Author:

Housing Choices

Our company Housing Affordability Tasmania Pty Ltd (see www.hat.house) was originally going to build 62 units on 13 titles but we had to get a loan to build a road.

It has proven impossible to get a loan for the road, as financial institutions will not provide loans for infrastructure.

We had a meeting earlier in the year with you and William to talk about my Housing Affordability Trust to solve the Housing and Rental Crisis in Australia as well as discuss my project in Geeveston,

We still cannot not get a loan to build the road. We now had $100,000 in the bank, good income from  leases and would have no problems servicing a loan.  The loan would be repaid by selling 2 or 3 blocks of land after the road was built.

Another problem popped up . All blocks if land have individual titles but the banks would not take them as security unless we built the road first.

What a mess !

The company has $100,000 in the bank as well as 7 blocks of land with a council valuation of $50,000 each ( $350,000) and an acre of land where I could build 32 units with a council valuation of $170,000 ( but a 20% risk and hypothetical development valuation of $850,000)

My only interest in the project is to provide Affordable Rental Accommodation and create income for my grand children in a discretionary Trust .

I have no interest in assets or income for myself as it will only affect my pension. I have re-arranged my affairs so that I have a full pension but $66,000 of income which is more than enough

We still need co-operation with a Community Housing Provider to get access to the  NHIF (National Housing Infrastructure Facility.

NHIF would be ideal organization  to provide funds to build the road if a Community Housing Provider would be associated with a project.

We are now offering to donate an  acreage block zoned Village  on which 32 houses can be built .

Estimated value $850,000

We can build 8 x 2 Bedroom and 24 x 1 Bedroom units in Geeveston

Properties are silver level Livable Housing

Specifically targeting Pensioners

1 Bedroom designed for Single pensioner

2 Bedroom designed for married pensioner

Highset 2 x 1 Bedroom . Bottom unit livable Design. Top unit is the same design apart from access which is not Livable Design but can be used for carers or younger pensioners

 

Cost of 2 Bedroom $240,000  60m2  or $4,000 /m2

Cost of Highset        $240,000 2 x 30m2 or $4,000 /m2

Note land is zoned village which is much more beneficial than residential

Area is 4102.2 m2  which when zoned residential would accommodate 13 dwellings  but zoned Village will accommodate 32 units.

I realise that it is very difficult for Community Housing Providers to build 1 Bedroom units , yet 60% on the Homes Australia waiting list wants 1 Bedroom unit.

This an ideal site for 1 Bedroom units

Community Housing Providers should not build or buy or build properties . They do not pay tax and cannot use tax deductibility of interest and depreciation . The difference between Housing Choices buying a $240,000 house and a group of pilots and doctors buying the house is $95 per week.

There is enough room for the group of investors as well as Housing Choices to share this difference. My proposal is that we build the buildings and lease them  to you , reducing the rent by the full CRA for the Single Unit.

The model is the Land Lease Community Model.

You or we own the land but we own the building and lease the buildings to you on a 99 year lease.

We are quite prepared to transfer the title to you to make your balance sheet look better, but the land as well as the building must be used as security for a loan. The loans must be in our name.

1 Bedroom unit Rent

Our normal rent is 30% of the single pension + Commonwealth Rent Assistance (CRA).

30% of  $1096.70FN             $329.01FN          $164.51/week

CRA                                               $184.80

Total                                        $530.81FN          $256.91/week

Less 100% CRA                      $ 184.80

Leased to Housing Choices  $329.01FN          $164.51/week

2 Bedroom Unit

Our normal rent is 30% of the Married Pension + CRA

30% of $1,396.20                  $418.86FN

CRA                                         $174.00

Total                                        $592.86FN          $296.43/week

We could subsidise 1 Bedroom units because with our Highset design we can build 2 x 1 Bedroom units instead of 1 x 2 Bedroom unit.

