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In NSW, if they hold a registered mortgage they will need to consent. If they hold an unregistered mortgage by deposit of the deeds they will still need to approve it as theyw ill need to produce the deed.
The mortgage is over the whole of the subdivided land. If you want something released from the mortgage youw ill need to negotiate.
My gut feeling would be that you should consider a NZ incorporated company as trustee.
Don’t panic. In some of the towns I’m looking at prices are falling, not increasing.
I’d suggest that you work out what your strategy is:
1. Is it +cf or are you looking at -ve gearing where capital growth might occur. This will help you narrow down where you’re looking.
2. Do you have the time/skills for renovation, is cordinating renovation from a distance going to be a problem?
3. Are you going to need a managing agent? Some small towns don’t have them.Don’t do something that’s too far out of your comfort level the first time. Even around yiur own area, familiarity with its prices, future development and employment might give you some good opportunities for early buys.
You need to take your contract and talk to a lawyer. There could be a whole range of issues eg who determines if they are entitled to an extension, have they failed to do enough in good weather. This is all going to depend on the wording of not only your ‘sunset’ clause but also other parts of the contract. Other issues about quality of specifications etc might need to be considered.
You might need to instruct a solicitor experienced in building/construction disputes.
If you’re going to try and get out of the contract, and presumably the Vendor wants you to stick to it, there are going to be costs involved. You should consider doing a cost-benefit analysis to see whether the costs of trying to/getting out of the contract are cheaper than your presumaed loss on settling at the contract price.
May be you should define what you mean by longterm. I sold some land in Vic years ago and the agent said they’ll offer $x for a 28 day settlement or they’ll pay your price for a long settlement. I said how long. He said 6 weeks.
Generally I’d think unless there is a particular reason eg subdivision, deceased estate, vendor waiting to complete building of new house or for end of school term, purchaser waiting for a term deposit etc to mature, most settlements in NSW and Vic would be within 6 weeks of exchange of contracts.
If you want a longer settlement you’ve got to have that in your negotiations.
You’ve got two types of renters of sheds –
temporary eg between houses
longer term
You might not get any response from potential temporary renters
Longer term might, but probably notIf there aren’t any sheds in the district what you’re doing is also an educative process of advantages of sheds eg free up the spare bedroom, make room for a billiard table etc etc
Look at your demographics. From a cash flow point of view you might be better to build in stages and say build the second stage when your first stage is 75% let
I’d advertise in the local papers, maybe a local radio station. Prominent signage which simply needs to say “Storage” and give some contact details
Changing tax residence to NZ might have other ramifications as it might possibly trigger CGT events on your assets that don’t have the necessary connexion to australia, or if your change of residence results in your australian trust becoming non-resident.
If you’re serious about these kind of things you need to get good advice early. Read “The rise and fall of the house of Vestey” by Knightley
In at least one state if the purchaser fails to sign immediately after the auction the auctioneer can sign for the purchaser
Get some professional advice. You actually will have two assets, the land which was acquired at date of contract and the building.
Also have a look at Business Review Weekly 4 March 2004
an extract:
“Income v. capital gainsThe difference between income and capital gains has been the root of much tax avoidance and evasion during the latest property boom. The broad rule is that owners who hold an investment property are subject to CGT on profits from its sale. By contrast, owners who are in the business of developing, or buying and selling property for profit are subject to income tax on their profits.
Expectations of obtaining either a main-residence exemption from CGT or discount CGT are encouraging many developers, particularly the smaller ones, to wrongly claim that their income is a capital gain.
One of the main problems is that there is much confusion – even among tax professionals – about the difference between capital gains and income. Wolfers says: “I see all the time where one accountant will say a profit is income and another will say it is capital, yet their answers are based on the same set of facts. At seminars last year, I gave 200 tax accountants and tax lawyers examples, and would ask them whether the profit was income or capital. Half the room would say ‘income’, the other half would say ‘capital’. The law is not clear.”
Wolfers believes that the ATO has also not given enough guidance to taxpayers about whether their profits are capital or income. The introduction of discount CGT in September 1999 brought about a massive difference between income and capital. “Within days of this change, members of the tax profession, including Gordon Cooper [from Cooper & Co] and myself, were warning that this would be a big-ticket item for avoidance.
“This issue most commonly arises when mum-and-dad, small-scale property developers are looking for security in their tax treatment. They are stunned when told they are not entitled to the CGT discount. They are stunned because they are doing what tens of thousands of others [who are also not professional developers] are doing and claiming CGT discounts.
“If a person buys a property on a large block of land and wants to subdivide it to build a townhouse to sell, the question of whether the profit is subject to income tax or CGT is not clear.”
The deputy commissioner for personal tax, Raelene Vivian, responds by saying she believes the ATO provides much guidance for such small property developers – written and verbal.”
