to help recover from jetleg.

Keep you points to fly domestic, even better, to upgrade to business (When they permit it…). An excellent article that will convince you here.

Saying the above, don’t hesitate to take them out when they’re free! At the moment, sign with ANZ, you will get $75 000 of them ! As long as you cancel the card in the following 12 months, you will have them for $0! Not bad. Details: http://campaigns.anz.com/credit-cards/frequent-flyer-black/?sourcecode_1=IWTU-IWTU&cid=ps:cc:1&jvt_k=%2Banz%20%2Bqantas%20%2Bcredit%20%2Bcard&gclid=CIDe4LGvxtUCFcQnvAodtYIDAA&gclsrc=ds&dclid=CMS_gLKvxtUCFUYbKgodhoMD7A


2/ New energy plan?

Well, I decided not to, but would very much emphasize for you guys to see if the switch with a different company is worth it:

https://www.comparethemarket.com.au/energy/price-rises/?cid=nt:ob:energy:127452&utm_source=outbrain&utm_medium=native&utm_campaign=outbrain_|_native_|_energy_-_july&utm_term=blank&utm_content=version_7

3/ How to save $$$ before repairing the car:

I went to service my car and my auto repairer told me I had:
– A broken power steering pump (and noisy)
– A light from the dashboard mentioning I needed to change my O2 sensor
– Needed a new battery

Well, I own a Subaru Impreza and I went to Subbie to check on pricing: OUTCH! New power steering pump, $700, new O2 sensor $400.
I went to AutoOne: Battery under promotion with 20% off – Done
Went on youtube, turns out I don’t have to replace the power steering and just change the O-ring. https://www.youtube.com/watch?v=4tTYrdzSZGk

Took me 5 mins – Cost = $4 – Done
Went also on youtube and bought the O2 sensor on ebay OEM for $225. Took me 15 mins. Done. https://www.youtube.com/watch?v=Cw1O93BuwK4

Savings = $875 !!!

4/ The trade off between time and money

We have made a bizarre decision. We have decided that they are things we will have someone to help us with. In that instance, we have plenty of “small jobs” to be doing at home. I usually do them during the holidays once a year but we realized it would take me YEARS when, with the help of someone, it would be WEEKS:
– A new door
– Revamp of the laundry with new storage
– Paint balcony – Brick and wooden cracked
– Building storage around the house
– Etc etc..

The trade off here is that we have decided that this week usually spent doing work around the home will be spent as a family quality time with kids.

Sorry we’re spending money on something we could have done ourselves, to trade off with something invaluable: Memories.

We’ve also decided to buy a new couch… Why? Because we want a sofa bed to be able to have friends and family staying – cosy – around the house. We figured out it would be better to get a new couch then getting a house which would cost a us a lot more in rent.
Cost = $0! Why? Because my dear wife is an exceptional negotiator. See, we bought our couches from Fantastic Furniture (I know I know, but we got them for half price…) and the leather is peeling. She went online and figured out that if you were putting a bad review on them, FF would come back to you and try to resolve. In that instance, she did… and they did! A few calls and emails with pictures later, we got to exchange the couches against the same value new in store, in that instance, a nice couch convertible in sofa bed! Voila!

5/ Tax time tips!

If you nicely ask for it, I am being sent by a tax agent an excel file that explains the new legislation, especially for real estate and claims, I can share it with you. Send me an email.

Some nice other tips I have found https://www.finder.com.au/tax-returns/tips

https://www.etax.com.au/5-forgotten-tax-deductions/

A car crash, poor investment decision and important others to protect our loved ones

I heard a big BOOM and my car went flying onto the car in front of me… 5.30 pm on a Friday evening. What a week that started and now finishes badly! But wait, there is more, the guy who hit my car at the rear tried to escape the scene!
A lesson learned that I should have let him go and take his plate down instead of chasing him down the roads of my suburb… at the police station i was told that there was nothing they could do to help…

We’re now the end of week 2 since the accident occurred and need to find myself a new car.

lesson number 1:
When choosing for you insurance, take car market value insurance instead of set value if you believe your car is worth more than the market. tip – it should be for cars depreciating faster than others.
This mistake is about to cost me $2 000: i m about to get $2 500 from the insurance when i could have sold easily this nice beauty for $4 500 privately.

lesson number 2:
You can negotiate a LOT of things with your insurance. Especially when you re not at fault:
– No excess paid upfront
– The other party to pay for your car rental until you purchase a new one
– Psychologist if you need help can be taken free of charge
– Etc etc

lesson number 3:
I confirmed that i prefer to pay $900 in excess to lower my yearly insurance bills, and for a few reasons:
– It forces you to be a good driver
– It saved me around $500 across 5 years by paying $100 of premium every year