It is not possible to subsidise 2 Bedroom units , so we can only offer the 2 Bedroom units for lease at our normal rate of $296.43 per week

There are 12 Highset buildings of 2x 1 Bedroom units. The top unit is the same as the bottom unit but obviously has no wheelchair access. It may be better if we only lease the bottom units to you .

In that case you would have 12 x 1 Bedroom and 8 x 2 Bedroom

We still need  Housing Choices to assist us to create a loan from NHIF to construct the road. The loan can be in our name . We will pay the interest and fully repay the loan in 1 year.

Summary:

Housing Choice to help arranging a loan for us with NHIF  for $320,000 to build a road.  Loan is in our name and Interest paid by us. Loan fully repaid in 1 year

Land @ $875,000 is donated to you

We borrow the money and  construct 32 units ( 8 x 2Bedroom and  24 x 1 Bedroom)

 

We will lease to you:

12 x 1 Bedroom units @ $164.51/week

8 x  2 Bedroom units @ $296.43/week

 

20 units for an average of $217.28/week

 

 

Please give me a call  on 0412 324 808 to discuss.

 

Regards,

Peter Griep

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hi,

I have attached a summary of my experience.

I have experience in multi million dollar projects.

30 years ago I had the sole agency of 4 Holiday resorts , Gold Coast, Tangalooma , Fraser Island and Hamilton which I marketed for $20m to international airlines and holiday operator. I financed Shopping Centres, Pubs, Holiday Resorts and large self storage complexes and personally ran a 10M Currency Management Fund

I was a chairman of 6 Bodies Corporate and developed a 82 Town House and 102 unit retirement village.

No longer interested In making rich people richer I specialized as an investment adviser maximizing pensions for retirees. My hobby then and now is beating Centrelink.

I am very much interested in the not-for-profit world and my strategies are always out of left field , innovative and unique.

I have a perfect system to solve the Housing and Rental Crisis with my Housing Affordability Trust (HAT) at no cost to the Government at all and have written to every Minister and Senator , Tasmanian and Federal Treasury. Documentation is 15 pages long.

I wrote to Jim Chalmers before the last election setting out HAT and suggested that to improve his election chances he should appoint a Housing Minister to show that he was serious about solving the Crisis.

Whether he adopted my suggestion of a Housing Minister or not I do not know because he did not even acknowledge the receipt of my email. All correspondence probably goes straight into junk mail.

However, after the election Julie Collins was appointed  as Housing Minister.

I also live in her electorate

I have written 3 times to her and 3 times I have suggested to have a 5 minute meeting with her rather than wasting her time going through 15 pages of complicated material

No action whatsoever .

The only solution is shaming the government into action and Julie Collins will feature prominently in this shaming. Shortly I will  feature on my website 39 articles on Finance for Pensioners and How to solve the Housing and Rental crises. I will no longer publish any material on HAT as my biggest fear is that a Superannuation Fund, Institutional Investor or a Price Waterhouse will get hold of my innovative Housing Affordability Trust which is a not  -for-profit Trust and skim of the profits for their advantage rather than the investors in  HAT.

I can explain HAT in 5 minutes  over the phone so if you are interested I am only too happy to do so.

On my website I will publish a number of strategies for Community Housing Providers and am absolutely sure that I can improve their effectiveness and profits

If you would allow me to get details of your modus operandi and aims and objectives of your organization I will improve on it.

How much can you borrow?

The following is a general broad picture about serviceability of a loan.

Individual lenders may be different but we look for fundamental principles.

Banks have different criteria but are controlled by APRA ( session 17 ) who determines how much of a margin banks should apply above the  interest rate determined by the Reserve bank rate.

Interest charged by the banks in general is 2% above  the Reserve Bank interest rate

And the banks advised by APRA apply  another 2.5% to determine whether the Bank’s clients can service a loan  and APRA further advises that serviceability should be assesses on P&I rather than on Interest only which adds another 1.25%

Therefore:

Interest Reserve Bank rate   4.25 %

Bank Interest rate                 6.25%

Serviceability                         8.75% +1.25%=10%

The banks will take into account 30% of gross income as serviceability, so a couple on $100,000 of combined income can borrow $300.000 ($30,000/.10)

This is 3 x combined salary.

