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GR do you build and hold or do you build sell and move on?
just as Foundation wishes for a fall in property prices I wish for a fall in share prices. I totally missed the boat on this boom and would love a collapse so I could put my portfolio together. Of course markets don’t work in isolation and for the share market to halve would either be a dramatic symptom of a serious problem or catalyst for economic collapse. It all depends on your strategy and where you are at in your life. Making calls on property for 40 years into the future I think is even beyond the imagination of BIS Shrapnel.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
guys don’t waste your money on fancy development programs – it really only takes a basic spreadsheet.
http://www.megainvestments.com.auJohn Carroll
as a rule of thumb allow $10k. when they do it go down there and watch them – i have now been ripped off twice now, once when they buried all the rubble on site and i had to pay to get rid of it again, secondly when they left a bore housing which shouldnt have happened if they raked it to the required depth. oh and once they claimed to cap the sewer and the plumber issued a certificat saying he had done it and it hadnt been doen so I got charged by the builder again. someone lied and could of lost their plumbing licence but I had no proof. once the builder is on site doing works it is too late to worry about who did or said what… you just need a clean site asap.
you definitely need a demolition permit and most shires require you to bait the house several weeks prior to demolition.
sometimes they wont issue a demolition licence until a building licence has issued. I had a nightmare experience in Vic Park where this was the case. I couldnt get any liability insurance and squatters moved in and were lighting fires etc. the council wouldn’t allow demoliton yet insisted I had to make the property safe and secure – I did my best to board it up but we are dealing with the dregs of society here… needles and who knows what else lying around. the neighbours were all up in arms and forever getting me out there to complain about the eye sore but what could I do? I was SO happy when I finally saw a bulldozer sitting on top of the house! those initial problems should have sent a signal to me… what a nigtmare development that was!
http://www.megainvestments.com.auJohn Carroll
Hi MArisa, yes GST is a real kicker, the admin side of it alone is a real pain.
i have done a spec home in St James…. it has been dragging on so many years now it is almost funny. last week the kitchen cabinets went in, albeit all the wrong colour. turns out they belong to the house next door so they all need to come out again.
I am also doing a quad development in central mandurah. I will probably keep 1 of these. values down there have raced ahead so fast that I am very pleased with the result.
I have been flipping a block here and there around Baldivis and the anchorage whilst half considering building on them, but by the time you take the apprciation of the land out and weigh it up against building for 6 to 9 months (if you manage to pick the right builder) I just dont know if it is worth the headaches. It seems easier to be buying villas off the plan and watch someone else struggle to get them built and enjoy the resale rewards at the end. I have a few on the books like this and for what I paid for them I can’t see how they can construct them for that. I sold a house off the plan in Karratha and the delays on that are incredible… really eating into the profit margin (so I am on the other side of the fence on that one).
am also into a syndication developing in leederville – the project should be ok but the returns at the end of the day will be pitiful and is a big lesson in not handing control of my money to another so called expert.
I am a bit tired of all these loose ends so will spend the next 9 months wrappign them all up and tidying up the balance sheet. I guess I get concerned about trading all these properties when I read so much about the equity increases people are making… the likes of Kenneth and yourself for example, but Michael Yardney in particular who believes in keep everything. Ths contrasts greatly against this guy who makes an aweful lot of sense http://www.investinginland.com/land_myths.htm who basically says holding onto a depreciating asset like a building at a negative rate of return is a losers game. I think I will continue to develop and just accumulate ‘keepers’ ata rate of one in every 5 or so.
http://www.megainvestments.com.auJohn Carroll
Marisa do you plan to sell your homes? I am getting terribly twisted up on the whole sell/hold decision. if i develop and sell i am up for 10% GST plus full tax of say 50%, leaving around 45% clear. If I hold then sell after a while the effective CGT tax rate is only 25%, leaving 75% clear, but the value will not be as much as a tenant has been there for a year or two depreciating the place – so it would work out about the same.
http://www.megainvestments.com.auJohn Carroll
yes 2 distinct things happening here:
1) if not registered the gross price e.g. $11, can be claimed as atax deduction. in this scenario you are probably talking about depreciation spread over many years.
2) you are a developer regostered for GST. so you buy a block for $110k, claim back your $10k, then build for $220k, claim back your $20k, then sell it for $440k, pay $40k GST, so it has cost you $10k. the other $100k goes into your persoanl tax return so you lose another 50% or so there, nett profit approx $50k.
If you held the investment you would have an equity of $110k with no tax bill.
http://www.megainvestments.com.auJohn Carroll
Hi Mikala – I have been deliving around a lot on this subject lately and I would say:
if you plan to hold and rent it you can’t claim the gST back.