If you have any idea of what would be a good replacement car, leave a comment…

 

Switch super-annuation update

I’ve switched as the readers know from amp to Hostplus but not without troubles:
– they ve mixed up my application, couldn’t open on line and ended up with two accounts
– My wife still hasn’t had her roll-over transferred after one month from amp when mine was done in a few days

I also took the chance to review our insurances and took the excellent advice from Scott Pape (the barefoot investor) to increase the standards. I have chosen to work with my insurance broker who has given some great prices and good advice along the years, such as:
– taking death and TPD Inside AND outside of super to maximize your chances of a quick payout should something wrong occur
– having a look at the payout vs claims of the insurance. in my case, i have chosen onepath for that specific reason
– ending with a cheaper bill than standard insurance super is a big plus!
One funny comment i would make: while it s good to take advice from experts it s always good to make comparison. In my case, the broker didn’t believe when i mentioned that Hostplus was having a mixed index investment option at 0,02% MER per annum.

 

Private health insurance cover: my daughter needs speech therapy – Do I take a new private insurance to cover that risk?

I used research online and then look at the PDS of the insurances that suited my needs for speech therapy. Turns out that even if my insurance does not cover speech therapy, my excess is quite competitive with $200 vs excess of the others $500 or day share cap.

At the moment, I pay $239 per month when the rest was largely above $300 minimum.

 

Update on my Japan property investment:

It settled! – I even got a bit back from the agency i m using as i ended using their service for an apartment costing $37k when we budgeted $45k.

I’m now waiting for the contract originals to be sent over, the first month of rent to be on my trust account with them in Japan, and see from there where this adventure takes me.

Next question is tax – do I need an new accountant if I buy more properties? Will I buy more properties? It is highly recommended that you take one to manage your tax affairs if the income grows about the minimum threshold for tax in Japan..

 

Refinancing with loans.com.au

We bloody had to redo the whole thing and have it witnessed again as it turns out that police officers can witness NSW properties but not QLD ones.. what a great lesson to read all line items when you receive documents.

Anyhow, it’s now finally signed and i’m now waiting for the settlement date to be confirmed.

I received a call from CBA who tried to win back my business.. fun to hear that they decreased my rate by 0,4% when my broker mentionned there was nothing he could do.

Still surprised that they could beat loans on the PPOR but not the investment property. Since we don’t have a mortgage left on the PPOR…

Now hard times ahead and we will need to update our whole direct debits!

 

Early retirement plans:

I had to close my account in France definitely as they started to charge me 5 euros per month, which seems to become the norm in France.

Since we re most likely going to end up with any pension whether in France or Australia, I have checked to see if I could pay the France centrelink equivalent to get pension… 10 years gone from France would cost us $180k and it sounds a bit risky to me not knowing where we will lend, nor if full pension will still exist as we turn 70 (i doubt the age pension will stay as it is now – 65). Not even discussing about the issue to sustain a job after 50 IMO!

So our plan is still to invest with interactive brokers and get dividend paid in euros in France….

We have now to analyse the international tax burden..

How do you plan for your retirement?

Refinance, new super annuation and update on my investments in Japan

Hi everyone,

What a busy April already! A rather long article since I haven’t written for a while. But I have good excuses! I have refinanced both my PPOR and IP, changed my super (and my wife’s) and almost bought my first IP in Japan, not to mention adding more shares through Interactive Brokers and, for the first time, CMC market. Why so much as the same time? And how? And what? Let’s find out.

1/ Refinancing with Loan.com.au

I’m a strong believer that we should review our finances regularly. I never renew my insurance automatically as an example. As for our loans, I have put a reminder every 6 months to check what’s out there, which has never pleased my mortgage broker.
I have refinanced already once since the purchase of our PPOR. We were with Citibank (way too inflexible banking!) and then CBA (more flexible, more expensive, the easy solution if you need a packaged bank IMO), and I was on the market for the following: 100% offset for both properties, non cross-lateral of properties, interest only, split loan capabilities. Loans.com were the only one to tick all the boxes (UBank was close, but could not offer 100% offset – just redraw).
The only draw point for loans.com is that they’re not protected by the government (more details here). I’m always a bit of a skeptic when it comes to government “protecting” your assets. Why not spread your risk and invest defensively, way more effective instead of relying on others to protect you.