There is another rule of fist that you can borrow 5 x of combined income but this is probably a bit optimistic  but can be achieved if you are a public servant or pilot and  can find a good finance broker.

This  pales into insignificance compared to the way banks  treat income  from rental properties. They will take into account 80% of rental income as serviceability ( and if they don’t, find another bank that will)

This will lead to a fundamental conclusion:

The only way to make money in property investments is to borrow money. and the more money you borrow the more profitable you will be.

$ 1 of rental income will allow you to borrow  $8

$ 1 of extra salary will allow you to borrow       $3

ONE DOLLAR OF RENTAL INCOME IS WORTH $2.67 OF SALARY

So probably people should consider investing in property rather than trying to increase salary by doing overtime or protest in the streets to increase salaries.

Using Superannuation for Investments

There is a large difference between using superannuation money for investments or using your taxable income for investments.

Super may have a taxable and tax free component but it is a simple procedure to make a taxable component of your super tax free. You should have consulted with your investment adviser or googled how to withdraw money from your super and re-contribute it as a non-concessional component  to make your super tax free.

When you have reached age 60 you can generally withdraw a lump sum from your super tax free.

We have seen in sessions 10 that tax free money is worth more than income from work or other investments.

We have seen in sessions 10  that a tax rebate is more than a tax rebate. In  the 30% tax bracket a 30cts tax rebate  is worth 42.86cts of income  and in the top tax bracket it is worth 81.8cts.

We have also seen in session 20 that you should never use your own money and always consider borrowing money for investment.

Interest on a loan is a tax deduction

If you use money withdrawn from your super to pay interest on a loan you get a direct tax refund of 30% (or higher). This is the equivalent of a return of 42.86%

This makes investment with borrowed money so powerful.

Also, if you borrow money you are beating inflation.

You are paying back a loan with deflated money.

Never use your own money.

You want to use your superannuation  to buy an investment property.

If you are paying  tax, the biggest advantage of investing in property is the tax deductibility of interest on a loan.

Only buy investment property with borrowed money.

How do you change cash into borrowed money

A convenient way is to invest the cash in bank shares ( or any other shares paying franked dividends) and then use those shares as a security for a loan.

Ideally you should pick a share with a franked dividend that pays  the interest on a loan.

Most larger company have a franking credit rate of 30% which means you effectively get a tax rebate at the 30% level. A tax rebate is tax free but your income is taxable. What is the equivalent income for a tax rebate of 30% . Every 30cts of tax rebate is the equivalent of 42.9cts of income because if you pay tax of 30% on 42.9cts of income you get 30cts

Assume interest rate on a loan is 6% . What is the equivalent franked dividend to pay for this interest. A franked dividend of 4.2 % is the equivalent of 6% of income which will pay the interest on a loan.

 If we use the bank shares strategy, dividends will pay the interest on a loan and any capital gain (say 6% on bank shares) is a profit. Also bank shares are liquid and you can cash in part of your shares for emergencies.

 

 If you use superannuation to buy the investment without a loan the effective return of your cash is the  interest you save on a loan.

 

This is part of a series of sessions on Finance for Pensioners and a solution to the Housing and Rental crisis in Australia

 

We have come to a number of  conclusions

 

• Pensioners affected under the income tax pay 73% in tax
• In all property analysis use the 5.2% rule
• Community Housing Providers should not borrow money or build buildings
• Pensioners affected under the Income Test can borrow money.
• Retire or double your income in one year.
• Housing Affordability Trust is the only solution to the Housing and Rental Crisis

 

 

 

 

1            Pensioners affected under the income test pay 73% in tax

 

They lose 50cts in the pension and 23cts in tax, tax concessions and medicare

( See   Session 1)

 

 

 

2        5.2% rule

 

Rent per week should be 1/1000 of the value of the property. A $300,000 property should have a rent of $300 per week . A $500,000 property should have a rent of $500 per week. A $20,000 caravan should have a rent of $20per week. Lease on a $100,000 block of land should be $100 per week. Also assume interest rate @ 5.2 % and analysis becomes very easy. You can do an analysis at these figures and then can easily see what would happen if interest rates increase by 1 % or rents increase by 1 %.         

