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While each and every person has a different situation, if you are going to sell a house that is your primary place of residence (PPOR) then you will not pay any capital gains tax on the sale, subject to a few criteria. No trusts required for that step, however if you're going to keep it, that's another matter. You have many many variables here.
It also depends on how much debt you're going to be carrying into the future, and it's tax status.
Finally, when working out if you should be selling or keeping, I usually run the ruler of it this way – if you were looking at the property that you have, and work out what it's worth to you, would you in another situation buy something similar and see it as good value? It's easier to do it with shares, but the same idea works here. So many people say they will sell an asset when it goes up in value, however sometimes the money could work a LOT better elsewhere, if only they could view the asset as what it is – a money making asset, not something which they own and are attached to.Hope that helps a little bit!
Some lenders will look at your earnings history (more than the last few payslips) and potentially lend to you on your merits, however you have to be able to show that you have been, and will likely continue to, earn a similar amount of money.
Casual employees are less secure than full timers, therefore the banks will tend to take a more cautious approach to lending here. It's still possible however.
By the looks of things, you would be making about 5% profit on the gross investment over a period of 6+ months – if you could find a way to lock in the profit, then maybe, otherwise I would say that $18k profit for the level of effort and risk may not be worth it for you. Not sure if it's my warped sense of money (open to comments here!). Don't forget, you may have to pay tax on the amount that you make as well, so depending on your taxable income, you could get a lot less than the $18k. If it was a buy and hold strategy, so you had some instant equity with great long term potential, but also the time to make things work if it does not go to plan, I would have a different opinion.
It's important to get the title particulars correct – you mentioned that the land was in your fiance's name before the subdivision – am I right in saying that's still the case now?
How did her mother contribute the $90,000? Was it a cash contribution or did she borrow it? If she borrowed it, was she joint on a loan, or did she use other equity in her own property?
Other things that would be of use to know are:
How many properties are there (depends on how you did the sub division)
Total value
Total debt on those properties.
The more info, the greater the chance of getting a solution.Yup, very relevant here….
Mathematically, it works out the same as either way, you have money sitting off a mortgage. Where it matters is what you do with that money, and the tax treatment of that.
I'd stick with the Offset account as it gives you the greatest amount of flexibility. Most loans that we've set up for clients have both offset and redraw, so if you need to put money into the loan, then you can move it from the offset to the loan, and then draw it back out again.
Keep your flexibility high, that way, when you are making changes to your investments and/or lifestyle, you're not restricted on what you can do.
It's only a short reply, but I hope it helps a little!FS
Hi Jacksson,
To fix or not to fix… that is always the question that will never have a complete and accurate answer. The best to time fix is when it does not seem like the best time to fix – ie, when there is still downwards momentum in interest rates. As soon as anyone gets a whif that rates may go up, long term fixed rates start climing. An example of this is that we managed to fix some clients at 4.99 for 3 years only a few months ago, that just isn't possible now.
You have to keep in mind that your interest rate has to AVERAGE out over time… ie, if you're fixing at 7% for 5 years, then the variable rate has to average 7% over that period of time. if rates stay below 7% for the first 3.5yrs out of the 5, then hit 7% and then only climb above 7% in the last year, then the average variable rate is going to be less than 7%, therefore you're paying more by fixing.
If rates hit 7% next year, then climb after that, then fixing at 7% is certainly a good idea.It really comes down to where you feel rates are going to go and what you're comfortable with. If the prospect of rates going up is going to keep you up every night with worry, fixing is also a good idea. You may pay more, but maybe the premium is worth it.
I don't think that anyone can say either way if it's the right thing or not, it's the same as asking what a house will be worth in 5 years… you can have an educated guess, but you'll never really know.
Hope that helps, I know it's not an answer, but may help with the thinking.
FS
If you have a fixed price building contract that the bank and valuer can see, they will potentially give you a percentage of the costs to build the property. They will look at what the end value of the property would be and asses it based on that. So if you're going to spend $200k building, but it only adds $180k of value, then you'll get less. On the other hand, if you're going to spend $200k and add about $250k of value, the bank WONT take that into consideration when lending the money, they'll still give the same LVR as if it's come in on the dollar.
If it's a difficult block of land, make sure you're not over capitalising as that could end up eating into your profit, and it will also make it harder to fund.