My rates (before the recent increase) with CBA were 4.07% for the PPOR and 4.47% for the IP. Loans.com provides a package which gives the same rate for both at 3.87%!
Including exit fees and refinancing cost, I will break even in 9 months.
Funnily enough, both Loan.com and CBA have increased their rates now…

I have been discussing with my broker who has been pointing out all the negatives of an internet banker… Still, after my own research, I was able to check that some of his arguments were wrong. The only reason I stayed so long with CBA is the fact that the banker was a mate who was helping me a lot and was proactive. He was made redundant so I had no reasons to stay..
Mortgage brokers are sneaky and I still haven’t found one who is REALLY playing for your best interest. Their trail commissions is what is driving them. Unless you find one who has fixed fee, I keep to be reluctant to play their game.
And online is always cheaper!

2/ Changing superannuation

I recently bought an excellent book from the Barefoot where Scott Pape points out an easy way to check your fees.
I was with AMP through my employer and could never find out exactly the fees they charges us (my wife and I) until I started researching… OMG! What a surprise when I discovered they were taking 1.4% ANNUALLY (!) to “manage” our investments!!
I also liked AMP because my employer paid for my good cover of insurances. What do I mean by good cover?
My mortgages would be entirely reimbursed if I was to disappear and be permanently disabled and a VERY comfortable salary continuance package.
A quick calculation confirmed that I should rather pay for these insurances with a new and cheaper super fund.

So I did my research and have switched to Hostplus, 100% indexed balances option.

I also would like to mention that we do salary sacrifice. To me, the one and only best tax heaven in Australia. Currently to $30k per financial annum (and $25k from next financial year).

I know some take an accountant to help them do their calculations for salary sacrifice arrangements. My salary changes every month due to the commissions I receive from work, and I still manage to cap at the maximum. So save yourself a couple of hundred bucks and DIY!

Lastly, and I know it has been a debate in Australia, yes, I’m chasing financial independence, an early one, and yes, I’m taking into account my super. Some will argue that you can’t get a penny be until you reach 60 and get your super. I take in my calculations into account that my Super will start paying money at age 70… An entire post to follow on my calculations later in the year.

3/ Investing in Japan:

I hear every day from my broker and bank (before I refinanced) that I have a huge equity in both PPOR and IP, and that I should use it buy more property. Australia, and not only IMO, is a very risky place to invest in real estate.
I would add that even if I have taken my precautions with building every month a nice safe in the offset accounts, a large portion of my wealth is in here, in property too.

As discussed many times, the two only ways to save yourself from catastrophe is to invest defensively and diversify (assets, and geography).
I explained here why I have chosen to invest in Japan.
I’m not a speculator so I have preferred harden yields against potential capital growth and I’m about to sign for my first purchase in Japan. In the city center of Fukuoka, for around $37k AUD all costs considered, returning pre-tax more than 8% yields! Not bad!

Before jumping on this unit, I have said “no” to many – I receive new units fitting my criteria every week- , put my own calculators to double check and this has given me:
– An idea of where to buy with Fukuoka (what Japanese like is very different to what Aussie do)
– The size of the units
– Potential issues (tenants, earthquake construction measures, …)

For the particular one that I have signed for, the vendor accepted to reduce the price due to some reparations which are going to affect the yields potentially – So win win.

So far so good even if I consider it a very risky investment too, as there is virtually no control on your asset (you’re far away, cannot open a bank account locally and have to put all your trust with a local agent speaking your language). I would recommend only a small portion of your portfolio. Saying this, the Japanese culture is a trustworthy one which balances with what I have just written.

4/ Investing in shares:

6 months ago, I knew nothing about shares, even worse, how to trade them. Today, I have a sizable portion of my assets invested in them, using Interactive Brokers for the US shares I buy (again, diversification…), cheapest broker around and where I can buy direct shares.
As I learn along, I realized I couldn’t sign for Dividend Reinvestment Plans for my Aussie shares so I signed up for CMC market and bough some shares in my home land. This is also a great idea to diversify with your brokers too if one goes bankrupt.
In Australia, I’m buying only AFI and ARG as they are based on value, great with distribution and offer distribution reinvestment plans.

5/ FIRE calculator and where am I going with all this:

I have set up my own retirement calculator because I’m not 100% sure I will be in Australia in a 4 years’ time. I could not find a calculator that would take me through the exercise of different tax rates (resident vs non-resident).
All going well, I should have a possibility to stop working full time by the time we depart. I have based my FIRE calculator on different excellent websites: madfientistfinancial mentor and of course my guru MrMoneyMoustache.
I have not made any choice to stop working but I would like to work part time. I also factor that my wife will continue working.
In parallel, I have started a list of things I want to do when I’m “semi-retired”. Ideally, I still would like to be in sales and office for companionship and entrepreneurial spirit but also would like to help others to have a better life: Physically and financially, and mentally. Plenty of nice projects. As it turns out, I’m not the only one and I want to have no regrets in my life!