 

3. Community Housing Providers should not build or buy houses

 

From the spread sheet in Session 10 it can be seen that Property Investment is most effective if a person pays tax because of tax deductibility of interest payments and depreciation allowances. The higher the tax bracket the more profitable an investment in property is.

 

Not-For-Profit organisations like Community Housing Providers do not pay tax and from the spreadsheet it is shown they should not build property.

 

NOT-FOT-PROFIT ORGANISATIONS SHOULD NOT BORROW MONEY OR BUY PROPERTY , ONLY MANAGE IT

 

4. Pensioners affected under the income test could help solving the Housing Crisis

In session 1 we have seen that the highest tax bracket bar none is for pensioners affected under the income test. They pay 73% in tax if they earn or are deemed to earn more than $112 per week.

 

The average male balance in Superannuation is $430,000 and if you have more than $301,000 in super you are deemed to earn more than $106 per week and therefore are affected under the income test.

 

 

What if a person would withdraw $240,000 from super to buy an investment property.

 

It can be used to buy a property but should be borrowed back straight away to invest in shares.

 

To service a loan from the Bank you can borrow money from the government under the Home Equity Access Scheme and can borrow a minimum amount of ½ your pension which for the single pension will give you a fortnightly payment of $500 or $250 per week. This loan and the interest on the loan is accumulated and only has to be paid back when you die or sell the house.

This will service a bank loan of $300,000 but  as an example we have used $240,000.

 

The reason a pensioner will never get rich from ordinary investments is that a pensioner pays 73% of all income in tax. If you invest in  a new investment property and borrow the money, your interest on the loan and depreciation allowances will give you huge tax deductions.

THESE DEDUCTIONS WILL INCREASE YOUR PENSION

 

 

 

5. Retire within a year

 

We have a number of property developments where the cost of the land is very low.

On each block of land with a size as little as 450m2 we can build a 3-Bedroom dwelling ($300,000 , $450 rent) and 2 x 1 Bedroom units ($180,000, 2x $275=$550 rent)) on top of each other. We have shown in Session 27 how you can retire in a year or double your income if you are in the 30cts or 45cts tax bracket.

 

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6. The Housing Affordability Trust

 

The ultimate solution to the Housing and Rental Crisis

Principal  Government Guaranteed

3% Growth . Government Guaranteed

5% Franked Income

Tax and Centrelink Friendly

 

Can be combined with any of the strategies in previous sessions but should be the centre platform for any plans for the future

This is a true case that happened to me.

I was doing a 20 unit townhouse development .

All infrastructure was finished.

I poured the slabs and was ready to erect the houses.

Main Roads in their wisdom decided to build road there and resumed the complex.

All figures in the story have to multiplied by 20 to get the exact figures for the story.

Click below

 

 

My history and experience is as follows:

Bachelor of Science and Master of Science from Delft University in Holland

Lecturer (Associate Professor) in Surveying QUT Brisbane for 13 years. Lecturing in  Surveying , Geodesy, Astronomy, Map Projections, Satellite Navigation GPS, Hydrographic Surveying, Geophysical Prospecting and Surveying and Town Planning to Engineers, Builders, Architects, Landscape Architects and Town Planners.

Graduate Diploma in Landscape Architecture, 3 years of a 6 year part time course.

