Rental Income and Dividend income

Was talking to a friend of mine over the weekend. He told me he just managed to rent out his condo, after 2 months of being vacant after TOP. Was telling me his rental income just enough to cover his installment, with a little bit more to cover the maintenance, but kpkb on having to pay tax on the rental income and also the agent fees.

He was remarking that its better to buy stock/bonds or even reits where there isn't a need to pay tax on the dividend.
No sure how true is that though..........

Anyway, its his 2nd condo. First one I believe, still got some loan to pay, but very minimal. Maybe can pay off in the next 2-3 years. Net, Net is still positive, if really need to sell off as was bought low......

In the U.S. & Malaysia there is about a 30% tax on dividends. I don't want the hassle of being a landlord so prefer the liquidity of stocks.

johnny333 said:

In the U.S. & Malaysia there is about a 30% tax on dividends. I don't want the hassle of being a landlord so prefer the liquidity of stocks.

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In Aussieland, dividened counted as income, on your income tax rate. Selling considered CGT with a flat 30% at the moment but 15% if you sell after 1 year.

lifeafter41 said:

Was talking to a friend of mine over the weekend. He told me he just managed to rent out his condo, after 2 months of being vacant after TOP. Was telling me his rental income just enough to cover his installment, with a little bit more to cover the maintenance, but kpkb on having to pay tax on the rental income and also the agent fees.

He was remarking that its better to buy stock/bonds or even reits where there isn't a need to pay tax on the dividend.
No sure how true is that though..........

Anyway, its his 2nd condo. First one I believe, still got some loan to pay, but very minimal. Maybe can pay off in the next 2-3 years. Net, Net is still positive, if really need to sell off as was bought low......

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Pay simi lancheow tax? He can write off his interest on that very large mortgage he has, as well as the maintenance, property taxes, agent fees, etc. He will be lucky he is breaking even. Probably facing a loss. Where is this tax he has to pay?

For new condo like his, he should not need a agent to rent for him. I rent out all my condos myself. Even if your friend want to do AirBnB, no one will know or care. He can get much more income that way. He should have already started marketing his condo for rent one month before TOP. There is no excuse to have it vacant for 2 months. Maybe he was asking unreasonable amount for his rents?

Papsmearer said:

Pay simi lancheow tax? He can write off his interest on that very large mortgage he has, as well as the maintenance, property taxes, agent fees, etc. He will be lucky he is breaking even. Probably facing a loss. Where is this tax he has to pay?

For new condo like his, he should not need a agent to rent for him. I rent out all my condos myself. Even if your friend want to do AirBnB, no one will know or care. He can get much more income that way. He should have already started marketing his condo for rent one month before TOP. There is no excuse to have it vacant for 2 months. Maybe he was asking unreasonable amount for his rents?

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First timer renting out, guess he is unaware of all this.
didn't know that one can write off interest, property taxes and agent fees.
Even if after writing off, he stills needs to add on the remaining rental income into his salary + bonus and kena tax..........

I rent out all my condos myself Noted, condo, with a "s", how many unit you actually owned?.
Must be doing pretty well.....good for you.

I have both rental and dividend income. I prefer the latter, as it is hassle-free. I had to deal with tenants who pay late or left the premises in a far poorer state than when they first rented it.

While stocks may lose some value in a bad market, so can property. Both can make money if you buy low sell high.

lifeafter41 said:

First timer renting out, guess he is unaware of all this.
didn't know that one can write off interest, property taxes and agent fees.
Even if after writing off, he stills needs to add on the remaining rental income into his salary + bonus and kena tax..........

I rent out all my condos myself Noted, condo, with a "s", how many unit you actually owned?.
Must be doing pretty well.....good for you.

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Renting out a income property is like running a business. You have your revenues (in this case rental income) and you have your expenses. The net of the the 2 is a loss or a profit. Since your friend has already got 2 months of no income, it is not likely he will end up with a profit in the first year. During this 2 month period, he is incurring interest payment for his loan, condo maintenance, prorated property taxes, and insurance, etc. Therefore, the prospect of him adding on any net rental income to his salary is bleak. In fact,he should try to report a loss for his condo even if he is going to make a profit on it that year. For example, lets say I have a rental condo that has positive cash flow, and I estimate that I will have to report $10,000 rental income on it. Well, I look around my own house (the house that I live in) first and ask what do I need? Do I need a new aircon? Do I need some new furniture? Do I need a new oven?I will then buy these items, and have them delivered to my home for me to use. But on the invoice, I put in my rental condos address. I then write these items off against the anticipated $10,000 positive rental profit and bring it down accordingly. Is this kosher? No. But I have not known an IRAS auditor to go to my rental condo and check the serial number of all my appliances against the invoices. They don't have the time and are after much bigger fish. You mention that your friend has another condo that is almost paid off. If he rents that one out, he can use the losses from the new condo rental to offset the profit from the first condo. A rental property loss can be used to offset against a another rental property profit.