6/ Issues with our IP:

My agency has recently run into trouble. The OKT has seized their trust account. As a consequence, we have not received our March rentals until yesterday!
During the process I have also realized that they have forgotten $400 of rents last financial year!
A sign or not, I received a call this week from a rental agency which would charge 5.99% instead of the standard 7.7% I’m actually paying…

However, I still plan to stay with them… why? For a few reasons:
– I still trust them and believe that human error can happen. They have since invested into a software to avoid this issue again. They have been really awesome with driving and protecting my investment, being investors in RE themselves. They are great communicators and have reassured me all the way before the issue occurred.
– We have no real financial pressure since we have built the offset account. This is the good that happens when you invest defensively
– I believe that they’re going to be even better not to lose clients from now on
– That’s a boutique shop and I’m sure they would go bankrupt if people started to leave them
– Shit happens, you have to ready for it…

7/ Blog projects:

Lastly, I hope to find more time to enhance my blog. I don’t want really to write more as every article takes a lot of time to build but I would like to work on a new theme and make it more accessible. I would still like not to charge for nothing on it, to avoid losing the audience.

I plan to:
– Get more on Mrmoneymoustache forums and others to get myself known
– Re-do the website with new sections (earn more, spend less and invest wisely)
– Intro social media at a stage
– Translation in French for my oldies
– Start networking with FI French community

A lot going on!
See y’all!

So which Superannuation to retire early

When it comes to Superannuation, and we want to achieve early financial independence, we need one which combines the two golden rules: low fees, and index funds asset selection. So why on earth have I chosen AMP Super? And what are the other aspects to consider in Superannuation?

Fees. First. Always. In this area, industry superannuation seems to be the best. A nice collection of which to select can be found here.
Second: asset allocation: I have personally chosen index funds with a mix of index bonds (70%/30% – Why this split will be discussed in another blog post). Some great articles around asset allocation and its importance can be found here and  there.
AMP isn’t best at either of them BUT, my company pays for some important other fees/protection that we haven’t discussed so far: Death, Total and Permanent Disablement (TPD) and Temporary Salary Continuance (TSC). These are essential protection you need to offer your loved ones in case you were permanently ill or even die. And my corporate plans offers me a cracker of a deal: Death, TPD and TSC all free of charge and paid for – Around $700 per annum.
Why is it such a great deal? Death and TPD would cover all debts that we have and even more. My wife could stop working and still be covered for at least 2 years and a half of living expenses.
My TSC would cover 150% of our living expenses, should I become permanently ill. These are non-negotiable priorities and the best choice for my family. I probably would pay more if I were to switch to another super fund and chose the same levels.

We want to make the most obvious choice when we select our superannuation but also taking our own situation into account is very important. In my specific case and the corporate deal I got, I can confirm that industry fund would not offer the same level of protection.
So what do we need to take into account?
1/ Fees – all – such as annual fees for your investments but ALSO your Death, TPD and TSC
2/ Asset allocation.
3/ Consider ALL your options (corporate, government plans, etc etc…)

Anything I missed? Helpful? What super do you have and why have you chosen it? Leave your comments below

How i multiplied my income by 8 in 8 years (since arrived in Australia)

Hi Everyone,

I though it would be useful to share a bit about my experience since I arrived in Australia (2009), and, also, for the first time, sharing some real figures… I have to say, it wasn’t easy decision to make!

First and foremost, this applied to my situation particularly, having worked in corporate all my career.

2009: Passion and work don’t mix well

I lend in Australia and start hunting for a job, in April/May. Took me one month, as I really wanted to give it a try and work in something I was passionate about: Motorcycles. I used my skills at the time: 5 years of European sales experience and finally secured my first job: Salesman or “sales consultant” as they were calling it, in a small dealership in Hornsby. I had my eye on a different one, based in Parramatta, but didn’t get it.
Got hired the same day as another guy, hardcore salesman coming from the car industry. I sold one bike, he sold none and we both got fired a month onto the job.

In the meantime, I was putting a lot of pressure to get the same job at the other dealership. I was calling the owner twice a week, letting him know with my approximate English what I was doing and the (relative) success I was having. I learned soon enough that a reference was necessary down under to get better jobs, so I asked my sales manager to refer me. He accepted but slammed behind my back on the job I was applying for!