Founder and Managing Director of International Mortgage Finance Pty Ltd. Finance Broker, Foreign Currency Loans, Funding of hotels and shopping centres. Two of my clients were in the top 10 richest men in Queensland. Large 20M international tourism project, selling and marketing rights of a 4 resort project (Gold Coast hotel resort, Tangalooma Moreton Island Resort, Fraser Island Resort and Hamilton Island Resort.) International Mortgage Finance operated for  20+ years

Peter Griep trading as Positive Mortgages. Finance Broker and Licensed Investment Adviser for 20+ years. Specialising in maximising pensions for retirees.

Founder and Managing Director of Coolum Mini Storage Pty Ltd. Development and construction of a large 20 strata titled Self-Storage complex.

Founder and Managing Director of Port of Brisbane Pty Ltd. Development and construction of a large 20 Strata Titled Self-Storage complex.

Founder and Managing Director of Wondai Village Pty Ltd. 4 stage Retirement Village of 102 units. Design, development and construction.

Founder and Managing Director of Nadco Pty Ltd. Property Developer.

                   DA 12 unit development in Paddington Brisbane

                   20 Unit Development in Brisbane

                   82 Unit Development in Brisbane

Small subdivision on Lindisfarne Karoola Road.+ DA Multiple Dwellings

Small subdivision on Lindisfarne Derwent Ave + DA Multiple Dwellings

                   DA Multiple Dwellings Bridgewater

                   DA Multiple Dwellings Bridgewater

                   DA Multiple Dwellings Rosetta

                   2 appeals in the Appeal Court

Resident Manager and Letting Agent for Wondai Village. Licence now lapsed.

Chairman of 6 different Bodies Corporate.

Took the taxation department to court about a foreign currency matter and won.

Prepared BAS statements for 6 entities

Had Tax Audit of all entities by having 2 auditors in my office full time for 2 weeks. Passed with flying colours and was able to teach the auditors a few tricks about GST.

Hobbies: Sundials, gardening and beating Centrelink

Declared bankrupt 14 years ago through no fault of my own. Never been one cent behind in payments. Let us just say that there was a Global Financial Crisis and that the Royal Commission has exposed some of the unconscionable practices by the banks.  The Bank and the administrators sold my beautiful 5 year old retirement units, $44,000 for a 1-bedroom unit and $76,000 for a 3-bedroom unit, just enough to clear the debt and give the administrators their share.

Not a cent was left and I applied for an old age pension. Centrelink would not give me a pension because they do not recognise bankruptcy and on their books I still had several Millions . I had to take them to the Appeal Court and after 6 months Centrelink finally admitted that indeed I was entitled to a pension.

The bankruptcy is now discharged  and I  regard it is as a valuable experience on top of all the experience above. I am now ready to move on again.

Came out of retirement to start Housing Affordability Tasmania Pty Ltd

developer of Affordable Housing and Rental Accommodation.

Design of strategies  to solve the Housing and Rental Crisis  , Maximise Pensions for Retirees and improve Community Housing. See www.hat.house

Peter Griep

 

It is often the case that a married couple when getting older is contemplating selling their home in case one of the partners is getting frail and may have to go into aged care. This becomes an interplay between rules of Centrelink, Aged care rules and the ATO. The first thing to consider is whether the government will subsidise the accommodation in the aged care home.

There are a number of charges and fees

1. Daily Basic Fee. This is payable by everybody regardless of income and assets and equals 85% of the single aged pension which at present is $66.58. As soon as the partner goes into aged care the assets and income are split 50% between the partners, but instead of one married pension the partners get a single pension each.
2. Means Tested Care Fee. This is payable depending on an Assets and Income Test. These tests are similar to the Assets and Income Tests for Centrelink but the home is no longer free and assessed @201,231.20 per partner . Any income in excess of $32,819.80 is assessed @ 50% any assets above $59,000 up to $201,231.20 are assessed @ 17.5%, plus 1% up to $484,693 and 2% above that. When the sum of the two tests is higher than $68.14 the government does not give assistance and the excess above $68. 14 has to be paid as a Means Tested Fee. The killer is the Asset Test , which means that anybody with a house will not get government assistance and has to pay this fee up to $68.14 per day.