Sorry, I don't disclose my assets or portfolio.

Hi Paps, thanks for the advice. I will let him know on this as well.

lifeafter41 said:

Hi Paps, thanks for the advice. I will let him know on this as well.

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No worries.

Ash007 said:

In Aussieland, dividened counted as income, on your income tax rate. Selling considered CGT with a flat 30% at the moment but 15% if you sell after 1 year.

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The dividend paying stocks I own are foreign shares i.e. US & Malaysian. I've owned them for years but still face the withholding charges of 30%:(


All I know about Aussieland taxes is that some ex-Spore who are now citizens of Australia have parked their $$ in Spore

Papsmearer said:

Renting out a income property is like running a business. You have your revenues (in this case rental income) and you have your expenses. .........

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That's the problem with being a landlord, it's a business with all kinds of headaches. I've heard enough stories from my Aussie relatives who rent out some properties.

Not something for people who want to enjoy their retirement & earn a passive income.

While I understand on the hassle, it's would be the best scenario to have multiples.....

Dividend income
Rental income
Reits income
Interest income (FDs)
Annuity
CPF Life..........

All under passive, did I miss out on any others?

johnny333 said:

The dividend paying stocks I own are foreign shares i.e. US & Malaysian. I've owned them for years but still face the withholding charges of 30%:(


All I know about Aussieland taxes is that some ex-Spore who are now citizens of Australia have parked their $$ in Spore

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If you file a tax return in the US, you should be able to get a refund. Unless the dividends are so much that they bring you over the 30% tax bracket.

lifeafter41 said:

While I understand on the hassle, it's would be the best scenario to have multiples.....

Dividend income
Rental income
Reits income
Interest income (FDs)
Annuity
CPF Life..........

All under passive, did I miss out on any others?

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Remove CPF life... That is a rip off.. That is for stupid sinkie losers.

johnny333 said:

That's the problem with being a landlord, it's a business with all kinds of headaches. I've heard enough stories from my Aussie relatives who rent out some properties.

Not something for people who want to enjoy their retirement & earn a passive income.

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Hire a property manager. Australian property managers are all licensed and carry liability insurance. Most of them are honest and experienced. Let tehm deal with the tenant.

lifeafter41 said:

While I understand on the hassle, it's would be the best scenario to have multiples.....

Dividend income
Rental income
Reits income
Interest income (FDs)
Annuity
CPF Life..........

All under passive, did I miss out on any others?

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That makes no sense. You invest in the best investment that you feel comfortable in. If I determine that property is a better long term investment then stocks, or mutual funds or fixed deposits, why the hell am I putting any money in these instruments? I am putting everything in real estate.

Papsmearer said:

That makes no sense. You invest in the best investment that you feel comfortable in. If I determine that property is a better long term investment then stocks, or mutual funds or fixed deposits, why the hell am I putting any money in these instruments? I am putting everything in real estate.

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They are, to put it nicely, very new to investment.. So they are just learning... Investment is a very personal thing, just like your choice of a woman.

Papsmearer said:

If you file a tax return in the US, you should be able to get a refund. Unless the dividends are so much that they bring you over the 30% tax bracket.

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As a foreigner I have to submit a W-8BEN form which exempts me from US taxes. Have been doing it for 10+ years.
The US gov't still withholds 30% of dividens from my US shares

Can I as a foreigners get them to return this 30%

johnny333 said:

As a foreigner I have to submit a W-8BEN form which exempts me from US taxes. Have been doing it for 10+ years.
The US gov't still withholds 30% of dividens from my US shares

Can I as a foreigners get them to return this 30%

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When you mention withhold, does Uncle Sam keeps the 30%, as good as gone, or kind of holding in trust, as to will return but don't know when.....

lifeafter41 said:

When you mention withhold, does Uncle Sam keeps the 30%, as good as gone, or kind of holding in trust, as to will return but don't know when.....

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As a foreigner I don't file a tax returns in the U.S. So I can't claim any tax allowances or anything. Every 2 years I submit a W-8ben form as proof that I am not a U.S. Citizen or resident.

Don't really know if any U.S. Citizen can get it any or part of the amount that is taxed? I've read somewhere that dividends are not so popular because of taxation reasons. That May be why some may prefer that the companies do share buy backs to increase the value of their shares than to give dividends?