Because I was putting a lot of pressure, I finally secured to get a second interview, this time with the owner’s brother. And, I got the job! Well, I convince them to trial me for 2 weeks and see how I go…

First job: $30k AUD gross per year + commissions (Got $300 for the one bike I sold)
Second job: $42k AUD gross per year + commissions ($75 per bike sold)

What happened in the second job was massive. I had to “win” my spot: They were 4 salesmen and 3 desks, so I had no desk. Some were helping, and cooperating, some were stealing my clients, bashing me behind my back. But, all in all, with a lot of perseverance and influence, I made it to be the top sales guy for 3 months in a row! Man, I was proud!
I won my desk, I won some “rewards”, made money, but… also left the wife behind, worked 6 days a week, sometimes 14 days in a row, long hours, a lot of pressure… and, most importantly, I was starting to lose my passion for motorcycles, disgusted by customers’ behavior against salesmen in general and consumerism: Buying for showing and not for the love of mechanics or the motorcycles themselves.

After a few months, that was the time for a change. But I learned good lessons along the way:
– Not being afraid to raise some tough questions with customers
– Work and passion together might not be for me
– Finally, my “corporate” working hours were not that bad vs “retail” hours
– Importance of having a good reference
– A LOT of people are materialists and not passionate
– Being persistent was essential to secure my second job
– Presentation was key: I arrived in suit and tie to the interview (yes!), and the owner confirmed it made me a serious candidate

2010: Back to the roots and shake it up!

At the beginning of 2010, I was ready for a change. The wife was pregnant, I would sleep all day on my day off, I would start to hate everyone, I had to do something else…
My wife talked with one of her suppliers who was searching for a sales guy, selling IT equipment. I didn’t have IT knowledge but a strong background in large account management and my CV presented well. My English also improved drastically in the last 6 months, so my confidence did. I mastered the interview and got the job.

3rd job in Australia: $50K AUD Gross + commissions

But all didn’t come rosy. My wife lost her job (and the visa), she had to negotiate a year off as she was pregnant and could not find another position being 5 months pregnant. And… 1 month after I started my new sales work, my manager resigned. He was replaced by a pure sales guy who sent me two letters in one month: The first one was to congratulate me for my hard work, and the second one was an official warning as he was not happy with my services anymore!

It started to smell bad, I started to sleep bad at night, baby numero uno was born and I wasn’t bringing enough money home to cover expenses for the three of us.

That’s when I started to learn about the wonders of networking and the fact that when “one door closes, one window opens”. I started to apply for other IT vendors, and got told about a specific one few times. I applied and got the job.

Again, the references, that I had now, were key for me to secure it.

4th job in Australia: $70k AUD Gross + $30k potential commissions

2011-2013: Patience and stupidity

In 2011, we started to settle a bit… And we had to! The new baby turned our priorities upside down. But, at work, I was not making the commissions I expected and, even worse, my salary went on freeze due to some restructure (“You should be lucky to have job”). While I learned a lot and every day, I started to get bored, and really wanted to move up the chain.

But I got use to it and got a new skill along: Patience. It was really important not to escape, which could have been the easiest short term solution, but not probably the best choice long term. I had the feeling I could do something there.

However, I did one very basic mistake, which I will do again two times later on: I took no for an answer. Whenever I was applying for a new internal position (5 times!), or asking for a pay rise, when no was given to me, I was going back to “patience” mode, instead of fighting.

The power of networking was again very important. You have to spend time away from your desk and set your priorities right, not become the priorities of others. And this mistake cost me 2 years of patience. Seems that the lesson wasn’t heard as I did it again in 2014…

So still the same 4th job… and still the same pay!

2014: Finally, promotion!

Beginning of 2014, I finally got a promotion. Had to fight for it and write a long email to the director of sales, pledging for my case. I was the first one around 120 sales guy to ask for this particular grade, and this grade meant at least 10-12% pay rise. And got it! Even 14% to be exact.

I had a lot of conflict around my team, I was more senior and felt I had to be treated that way but still, was treated as a junior. It was again time for a move – And a promotion.

My lesson from the past was integrated and I was sniffing around for opportunities, until I heard that one colleague was about to be promoted and would be keen to introduce me to his boss. We worked on a plan, he trained me, I attended unsolicited events for this team to notice me. I championed their solution in my business. I was first on the line.

It would have been too easy if a restructure didn’t come to shake up all my good plans and my boss-to-be was made redundant. Replaced by someone who I interviewed with… who was made redundant… But signed my contract before he left! So I started my new job with a third guy.

And I did again a big money mistake. I accepted a decrease of my base salary with a promise of a better commission plan… which never arrived. Still I made good money, I guess…

5th job in Australia: Still the same pay!