There is a silver lining, that if the partner stays in the home, it is occupied by a “protected person” and is not counted as an asset , or is not counted as an asset for 2 years when the partner moves out and the house is rented out.

3. Daily Accommodation Fee

This can be paid as a RAD or Refundable Accommodation Deposit or as DAP or Daily Accommodation Payment and can be reduced to a DAC or Daily Accommodation Contribution if you qualify for government support under the Income And Assts Test above. This means that anybody with assets less than $59,000    and income less than $32,819.80 only pays 85% of the pension and does not pay the fees I 1 and 2 above

 The remaining partner  now has a number  of choices and an important consideration will be whether the home should be  sold. Again the critical issue is the treatment of the home by Centrelink and Aged Care and whether to sell or not.

Partner stays at Home 

Married pension has been replaced by 2 single pensions and the home is not counted as an asset for Centrelink or Aged Care . You have to pay the Daily fee but probably not the Means Tested Care Fee and Daily Accommodation Fee could be reduced to a DAC.

The partner can move out and rent out the house and it will still not be regarded as an asset for 2 years. If a relative or friend lives in the house rent free , they can pay the Daily Accommodation fee. Payment of DAP or DAC is not regarded as an asset or income for Centrelink. The Refundable Accommodation Deposit (RAD) is not an asset or income for Centrelink but when it is refunded becomes an asset with deemed income for Centrelink.

RAD is always an Asset for Aged Care and increases fees and can completely cut out government assistance.

Partner or Single Pensioner rents out the home. 2 Year period  

The home can be rented out and still not be assessable under the Asset test for a 2 year period.

If the pensioner is paid under the Asset Test this may be a good strategy (For instance a pensioner with an investment property) . as the extra income may not count under the Asset Test. Be careful, as the Income Test may take over from the Asset Test.

If the pensioner is paid under the Income Test, rental income is not very good income.

If the property is rented out, rental income  is reduced by 74.25% under the Income Test  and the Means Tested Care Fee  increases by 13.38%, so for every dollar in rental income you will only get 12.47cts  in hand.  ( Bit complicated: 74.25% is 50%pension and 24.5 tax and medicare. 13.38% is the remaing  25.75% @50%. See session 1)

After 2 years it is very bad and time to sell. You may otherwise lose all of your pension.

Partner/Pensioner sells the home. 

The proceeds of the house become an Asset with deemed income for Centrelink.  Per partner 50% .  This may seriously affect the pension for both partners and in some cases completely cut out the pension.   It will also affect the Means Tested Care Fee and in most cases this fee will increase to $68.14 per day. There is another 2 year period where the proceeds may not be regarded as an asset  if you can prove that the proceeds will be used to buy or build another home or are used to pay for a RAD in aged care. If the proceeds are not used for these purposes, Centrelink Pension may be seriously affected.

Partner buys into a Retirement Village

Similar to a RAD there is an entry fee when buying into retirement or over 50s accommodation.

There are a number of other options (See session 14)  but we will only consider the retirement village option.

The Entry Contribution (EC) is treated by Centrelink in 2 different ways depending on the              Extra Allowable Amount (EAA).

The EEA is the difference between the Homeowner and non-Homeowner lower allowable asset limit which at present is $242,000.

EC<$242,000 . Assessed as non-Homeowner under the Asset Test. Nil under Income Test. May be eligible for Rent Assistance.

EC> $242,000 . Assessed as Homeowner. Not counted under asset or income test. No rent Assistance.

When you are a single pensioner or a pensioner with a partner in aged care, selling your home may have serious implications for your Centrelink Pension and Age Care Fees.

Get financial advice and do not make hasty decisions. You have at least 2 years to make a decision

There are a number of other things that may be considered:

Family can pay Aged Care fees on the Pensioner’s behalf. Not assessed under Asset or Income  test.

Paying the Refundable Accommodation Deposit (RAD) is a good investment @ 8.33%

Pension Loan Scheme to pay Aged Care fees

Granny Flat Arrangements