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great question. you need to look at a h&l proposal and compare it to existing stock to see if it is value for money. yes new properties may go backwards in price a little for a couple of years, but if you have made an upfront immediate capital gain on completion then you need to consider the 2 in context. in a rising market such as WA where you would probably be looking (if you can find a package available somewhere) then it is unlikely that it will retreat and the cap growth will continue forwards anyway. there is IMO too many variables to answer this question simply. I reckon if you make an immdeiate cap gain then it must be good. after that you are at the mercy of the markets. so if you are in a good market you will be fine, with a house that has higher depcn write offs and hopefully less maintenance.
of course the prob with h&l is that you are exposed to the buildign delays and with trade shortages as they are you may be better off just buying somehting off the plan and let someone else deal with the headaches. when you go to settle you may have enough equity to not have to put any cash into the deal.
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property is a long term and illiquid asset. You obviously haven’t had the place long and negative gearing is a proven strategy despite the trendiness of positive cashflow. have you applied to vary your weekly tax bill? there must be some depreciation as you have just spent $15k on new fittings. it seems as tho you have $7k of lending costs that can be written back over 5 years. not to mention your weekly neg gearing.
Personally I think you are in here for the long haul and need to make it work. if you seek a pos cashflow portfolio by all means go for it, use the cashflow from a new property to prop this one up. but please don’t panic and – to coin a phrase – chuck the baby out with the bath water.
just my opinion of course
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until of course something goes wrong, in which case the agent is usually the first to be sued as all of a sudden they play a critical part in the process.
seriosuly tho… the perception that an agent stands by and does nothing but collect a commission at the end is really quite false. holding deals together, dealing with financiers that couldn’t care less about their client, chasing deposits and constantly renegotiating (no it doesn’t stop with a signed O+A) for up to 2 years and beyond is more like the reality.
having said that, the deposit is as per the contract an it is quite weird that the agent would want to depart from that. are you sure they haven’t made a simple mistake and didn’t realise that you had lowballed the deposit?
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yeh the contract date is probably correct, but if your intention was to build and sell then it is not a CGT event anyway, it’s just normal income.
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the cottage lots have gained a lot of popularity and I love our standard design that we have for these small lots, however in the case of capricorn, i went for a traditional lot as I felt there was a scarcity value attached to it.
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“1. Wages must rise dramatically – not likely under the new IR framework.”
On an individual level maybe not, but on an aggregate basis yes. As employers are less scared to put staff on and productivity rises and taxpayers stop funding so many doleys then it follows there will be more money chasing housing.
Not that I really believe the whole issue will impact the housing market.
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good point. increase the population 10 times and develop some depth to the economy and we could be a player.
now that would cause a boiling property market!
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
and lots of graphs and numbers, so the conclusion must be correct.
wouldn’t invreased immigration, lack of housing, changes to lending policies etc. cause a change in the value of a property? to say something is overvalued because it is only attributable to the fact that more people want to buy it is an odd statement. is oil over valued?
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I think I have misunderstood. What whitelaw was suggesting I believe was (as an extreme example) that you could build 3 units for $200k each, sell 2 for $300k each and transfer the last to yourself. sales = $600k, costs = $600k, presto, no tax payable.
I certainly agree that there is no problem retaining units without formally transferring them.
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“First AUSPROP nop its not unusual to hold one, two or three unit depending on the development and as for (was the accountant hinting at fiddling books a bit or is this a legit strategy?) well this is the norm as long as the structure has been setup at the start I am currently hold 3 in a development that is about to finish, whitelaw accountant is correct you take the profit in the form of product and you have a lower base value but because there is no profit at the end as its neutral, there is also no capital gains tax its a little more complex but whitelaw accountant is right as long as its is a trust structure but I will get back to the post and that is.”
Interesting… I will ask my accountant for an opinion. I have never heard of ‘taking your profit as a product’ as the costs etc need to be apportioned across each of units. However, I hope to have missed a big loophole as this would be an incredible eye opener and opportunity for me.
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Yes there is a block there for $100k with a $1500 rebate for an unconditional offer plus the building incentives. With 12 months till settlement it is a real bargain.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
hey redwing, any thoughts you ask… my biggest one is “I wish I owned more property!”
the stats as usual are a bit hit and miss with a few anomolies. it’s a good history lesson but the nore important issue is what will be the headline suburbs in the next edition?
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this time last year I copped a $300 fine at one of my development sites for having lawn up to ankle height… there was no arguing with the council and I had to pay for my ‘serious fire hazard’. My mate just emailed me to say a house he is building has been issued a fire infringement notice of $250 if he doesn’t clean up within 5 days (last time i saw it was just sand so it is hard to imagine). so my thoughts: clean up your sites or you will cop a very irritating fine
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Originally posted by whitelaw:out this way you can take advantage of tax and GST positions by absorbing them into the retained property …cheers john…
Hi John – welcome to the forum. Curious about this statement… was the accountant hinting at fiddling books a bit or is this a legit strategy? I am unaware of any way you can juggle costs from the other two to the remaining one… the costs would need to be apportioned on a reliable measure such as per square metre I would have thought?
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I don’t know that one dazzling but I would dearly love to own the Masonic Hall opposite Subi Oval there – what a building!
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well 20% gross is the bog standard which is usually 100% return on equity. but you can get good deals that are 100, 200% which would be a large return on equity – all depends how much you put in i.e. gearing and how quick you can turn it around. and if you put nothing in and make $1 what is your return on equity then?
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ah is that where the news was, that would make sense. I believe the plan was to build all the homes and sell them in a USA style completed estate. how can it not be property development? must have clever lawyers or something. maybe it’s a JV where the super fund buys the land cheap and then the partner pays a profit when they sell the house – am sure there would be a way around it, hence just holding land.
super is dead money anyway so I guess you may as well build something with decent margins and as safe as houses rather than gamble on the stock market.
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I have heard – 2nd hand only – that a super fund bought out all of the remaining lots and stages at Seascapes, so don’t expect to find any land down there. I think this is a sign of the future.
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it would be a brave dveloper that took on a devy with a 10% ROI. we are talking gross profit margin here right?
The only guys that I know that can do this are builders themselves, in which case they jsut consider the building and dev margin one and the same. these are the guys to buy good value OTP property from!
oh also – you’d find it tough to find a bank to lend on a project as low as 10% return… maybe they are lazy super funds or somehting.
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