2015: Another promotion!

I was still on the hunt, back in Jan 2015. Baby number 2 was born in mid – 2014 and I had now plenty of confidence, even to know that I was really undervalued. I almost quit my job due to the “commission promise” that was made to me in 2014 but not respected.

Same scenario as the previous job: Sniffing around, I heard before everyone that someone would leave soon the company and she was keen to reference me. My current boss (yes, I changed 2 times in between!), aware of my salary conditions, was ready to support me. I interviewed actually very bad, but my references were so strong that I got the job.

This time, I came to have a big salary increase: 30% +!

6th job in Australia: $95k AUD Gross + car allowance + commissions

2016: Lucky on top of that

The unit I integrated grew very fast, even faster that everyone anticipated. I had still some issues as I had to convince the business that it was worth recruiting more people. But I was happy, feeling recognized and  having plenty of responsibilities.

An internal survey conducted by my boss made them realize that I was underpaid vs my skills and responsibilities, so got a 14% increase.
Before he left (Yes! Another new boss!), he made me a very nice present: Stupidly low target to achieve…. which resulted of the following:

6th job in Australia: $108k AUD Gross + car allowance + commissions

Commissions: $120k…
So far, it means I have made $220k AUD Gross this financial year. Not bad. And here we are: 8 times my starting salary back in 2009?
The skeptical would say: “But you’re counting your commissions now, whereas you didn’t in the past: That was one off.”Yes, this is correct. And I do that as I know that, in my specific technical niche expertise, I’m still way below what I can expect if I were to leave for a competitor tomorrow: $250k approx..

So, one question:

How many bosses did I have in my career so far?
Well, back in 2009-2010: one boss per job, the usual, right?
2010: 3 bosses
2013: 3 bosses
2014: 4 bosses
2015: 3 bosses

13 bosses in 5 years! Not bad!

Next article: which super I have and why have i chosen this one

Airbnb ATO and Tax

Hi everyone, Since I have started to do some Airbnb and contacted my accountant to know the rules, I though it would be useful to share some of my findings:

CONTENT

  • How does the ATO treat Airbnb accommodation style sharing services? What you need to know
    • sharing a room or an entire house
    • Hosting for Investors
    • Sharing property owned by your SMSF
How does the ATO treat Airbnb, Uber, style services? What you need to know.
 Uber is calling for drivers, Airbnb is seeking more hosts but what are the implications of becoming part of the sharing economy?
 
The basics of tax apply regardless of how you earn money.  That is, even though you may be earning income from different sources or using different platforms to generate income, the fundamental tax issues remain the same. You don’t have to be carrying on a business to pay tax on income you earn.
 
And, given that so many of these services are through sharing platforms, the Australian Tax Office (ATO) has the capacity to data match money flowing through to financial institutions specifically from these platforms.



‘Sharing’ a room or an entire house
Sharing a room or your house through services such as Airbnb can be a great way to earn income from an existing asset.  The tax treatment of what you earn from these services is the same as any other residential rental property arrangement.  This means you must include the rental income in your income tax return.  For example, if a husband and wife jointly own a property that they rent out through a sharing service, whatever they earn needs to be declared on their income tax returns in the same proportion as the ownership of the house in the year they earned the income.
 
Hosts can also claim tax deductions for expenses associated to the rental, such as the interest on your home loan, professional cleaning, fees charged by the facilitator, council rates, insurance, etc.  But, these deductions need to be in proportion to how much and how long you rent your home out.  For example, if you rent your home for two months of the financial year, then you can only claim up to 1/6th of expenses such as interest on your home loan as a deduction.  This would need to be further reduced if you only rented out a specific portion of the home.
 
GST does not generally apply to residential rental income.
 
Be aware that renting out your home may have a direct impact on your tax-free main residence exemption for capital gains tax (CGT) purposes.  In general, your home is exempt from CGT when you sell it.  However, if you use your home to earn assessable income, then you might only qualify for a partial exemption on the sale unless special concessions apply.  If you are renting out part of your home while still living in the property, then it is unlikely that any gain you make on your home will be fully CGT-free.  You might also need to obtain a valuation of your home at the time it was first used to generate rental income.



Hosting for investors
A number of investors are generating income from renting residential investment properties exclusively on sharing services rather than traditional longer-term rental arrangements – rental income can be higher for short-term accommodation and the host has the capacity to increase prices easily for peak periods.  Just a quick look at properties available around the world on sharing sites shows how quickly this style of arrangement has attracted investors, particularly where the property is located in high demand tourist areas.
 