You appear to have sufficient equity to make up the difference that the bank won't fund, but it needs to be a fixed price contract with a registered builder.Hi Jack,
The main difference, from my perspective, between a solicitor and a conveyancer is the duty of care that they operate under. A solicitor has a higher duty of care to their client than a conveyancer and will usually charge a litle more. A great conveyancer is just as good as a Solicitor, and definately better than a bad Solicitor.
Just so I can see if I can refer one to you, where abouts would you like them to be?
Dave is spot on, you need to allocate some of your income to rental management fees. Also, don't forget to allow for:
– Maintenance, you mentioned that they are rennovating the lobby, so it can't be a new building. A little bit of pumbing or electrical can add up over time.
– Bank fees – you may have some bank fees on you mortgage
– Potential interest rate increases as well since you're only working off 5% interest rateOn the other side, if you're PAYG and paying tax, you have the potential tax depreciation – since you have not mentioned it, it's really the only what if – and could turn the property back to being positive, but since it's not a new building, this may not have much impact at all.
Regarding what you're aiming for, you really have to weigh it up – if you're going to get good capital growth, then the fact that you're not making much income is not as much an issue. If you're just breaking even, and you're not expecting good growth, then you don't really have many positives there.
Would love to help – not quite sure what we can do however, so let me know. I'm not a broker, but we have brokers working here.
Try contacting this guy… great source of up to date and accurate information – I use him a lot:
Stefan Deffert
Group Director
Level 5, 34 Queen Street
Melbourne Victoria 3000
T +61 3 8610 3900
F +61 3 8610 3999
http://www.structuredco.com.auFor reference, I have no association with this company other than I am also a client.
Ah, the old days.
In the past, before we were in the mess that we find ourselves today, there were a very small amount of people that could get access to the kind of money that you were talking about. However, with things the way they, it just does not exist I'm afraid. Even those that used to have it can't get it any more.
Keep in mind however:
wealthyjvd wrote:the more money you invest, the more profit you can make..Yes, this is true… however when you're investing money that you didn't have in the first place, your risk is also a lot higher. In fact, that's how the world got into the mess that we're in at the moment!
Well done Chris – great step towards a great future. Just be careful not to over extend yourself. I think you'll find most people on here will advocate a conservative approach – keeping yourself safe is very important.
Just keep reading through the posts and topics on here, there is sufficient information on here to learn just about everything. Keep us informed as to what you're thinking and doing, and listen to the comments of hundreds of investors that have been there, done that.
Best of luck and we're all looking forward to seeing how you progress!
Got someone good in St Kilda (Queens Rd, nr the city actually).
Would that work?
Hi Jake,
It call comes down to the maths really. If you can't find the property that you want in your own town, then find one that will get you as close to possible for what you want. Then, sit down and do the sums. Weigh up what it will cost you, add in the FHOG etc. Then compare it to a property that you would like to buy (providing such a property exists). Once you have these numbers, then you'll have a clear indication as to which will leave you in the best situation.
Also take into account potentially higher interest rates. I'm not saying that they're going up right now, but eventually, they will and that may have an effect on your CF in the future.You mentioned you had picked Brisbane or Melbourne – any particular reason for those two cities? Is it cost or your bestion opinion based on research?
Will you require immediate cash flow (ie, rent as soon as you buy the property) or can you sustain mortgage payments for a period of time (which means you can either build or renovate a property to potentially add value?) – also, your tax situation will have some bearing on if you buy new, semi new or old. $300,000 can get you a fair bit, so it's best to narrow down your options and you'll be amazed at how much more focussed you can be once you do that.
If you're still interested in what they have to offer, hear them out and then post the details back here – you're certain to get solid feedback from other posters here who have as good as or more experience than the people you are talking to.
Additionally, property is always about research, research research.
Then, you can base you decisions around solid research, reasoning and qualified opinion.
PosEnterprises wrote:Thanks DiggerJust not sure how to buy over East – don't know how the settlement process works over there compared to WA.
What state are you looking to buy in? Then we can let you know the settlement process
Some buying groups or buyers agents are good to buy through, however it's best to do heaps of research and talk to a lot of people if you're going to use one. Nothing beats personal research at the end of the day.
Hi pvrpunnad,
With regards to Park Trent, I have heard lots about them, however since I don't have first hand experience with them (I have dealt with clients that have dealt with them, and I have known some of their staff, but current and former) I prefer not to comment. However, I'm sure that many on here will be happy to do so.
For the property, maybe if you post a little bit more about what you're after, such as if you're looking for capital growth, income, value add, price range etc, then we can point you in the right direction.
