I hear that this is a good way to buy off the plan property Is this a fact and how does it work I also believe it can reduce the stamp duty Any information on this subject would be greatly appreciated Thanking you from a new property investor learner
Kobell
It is a good way of buying any property that you plan to onsell rather than settle on. You get to control it without owning it. It’s sort of like the yanks ‘and/or assigns’.
How it works is like this:
There is a standard contract of sale, but this is not signed, therefore not exchanged, and no stamp duty etc. Attached to this is the option contract. It’s actually a combination of two options in the one. A call option which gives you (or somebody you sell it to) the right to buy at x dollars at x time in the future. The Put option gives the seller the right to sell to you at x dollars at x time in the future.
You could both agree not to execute the contract, but I’ve found this is an unlikely scenario. Basically, it will have to be sold/purchased. The option contract should also set out when the ‘real’ contracts of sale need to be exchanged. Up until this point, you can sell the entire contract to somebody else, who will then sign the contract of sale, and pay the price you agreed with the seller. Your profit will come in the amount you are paid for the option – kind of like a finder’s fee.
Cheers
Mel
KobellIt is a good way of buying any property that you plan to onsell rather than settle on. You get to control it without owning it. It’s sort of like the yanks ‘and/or assigns’.
How it works is like this:
There is a standard contract of sale, but this is not signed, therefore not exchanged, and no stamp duty etc. Attached to this is the option contract. It’s actually a combination of two options in the one. A call option which gives you (or somebody you sell it to) the right to buy at x dollars at x time in the future. The Put option gives the seller the right to sell to you at x dollars at x time in the future.
You could both agree not to execute the contract, but I’ve found this is an unlikely scenario. Basically, it will have to be sold/purchased. The option contract should also set out when the ‘real’ contracts of sale need to be exchanged. Up until this point, you can sell the entire contract to somebody else, who will then sign the contract of sale, and pay the price you agreed with the seller. Your profit will come in the amount you are paid for the option – kind of like a finder’s fee.
Cheers
MelThanks for the eplanation Mel i appreciate your time
Does this negate the payment of stmp duty by me totally or do i have to pay it on the amount i get for the option Also i guess this is not subject to any CGT/Would it not be a good way to purchase property even if i chose to settle as i under stand that on a signed contract stamp duty is payable 3 months or 6 months into the term even though the settlement could still be another 6 months or so
Again Mel thanksNo you don’t have to pay it on the option, but you do need to declare any proceeds (ie sale price of option) in your tax return and pay income tax on it.
It is also a good way to delay the payment of stamp duty for off the plan purchases. I believe you get 12-15 months tho to pay the stamp duty (and you can delay that, but you pay ‘penalty’ interest of about 11% – on stamp duty value), but if you have not got an exchanged contract, the clock does not start ticking until you do. Short term solution though – you still have to pay stamp duty on settlement.
Cheers
Mel>>It is a good way of buying any property that you plan to onsell rather than settle on.<<
I am sorry to be a spoil sport but there is no such thing as a guaranteed profit.
There have been many people this year who got burnt buying units off the plan a year ago both in Sydney and in Melbourne (which I know of).
The problem is that if you enter into an agreement today, and the construction takes the best part of one or two years to complete, a lot can happen in the meantime.
Pisces133
I don’t recall saying there was a guaranteed profit. In fact, the phrase which you quoted had me saying a property you plan to onsell. This strategy could also be used where you are planning a renovation, and can get early access.
I am aware of many people getting burnt. It’s all over the news quite often.
Cheers
Mel
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