But what are the tax implications if you own one or multiple investment properties and rent them on a sharing service?  Firstly, it’s important to get good advice as this can be a complex area and being on the wrong side of the tax law can have significant implications.  For example, if the ATO deems you to be providing commercial residential accommodation, they will treat your activities in the same way as hotels and motels meaning that the

  • rent could trigger a GST liability for you (although you might be able to claim back some GST credits on expenses you pay). 

Broadly, accommodation falling into this category would have

  • multiple occupancies such as a block of apartments,
    • central management of the properties, and
    • provide services to the guests beyond the accommodation such as breakfast or room servicing. 

Before becoming a host, as a minimum, it’s important to understand the tax implications of your arrangement, check if there are council restrictions, and ensure that you have the right insurance in place.
 


December economy digest

Hi Everyone, I hope the below will summarize some important updates from the economy that influences our investment decisions. These are taken from all resources found around the blog community

In Australia: Building/ from nosebleed to nosedive
Although there is still a high volume of work in the pipeline, it’s clear to see that apartment construction will need to fall, and fairly soon.
Unfortunately last month’s record spike in non-residential approvals – presumably driven by Packer’s latest Barangaroo adventures – was not replicated this month, with the value of non-residential approvals all but halving month-on-month, from $5.4 billion to $2.8 billion.

Overall, although it could take a little while, it seems that it won’t be too long before residential construction will switch from being a driving force for the economy to becoming a headwind.

Meanwhile, in New Zealand:

Download the New Zealand Property Report in full here.

The New Zealand housing market has settled into a typical pre-Christmas pattern, as Kiwis turn their focus to the upcoming holiday period.
Real-time market statistics from realestate.co.nz for the past three months (ending 30 November) show a comparative cooling in demand across the main centres – most noticeably Auckland.
Demand is measured by the average number of views per listing for September, October and November 2016 which are then compared to the same period in 2015.

Sydney home values up 14.4% this year:
While Australian share markets continue to dither at nearly 20 per cent where they were fully a decade ago, Sydney home values were up by another +14.4 per cent over the first 11 months of the year.
No wonder so many investors have given up on Aussie shares with such consistently dismal returns.
Over the last quarter capital growth has rotated towards units in Sydney (+2.9 per cent), although quarterly house prices were still up by +2.3 per cent to be a strong +15.3 per cent higher over the year to date.
Melbourne home values were up by a similarly robust +11.3 per cent over the past year.
US unemployment lowest in 9 years
Employment increased for a record 75th consecutive month, with nonfarm payroll employment up by +175,000, broadly in line with expectations.
The results for September (+208,000) and October (+142,000) were revised up and down respectively, the twin revisions netting out to ‘not a lot’.
Over the past three months employment has increased by +176,000 per month on average.
Changes to pension asset test
A good read if you’re planning on pension for your future: here.
This will take effect in Jan 2017!
Another “predict” article for where property prices will go in 2017
Very hazardous if you ask me however, you can read some “experts” from Mozo here
First time in 100 quarters… Recession?
After 100 consecutive quarters without a recession, the economy posted a negative GDP result for the third quarter, but real national income measures surged to a record high.
Whether or not we experience a technical recession next quarter is open for debate, but it looks to be unlikely based on the recent growth in retail spend.
Overall, strong public investment figures in the first half of the year masked a softening underlying trend in growth in the economy.
An annual GDP growth figure of +1.8 per cent feels much more in line with the metrics we’ve seen elsewhere, including low employment and wages growth, soft inflation, and a budget in deficit.
Property investment on the rise
Loans to property investors rose 4.6 per cent in September to reach the highest level in more than a year, according to the latest ABS figures. The value of the loans was $12.4 billion, with most demand ($11.5 billion) for established housing stock. Over the 12 months, lending was down 15 per cent to $137.5 billion.
Price metric reveals true cost of renting
Rent.com.au has introduced the median room price metric to help renters understand the true cost of renting in Australia. Using the median room price cuts distortion attributed to property type (flat, unit, house). For example, Melbourne is one of the cheapest cities to rent an apartment or house ($380 p/w) but not an individual room ($163 p/w), the cost to rent an apartment/house in Perth is the same, but $33 per room cheaper. The metric is particularly useful for renters who share a home with others.
Strata laws in focus:
On 30 November 2016, new strata laws came into effect in NSW. The new provisions mean owners can be forced to sell the building for redevelopment if 75 per cent of owners in the strata block want to sell. The Property Council Queensland wants similar new body corporate laws to be introduced in their state to allow the majority of owners to force the sale of units in ageing strata blocks.