GST can be retrospectively adjusted but I don’t think it will apply in your case anyway.
http://www.megainvestments.com.auJohn Carroll
yes it is a consideration. you need to consider what is unique about the property, is it worth paying for in terms of cap growth and what is the rent % like. I have always invested inner city and close to transport. Buying in the ealrier stages will mean you are closer to the train station and should be rewarded accordingly. Singleton is very good as it has the beach, but the rents would need investigating. Alternatively you could save yourself the headaches and buy an established place in huntingdale – not as trendy as the southern coastal strip but at around $230k they are well below the median price (and replacement price I would expect) and IMO is a potential mover. the ripple of growth has spread from Perth outwards and – with added impetus fromn the fuel price – is likely to flow back to inner city areas. I would look at picking up an apartment at $130k in Victoria Park… you can walk to the city! Curtin Uni is loking to bring in an extra 30000 or so students into the area so it will be safe to say you will never be short of a tenant. Vic Park is tipped as undervalued and with the cafe strip now evolving it does seem very cheap. St James villas also appear under valued IMO at $250k – around replacement cost, and also adjacent to the uni, if not closer than vic park in fact. with prices on the rise so fast it is hard to pick the quality – doesnt make it any less important though
http://www.megainvestments.com.auJohn Carroll
I love the incluisons and packaging of Impressions – corian benchtops, the solar heaters etc. Pity they take so long to (a) draw the plans and (b) ever get them built.
went to a spec home I am doing for a site visit today. geees the building industry is hopeless at the moment… kitchen cupboards are all the completely wrong colour, so they will need to be scrapped and replaced. same as my friend who had the wrong roof tiles put on – poor roofers had to pull them all off and replace them again. Every time they dropped one it went through the ceiling and it had to be repaired. Still I did make the guys rip the entire ceiling out of my 2 storey house, filled about 2 skips with gyproc. then there is the guy who had the slab poured in slightly the wrong location, so they got an angle grinder and cut a bit off one side and added some concrete to the other side. when they cut through on the one side the slab was a grand total of 40mm thick. Ya gotta love building!
http://www.megainvestments.com.auJohn Carroll
ps I think Wellard is an excellent estate, a village style development around a train station has to be a winner
http://www.megainvestments.com.auJohn Carroll
Marisa my concerns with Singleton were that the supposed train station is only a proposed one which will quite possibly never happen – any thoughts on that? I note that at Lakelands the developer paid to have the ear marked train included in the first round of train stations. when weighing up the Anchorage at $130k against Singleton for similar money I felt the Anchorage presented better value. now that the Anchorgae is set to be selling at $200k in the next release the prices at singleton are looking better. I dont know why Singleton has been so slow sellign and I wonder if it is just lack of marketing? Rivergums is looking very cheap at the moment. Baldivis central is completely sold out but there will be a new release soon. Getting titled land anywhere is pretty difficult. When I drive people to Mandurah they are surprised at all the development. They aint seen nothing yet….. some of the deals that have gone through and are being drawn up for the next few years are amazing. this place here for example was a rocky wasteland only a couple of years ago – still pretty much is http://www.lakelands-estate.com.au/stages/default.asp?sID=3&sc=g
now to own land beach side of Fremantle Rd will be the long term growth play
http://www.megainvestments.com.auJohn Carroll
of second importance is GST. if you build and sell you need to register and lose a further 10% of your profits. it pays not to be a developer!
http://www.megainvestments.com.auJohn Carroll
as far as r/c ducted goes I have just considered that for an IP and it really isnt a smart decision economically speaking – you will never recover the cost in rent let alone make money on your investment. personally i would install a evap unit and get a plumber to put a gas negus point in.
http://www.megainvestments.com.auJohn Carroll
I saw a fascinating article a couple of years ago that attempted to disregard the effects of building and renovation such as Dazzling has described. The long term suburb winners were…..
Mt Lawley and Shenton Park.
But times do change and areas such as Anchorage didnt even exist back then so it is hard to compare apples with oranges.
http://www.megainvestments.com.auJohn Carroll
dont get too excited Redwing – all Steve Navra says is that he does a calculation using rent yield to see if a propety is fairly priced (with a few fancy graphs thrown in). Dont we all do this?
I see the couple under discussion have consistently bought property over time – could be a lesson there in not trying to pick the top and the bottom of the market… rather just dollar cost average it.
http://www.megainvestments.com.auJohn Carroll
I have no doubts about the quality of the subdivision… but the sales rate doesnt surprise me. where hasnt been selling that fast???
http://www.megainvestments.com.auJohn Carroll
ha ha! it really is amazing… an economic forecaster that builds their reputation on incompetence.
http://www.megainvestments.com.auJohn Carroll
very true. if I was a Seller and you offered to buy my property on 5 cents deposit I would reject it, especially in todays market. I think a lot of people believe an unconditional offer will just sail through to settlement – unfortunatley it is common for settlement not to occur for whatever reason and at least a decent deposit protects the Seller in this event. There is absolutely no benefit to the agent though as the property has not settled! What it does mean is that if the Seller refuses to pay the commission upon successful settlement and there is a decent deposit in the trust account, the commission is paid straight away.
http://www.megainvestments.com.auJohn Carroll
