1. Sell primary home – lease back for 2 years.
2. Buy vacant block 1400m2 – Qld.
3. Subdivide into 2x 700m2
4. Draw up plans for 2 houses (1 as primary home, 1 to sell)
5. Sell house 1 off the plan. Take 10% deposit.
6. Build the 2 houses. (Volume cost efficiencies)
7. Move from rented (former primary) property into 2nd house.
8. Sell 2nd house after 12 months….and repeat.Questions:
1. How is the deposit held?
2. Is the vacant land (and subsequent houses) considered primary residence?
3. When does the 12 months primary residence ownership begin – with the purchase (contract date) of the vacant land?
4. Is the project GCT free?
5. Have I missed something?
6. Why hasn’t current land owner subdivided to sell 2 blocks?
7. Sell 1 block as vacant land?Your suggestions, opinions, alternatives, experience appreciated.
Hi,
1. The deposit can be held by a real estate agent if one is working for you in the sale. Otherwise you can employ a solicitor to act as agent to hold the deposit in trust or you open a joint account with both yourself and the purchaser as signatories .
2.Vacant land can be considered primary residence for up to 4 years prior to building, assuming you are not currently in a primary residence (which in this case you aren’t).
3. Primary residency status for CGT begin when you settle and the time spent vacant is considered at this point. However if you never move in and sell or rent it out you can claim the interest expense against the cost base for purposes of CGT.
4. The portion of the land you live on is CGT free. The one you sell is not. Cost base generally speaking would be aportioned based on percentage size. So if you split the land in half the cost base of the bit you sell would be half the purchase price plus half the interest paid plus half the other costs associated (see your accountant or tax professional).
5. With only 8 points in the plan one could say you’ve missed a lot or it could be that you’ve missed nothing… My father-in-law essentially did this. He bought a large block, built two places and sold the back one for the total dev costs thus effectively getting a free house (though he had to work bloody hard on managing the project).
6. There is a lot of stress and effort in subdividing and building. There is no such thing as money for nothing. The current owner may value their free time more highly or maybe there are easements and or caveats on the property. Maybe it isn’t zoned correctly or maybe they just haven’t thought of it or are afraid to do it.
7. Selling one block as vacant land would probably be more cost efficient. You may consider selling the land with plans already approved. That way the purchaser can save on stamp duty and you don’t need to spend all that time and money building a house.You will need to check everything above with real law and accounting professionals or be satisfied for yourself that I’ve got it right as I make no warranty as to the accuracy of what I say. [biggrin]
Having just gone through getting a project house built I have a greater appreciation for development. It actually takes a heck of a lot of effort and running around.
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