Need some good advice

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jody lazar
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@jody-lazar
Join Date: 2004
Post Count: 1
January 16, 2004 - 5:54 am
First Posting !
Need some good advice – First time investors
My partner and I are considering buying a block of land, building a house on it and selling for a profit, within a space of 6-12mths. If the loan amount was $200k and sold for $240-250k, what would I need to be aware of in regards to legal and tax issues on the profit?.
I know capital gains tax’s applies, but I’m not to sure of how it works and how this profit would also effect our personal tax?.
We already have a home mortgage and are purely looking at this investment to create ready made cash to reduce our home loan faster.
Is this a good option or is it going to be more detrimental to us tax wise?.
Jodie
Rugbyfan
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@rugbyfan
Join Date: 2003
Post Count: 683
January 16, 2004 - 6:06 am
Can I just say that if you only plan on making $40,000 in 6 – 12 months, it is probably not worth the effort, commitment and general worrying with building a house. You should try to look at closer to $100,000 in 12 months as you will inevitably have hold ups, extra costs, unforseen problems and the like. Your $40,000 may end up closer to $10,000($5,000 after tax) and that is not much for 6-12 months of work.
Try to see if you can either reduce the building costs (without cutting corners) or fastrack the builder so it can be done quicker. Look for little and inexpensive add ons to make your property more attractive too.
Just my 2 cents.
‘Eat rich food, barbeque a yuppie’
AUSPROP
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@ausprop
Join Date: 2003
Post Count: 953
January 16, 2004 - 6:06 am
I would wait for 12 months so that you can get the capital gains reduction of 50%. Given the construction times recently I doubt you could do it in less anyway. If you do too many of these deals the ATO will regard you as a developer and you won’t be eligible for the 50% reduction (as it will be just operating profit). If this is a one off, by all means go for it.
Paying tax is good because it means you have made money – go for it!
Actually I just read Rugbyfans comments and I would agree. The profit you mention would have to be a comfortable profit with all interest costs etc factored in to even consider it.

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