I have inheritated a property recently in need of renovation byt situated in the best street in bondi beach. 100 metres from the main drag but in a cul de sac.
I have a few issues I’d appreciate an opion on…
Do I sell and for how much? I have recetly had interest from the neighbour and find bondi prices so ridiculous I’m not too sure what price I can rest on. The other prospect is renovate and sell before the two year mark or renovate and rent.
I am not sure what to do as far as in keeping the place and getting the cashflow although I would be sitting on a lot of money or bite the bullet and sell soon.[blush2][blink]tara
Most people who come into a large sum of money (or inheritance) end up spending the lot on ‘doodads’ and wind up back where they started (or worse). If you sell it, what are YOU going to do with the cash?
My 2c worth –
Unless you are desperate for the cash, or need the place as your PPoR, then I suggest do a reno and rent it out If you have access to funds to carry out the reno.You could actually borrow the funds to do this from the property you inherited.If you sell it you could be liable for cap gains tax, which is not that big a deal as the property wasn’t yours to begin with, but you can do better by keeping the property in my opinion.
If you plan to rent it out the reno doesn’t need to be exorbitent, and in an area like Bondi, you should have a very nice positive cashflow. Check with local agents on the likely rent return.
You also have a great asset there for further investing in the other asset classes – property, shares (and mutual funds), businesses and/or paper assets. You can do this by accessing the equity in the property, but you should sit down with a financial planner who is experienced with Property Investing and who won’t just try to get you to buy a whole stack of mutual funds that they get commissions on (you can still buy th M.F’s and shares, but you want a Financial Planner who is looking out for your interests not theirs).
You will also need a good Property Investment savvy Mortgage Broker to set up the right loan structure, a good accountant and probably a lawyer to assist you.Structured the right way, this property will set you up for the rest of your life.
Cheers,
Marc.
[email protected]“we get sent lemons; it’s up to us to make lemonade”
Hello Tara
I actually think the CGT issue may be very important and I would suggest that you go to an accountant who is well versed in CGT in relation to inheritance.
A lot depends on whether the property was bought pre or post Sept. 1985 and whether it was always someones PPOR or an investment property.
You may want to read up on this topic on the ATO site so that you are a little familiar with the issues and know what questions to ask.
http://www.ato.gov.au/individuals/pathway.asp?pc=001/002/026&mfp=001&mnu=5060#001_002_026
Good luck [smiling]
ElkaThanks for your replies.
Firstly elkam, I have seen an accountant but actually found the ATO website more informative. Think I will look for new accountant although they thought selling was the best option for me and I was against this initially.LA Aussie, I would do well to explain my circumstances better. I have been paralyzed with the thought of not being able to handle this properly and the thought of blowing it has kept me awake at night. However my priority is my young family. Initially I was going to do a reno and rent out but we have been wanting to move to the North Coast NSW for some time now, particularly Bellingen, but couln’t work out how to do such a move and time it right etc. (I live near Liverpool NSW) WE have a PPoR worth about 320,000 and owing 160 000. I now plan to sell Bondi and use that money to purchase or build family home on acres with potential to build holiday cabins and small farming endevours. The rest of the money I would split between shares and investment properties. I can rent out my current home which would be slightly cashflow+ so looks after itself.
I understand that I could use the equity in the Bondi place and also receive a good rental return but we are a one wage family at the moment with two very young kids and hopefully another one soon. I would like to bring them up in a nice home without the burden of a mortagage on my shoulders.(apart from the IP’s).
I guess its a matter of what you want out of life and what’s important.
Meeting an interior designer tomorrow. Has anyone used their services?tara
If you are single income then I think your number 1 proiority is always to avoid debt. If you can sell it to totally live out of debt you will be far, far, far ahead of the average australian family that pays over $500 per week to service debts. Basically if you are single income you won’t be paying down any loan quickly at all, probably 20-30 years, in which case you would be paying back the money 3 fold. I would sell it, it will be load of your mind and you can go live without having to worry about such things. Remember when you are in credit you never ‘loose’. Just put some money in a bank with 6% PA savings or term deposits and rest in managed shares that should return up near 9%.
I would agree with Elka. Getting good tax advice is essential for something like this. Since it is a complex area, I would suggest you talk to a few different accountants as good advice could save you tens of thousands.
Terryw
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