Hi folks,
I've found a block of units for sale at approx $1m and I believe I can renovate them and sell for up to $1.5m. I only have enough cash to renovate a couple of the units and my thoughts are to offer the asking price payable within 1 year once I've renovated and sold the individual units, on a staggered basis 2 units at a time. This would allow me to reduce my purchase costs as there would be no transfer to me therefore no stamp duty to pay, holding costs (bank interest etc) would be reduced also although I'd cover the loss of rent for the units which are under renovation. I understand that the ownership of the property would remain as the vendor's until all units are sold and I have fully paid the purchase price.
Could a specific agreement/contract be drawn up to allow me to strata title, renovate and sell the units even if still owned by the vendor? And can anyone suggest a solicitor who could draw up the relevant contract?
Any help would be much appreciated, it seems like a great deal I really would like to pursue. The lack of capital is restricting me and if I was to factor in loan costs and stamp duty it makes the margin to small.
Thanks
Tim
Good luck in finding a Vendor who is going to allow you to settle when you like but in the meantime renovate the unit whilst he gets no rent signs all of your strata title documents and then pays you the balance of the purchase price after he gets stung for CGT & GST being the Title holder.
Richard Taylor | Australia's leading private lender
Fair points, thanks for the insights. Has any one else done something like this before or am I flogging a dead horse?
FDH i am afraid.
Richard Taylor | Australia's leading private lender
You could always put the offer to the vendor. You never know what the vendor may accept.
You could perhaps do a 6 month settlement and take over the lease in two of the units while you renovate them. That way the vendor will still get ongoing rent. Then you could take over the lease in the remaining units and do the same thing to them.
I doubt that any vendor would agree to such terms but, as I just said, you never know if you never ask
Cheers
K
Thanks Linar,
Paying ongoing rent while renovating the units would be part of the offer so the vendor is not out of pocket from the delayed settlement. The upfront and holding costs make the deal too costly.
Richard, if the units were sold individually would they be subject to a GST component?
Would depend if they were substantially renovated or not.
Richard Taylor | Australia's leading private lender
Thanks Richard, can you elaborate on that a bit? Based on a 1 bed unit, current value approx $135,000, renovate (and strata) for up to $35k and sell for up to $240,000.
You need to look at the Tax defination of a substantially renovated property.
We do a fair amount of strata titled blocks in Qld (buy renovate and sell) and obtained a PBR from the ATO.
If you are going to spend $35,000 per unit including development costs you may well find the ATO consider the work "Substantial" and then GST will be charged on your sale price.
Richard Taylor | Australia's leading private lender
Thanks again Richard,
Could I ask you, in your opinion, are there too many grey areas in purchasing a block of units using some form of vendor finance? Have you bought in the past with your own capital and bank loans?
99% of times we only ever use our own funds to purchase as most Vendors and your financier will say NO.
Richard Taylor | Australia's leading private lender
You must be logged in to reply to this topic. If you don't have an account, you can register here.