Jaffasoft,
Your figures are suggesting in 2003 1,400,000 bed nights (5 days, 4 nights) and in 2004 2,850,000 bed nights (7 days, 6 nights). This works out to be the equivalent of 3835 fully occupied single beds in 2003 and 7808 fully occupied single beds in 2004 (or if all couples 1917.5 (someone always misses out) and 3904 double beds in 2003 and 2004).
I’d be cautious and recheck your figures as what your figures are saying is that in 2004 there was not only a 35% increase in visitors but all the visitors stayed 50% longer on average.
I don’t know what happened in your area in 2004 but this is phenomenal.
Your area might be booming and tourist accommodation might be a good investment but on this basis any property investment used by tourists – Laundromats, cafes etc etc would be likely to be a good investment.
Why don’t you look at the census figures for 2001 and 1996 which the local council or library probably has and see what the numbers of nonlocals on census night was.
I’ve had two experiences of living in tourist oriented areas.
In one – a Murray River town the population went up several fold between Melbourne Cup Day and the end of January. Obviously these people were staying for longer periods so if your area is like that the demographics being attracted might be families not backpackers
In the second – on the Newell Highway where I was also involved in tourism committees, the average stay was 1.1 nights
If your area has high numbers over a short period, in the off season there are going to be people undercutting prices, so you are really going to have to make your profit in the busy time.
Tourism might be growing in your area, but it is also the industry most areas of Australia are looking at for growth so there will be a lot of competition
Good luck
The ATO will say the purpose of your additional borrowing is to buy your new home not to create income.
Alternatives:
1.Sell your first home to your family trust which borrows to purchase.
2. Sell your first home. Put all the proceeds to your new home. Get a line of credit on the new home to use as deposits on your new IPsThanks Michael for sharing this resource.
Redhaven
You’ve obviously got good knowledge of what’s happening in this area. Great that you’re looking to capitalise on this.
Maybe when you buy in this new town you should appoint as managing agent one of the agents in the other town. They’re obviously going to have qualified tenants and they’re not going to be apologetic for charging the rents you want.
This might be one of those opportunities in a lifetime to look at buying extra properties if you can and selling something off as prices/rents increase.
Maybe Steve’s multiplication by division might be worth considering.
Good luck
If these are older flats, you’re probably going to have to factor in stuff like new kitchens at some stage in the future if you want to keep occupancy high.
Any lawns to mow?
I’ve got an older block of flats. Maintenance is probably closer to 10%.
If you can build some equity quickly and have some contingency funds to cover some extra repairs close together, I’d consider it seriously.
Just because a house is cheap might not mean it is undervalued. There are two components to calculating your total return on an asset, namely (cash income + price changes over the period)/price at which the asset is purchased.
In Sydney for example people have bought assets which give a low cash income because they are expecting a large price change in the asset.
In country areas on the other hand your cash income is often higher because the likelihood of increases in the value of the asset is lower.
During the past three-four years prices in small country towns have risen dramatically, yet often the value of land has not increased or if it has increased the increase is less.
There are a number of factors which might have driven the low end of the market:
1.FHOG, in a lot of towns that $7K went straight into a price increase
2. WWW making it much easier to find property in the same state or interstateThe issue is what happens to prices in small country towns. While investors are still active there are fewer investors. 18-19 months ago I went to a number of open houses in Dubbo. Heaps of people, high proprtion investors. Investment properties advertised in the paper are often advertised for several weeks now.
There are a few towns whose prices I follow regularly. Since September in a couple of the smaller towns prices have dropped substantially. In a couple of instances I can identify for specific properties drops of 15-30%. In other cases I’m going by numbers of houses in windows, price ranges and conversation with locals.
By all means buy a cheap house somewhere, if that fits in with your investing strategy eg need a positive cash flow from the property, but don’t just assume (particularly if the property is already returning its best income eg a rented house or a fully tenanted commercial property) that values will go up even if the price you paid is less than replacement value.
If you want equity growth you’re going to have to solve problems that exist. One area where there ,may be potential is providing good office accommodation in country towns. I did that for a property for work this year.
Bear in mind drought is still affecting a lot of country towns in NSW. May be there will be a bounce when incomes increase.
What are you wanting to achieve from investing? I know towns where you have a positive cashflow, but where there aree no managing agents within 100 km, also difficulties organising tradespeople etc.
You need to work out your strategy, how hands on do you want or are you able to be.
But generally if you want +cf, you’re going to need to provide a solution eg vacant buildings – organise tenancies, vacant land – organise a use may be relocate houses, maybe horse agistment.
Start at a level you’re competent with, understand your risks.
Good luck.
Try APIMagazine. I don’t think they did rental yields, but if you can find median rentals and median prices you can work it out.
Questionable whether the result justifies the effort and time which is probably better spent trying to find new investments.
From memory, change of residence for tax purposes might also be an event triggering capital gains tax.
If you look at the Derivex.com.au website undere site updates there is reference to them seeting up a subsite for NZ.
If there’s a bank branch near the land try that bank.