November economy diggest

Hi Everyone. I usually try to summarize myself a few economic every month, to keep on top of things and I have decided it could be a good idea to share this content.

US real estate price finally recover

It was reported that the famed US Case-Shiller index now records house prices as having finally moved above their 2006 peak.
Case-Shiller’s index enjoyed a spectacularly bubbly run over the two decades running up to 2006, with prices all but quadrupling over that time, but it’s been a very different story since the sub-prime crisis erupted.
And nationally prices at long last eclipsed the previous peak seen in July 2006, albeit very marginally.

 

New home sales 2 years low
New home sales declined by 8.5 per cent in October to their lowest level in two years.
Sales were down for both detached houses (-8.2 per cent) and multi-units (-9.2 per cent).
The Housing Industry Association (HIA) sees this as consistent with its forecast of housing starts declining to 172,000 by 2018/19, driven by a substantial drop in apartments, which is fair enough.
More parents helping their kids to enter the market

According to a Fairfax report, figures from both NAB and Westpac have confirmed that guarantor loans are becoming increasingly common. The loans see parents or close family members provide their property as security for a home loan, eliminating the need for a deposit.

NAB told Fairfax guarantor loans had risen from 4.8% of all new loans in 2010 to 6.7% last year. A Westpac spokesperson also told Fairfax that the number of guarantor loans through its St.George subsidiary had risen 9% in the last year.

Immigration up
Annual net permanent and long term arrivals into Australia increased marginally in September to +267,500, some way up from the nadir of +262,800 in June
Aussies to struggle with repayments?

A study by UBank has found 25% of borrowers are experiencing stress due to their home loan repayments, the Daily Telegraph has reported. The study found borrowers were sacrificing holidays, social events and time with family in order to meet their mortgage payments.

According to the Daily Telegraph, 56% of the survey’s respondents said they had missed out on time with their children to earn more money to meet home loan repayments, while 54% said they had sacrificed a family holiday due to financial pressures. Around 59% said they had cut a family holiday short because of financial strain due to mortgage repayments.

Boom and bust report
Christopher’s Housing Boom and Bust Report 2017  has now been released and is immediately available at this link.
It may pay to be cautious as the housing market is currently at its second most overvalued point on record driven by a combination of factors including loose monetary policy, strong population growth and booming local economies, especially in New South Wales and Victoria.
The earth awaits
The Earth Awaits started to imagine a tool that would build budgets for places all around the world while considering the important aspects of a person’s lifestyle: their price range, family size, housing needs, and their lifestyle expectations. I knew about Numbeo, which gathers cost of living data for cities around the world. I knew where to get information about safety, visa information, and I had a pretty good idea of how to create a budget that would reflect the local cost of living anywhere in the world. Someone just had to put all the pieces together. Why had nobody thought of this before?
US Fastest earning growth
The US Bureau or Labor Statistics reported that the US economy added +161,000 jobs in October, with upwards revisions to the two preceding months totalling +44,000.
Business expectation to rise to 17 year high
Reports Greg McKenna over at Business Insider
Capital city prices continue to rise
CoreLogic reported its October dwelling prices today, which you’ll no doubt read about elsewhere.
Capital city dwelling prices rose by +7.5 per cent over the year to October.
Vacancy rate down in October
Vacancy rates declined nationally to 2.3 per cent in October according to SQM Research, led by falls in Sydney, Melbourne, Perth, Canberra, and Hobart.
Sydney (1.7 per cent) and Melbourne (1.9 per cent) have seen their rental markets tighten a little over the past year. Nationally, rental markets have held fairly steady over the last 12 months. There was another uptick in Brisbane to 3 per cent, where there is also a high number of inner city apartments still under construction.
Bonus: Excellent article on how to transfer property and its consequence on CGT
The main issues to think about and plan around when gifting or transferring property include:

  • When was the property purchased by the transferor
    • Before 19/09/1985 or
    • After 19/09/1985
  • Why is the transfer necessary .. at this time
    • Is there a better result when transferred throuh a will
  • What is the Capital Gains tax status of the recipients/transferee
  • Stamp duty implication to be paid by the transferee
  • Centrelink implications for the transferor – where they are of pension age
  • Legal/conveyancing fees for transfer

To better understand the implications of CGT when gifting and transferring property it is important to start with understanding the basics of how capital Gains tax works. Click the link below for the fact sheet we have prepared on the PTS website  http://propertytaxspecialists.com.au/property-cgt-the-basics/

For case studies and examples of the implications on transferring or gifting property or just adding names to title click the link below to the fact sheet we have prepared on our website

http://propertytaxspecialists.com.au/cgt-implictions-transferring-gifting-adding-names/