I just finished a lunchtime meeting today with an old builder friend from a few years back.
Seems he is now working with investors to put up Duplexes and Triplexes etc around the Hunter Valley area inc Newcastle, Port Stephens, Maitland etc. The LEPs are very supportive esp in the Maitland, Port Stephens and Newcastle councils and less so around Lake Mazquarie who have an unenviable reputation for length of time to process a DA.
The margins between buying the land and building still seem strong when compared with the final valuations – even in this less bouyant market. Although I am hearing whispers from my agent contacts that they are having some very good sales figures this quarter which is normal with Spring approaching I imagine.
I am planning on building and holding as I know the area has a 1% rental vacancy rate and also that, with non-cash deductions, I can see these being positive geared tho not pos cashflow each week at first (is that correct use of the terminology [blink]).
I am looking at building and holding both dwellings then using the equity for the next project. I hope to have a number completed in my trust for the next boom.
I believe another popular strategy is to sell one and keep one with selling proceeds going into the loan which leaves you with a very pos geared high depreciation IP. From contract to contract being approx 12 months this leaves you with the 50% discount on CGT.
I am hoping any experienced Duplex developers and other IP investors might be able to share some experience either here or via email and I welcome suggestions and advice. I esp would like to discuss use of Trusts and the two strategies outlined above.
Thanks,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Hi Simon (about time) welcome to my world. I love duplexes and currently hold 7 (14) in QLD out of the projects i have been involved in. 5 are in my superfund (long term hold strategy) and the other two have borrowings on them.
Yes the numbers work as long as you pay the right money for the land and construction cost. You can check out Westminister Homes and Champion Homes both in NSW who build up there. Both these companies r very cost effective.
I also provide quality inclusions. So i use a cost effective (project home builder) and then trick them up with;
20mm granite top in the kitchen
Air conditioning
6 x ceiling fans
Dish washer
Stainless steel appliances
walk in robe to main
built in robes to all rooms
2 car remote garage
floor to ceiling tiles in ensuite and main
3 x toilets
tile all common areas
carpet in bedrooms onlyBy proiding more quality i achieve two things
1. greater tax deductions
2. higher rent and ROIresiwealth … PS if u sell the strata costs r about 5k
Hi, resiwealth. Are duplexes on strata title or separate torrens title?
Regards
AlexDepends on the council and their LEP I believe. In my area it can be either depending on the block size. Torrens is preferable but you can do more with a smaller block if you choose the strata route.
Is anyone interested in following the figures on this sort of thing?
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sure am Simon, i am going down the same path, difference is i am looking for land i can subdivide into 2 blocks and build 2 homes, sell 1 keep 1.
My 2 concerns are,
1. Like resi said buying the land at the right price. And finding it.
2. Competing with builders in the area that do house and land packages, their costs have got to be less. Then if i only want to sell 1 shouldn’t be a problem.
I have chosen to go down this road for these reasons,
1, Have done 1 dual occ and have just strata titled them so have an idea on whats involved with council, surveyors, lands title,
2. Have built 3 PPOR and building 4th now so have had experience with builders.
3. I can invest in my local area rather than chasing all over the country looking for IP,s
just to name a few.
thanks
RoboHi all, great thread
My partner and I are also looking at going this route but so far have not had much luck with getting land at right price – nearly had one but it got away.
Any info on figures and or what to look for to find the right sites would be greatly appreciated.
Cheers
Originally posted by Mortgage Hunter:I believe another popular strategy is to sell one and keep one with selling proceeds going into the loan which leaves you with a very pos geared high depreciation IP. From contract to contract being approx 12 months this leaves you with the 50% discount on CGT.
Hi Simon
Couple of traps for young players from an income tax and GST perspective.
Selling one on completion and you will find yourself “carrying on an enterprise” (assuming the sale price is more than $50K) and will have to register for GST (use the margin scheme). No big issue with this but your profit on sale will be treated as normal income and the 50% GCT discount will not apply.
Clients then say to me, “No worries then I’ll rent it out for 12 months to access the 50% discount.” Good, but be aware you are selling “new residential property” and the 5 yr GST rule will apply, (again use the margin scheme).
Finally, for Robbo, take care with building and selling PPOR’s one after the other especially if you are also in the game of building and selling homes as the ATO had clearly tagged this for audit activity, they have implied the PPOR exemption may not automatically apply.
Best to know your tax obligations in advance as they will influence your sales decisions.
Regards
TonyAppreciate those points Tony.
Certainly need to be considered and perhaps I should build and hold. Will chat with my accountant and see what she can do for me.
Cheers,
Simon Macks
Residential and Commercial Finance Broker
***NODOC @ 7.15% to 70% LVR***
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Simon (and the other contributors),
I stumbled upon this conversation by chance. We have been involved with duplexes for over 10 years and have submitted over 160 duplex DAs in the last 3 years (Sydney and Central Coast only).
The main attraction of duplex developments is that they explore a little known property market anomaly: you can get as much for a 4 bedroom duplex (on 1/2 land) as you can for a 4 bedroom house on a full size lot.
Over the last several years we met a number of clients that got ‘undone’ by different ‘name’ builders. The main reason is always the same: hidden costs. While they may advertise duplexes with prices starting ‘from’ $299,000 (or similar), the truth is that it is going to cost you close to $0.5M, once you calculate site costs, fees and contributions and items ‘by owner’.
I agree with ‘resiwealth’ that it pays to have a well appointed duplex offered to the market.
So, my business partner and I started a new company specialised in duplexes. If you visit http://www.duplex.com.au, you will find answers to most technical questions that you may have.
From the investors’ point of view, having direct experience in Sydney market only, we find 2 areas that are getting rather ‘hot’: Bankstown and Ku-Ring-Gai/Hornsby councils. In Bankstown you can buy a 40 years old weatherboard house on a 600sqm lot for $400,000. The cost of construction is (as I explained) somewhere over $450,000. They sell for $530,000+ (check http://www.realestate.com.au). We get DAs through Bankstown Council for 4-6 weeks (unheard of, I know). Another good point is that in Bankstown the sites sloping towards the back can be drained to the street (charged systems are allowed). This almost doubles the number of available lots to over 40,000.
Northern Suburbs are more difficult: it takes more than 4 months to het a DA approval. The benefits are, however greater: with the land costing $800,000-$900,000 and duplexes selling at $950,000 to $1,050,000. The lot sizes on the North side are larger, but the FSR is lower, meaning that you end up with large backyard, sometimes people don’t even realise they are looking at a duplex.
If you are an entry level duplex investor, it may pay to canvas for elderly house owners in appropriate suburbs who would love to exchange 1/2 of their land for a brand new 3 or 4 bedroom duplex. You may have to look at a single storey / two storey combination in order to accommodate their needs.
Plase do not hesitate to contact me if you wish to discuss duplexes in detail.
Regards,
Igor Vavrica
[email protected]
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