Forum Replies Created
" But if it is one off capital gains from the sale of property then this is unlikely to be considered income for loan servicing."
What classifies as one off capital gains terry? Is it If you had a buy and hold property within your trust that you had decided to sell yes?
If your business is the purchasing, renovating and selling of property within short periods of time, 3-6 months. ie if you bought/renovated and sold 3 homes in a year. Would that not classify you as a developer whereby the houses are your 'stock'. Thereby your capital gains from these properties would be treated as income over capital gains if you were a 'investor' who just decided to sell his property.
Shahin – what type of documentation are we talking about, BAS statements or other?
thanks gemma
Looking at my situation.
Currently 3 directors all of varying levels of income. In the future one of the directors is looking to remove himself from the company/trust to go off and do other things. So the only way that his personal guarantees for existing loans to be removed is to show that the existing directors income can satisfy the loans within that trust and then have them rewritten/refinanced. Can the 2 years of trust income be used to satisfy serviceability as well at this stage?
ie example
director 1 170 k income
director 2 75k
director 3 60 k
Trust earns 50k 1st year, 100k 2nd year. Taking the average of the two, 75k.
director 1 then leaves. So as long as the remaining income of the two directors + the income of the trust was enough to cover serviceability requirements the bank would allow his personal guarantees to be removed.
On another note. How do banks treat increasing sales, income through trusts. Ie. if you can show a clear case that you are having more sales/making more profit. Ie. 1st year – 50 k income, 2nd year 100k. Can you get them to average it higher then just 75k. I have read somewhere about perhaps 20% towards the higher figure if can prove increasing sales/profit etc
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HI jacM and all, with your comment "cannot subdivide off the back yard". Is it possible for a smsf to invest in a Unit trust say at at 50.50 ratio ( Half cash from smsf and Half personal cash). The Unit trust to then go out and purchase a property and using the personal cash to pay for any subdivision/renovation costs ?
The main way to keep down cost: try not to change too much of the plumbing.
Keep the sink where the sink is, the shower/bath in the same spot and the toilet the same too, unless you feel changing the layout will significantly improve and increase the room's value.
That means you have only second fix costs for a plumber, like fitting taps etc.
When you are getting quotes, make sure you specify clearly what you want them to do.
The first time I renovated a bathroom, we got in a tiler and the quote seemed ok.
What we didn't realise, after hiring the guy, that he hadn't included grouting, sealing and floor levelling into the per sqm amount.
So now I always tell them exactly what I want them to quote on, and make sure it includes everything. Only then can you be sure you won't get screwed. There are a lot of honest trades people out there, but unfortunately there are a lot of dishonest ones too.
With regards to a plumber, if you have second fix plumbing to do in the kitchen as well, try and tee this up with the bathroom as it saves on cost that the plumber takes driving back and forth.
You can pay a grand for a shower (purchase and labour), or you can buy one yourself for $300-400 that looks nice and fit the brackets yourself.
And what JacM said is important. When I renovate my houses to sell, I put attractive but very cheap fittings in. I'd never do that for my own home. No point paying $200 for a tap you'll never use. Buy a $40 one that looks nice instead.
Go to auctions. I picked up two great baths for $150 each (one had an imperfection on one side, but hey, that'll be hidden against a wall), two showers for about $150 and $170 each, and a vanity for around $200. And they're nice ones too.
I have also picked up tiles for bargain prices too at auctions.
If you take the time to shop around and do your research you can save yourself a bucket of money.
Good luck!
*40 linear metres
I currently have two properties located in taperoo. Both bought well under market value. The area still has a fair bit of stigma around it and I would would go as far to say its prob the worse thought of suburb in western adelaide. People say taperoo and go eughh. As for future growth. If your property is located on the western side of the railway in taperoo within say 500-800m from the beach I would say that Long term there would be good growth in this area. Being land locked by other high value suburbs like semaphore, largs north and north haven I can see it flowing through eventually.
As for buy and hold… Being 680 sqm. Depending on where exactly in taperoo you usually policy area 67 in the Port Adelaide Enfield council says that minimum allotment size is 250sqm. Perhaps you should try approaching a neighbors property and ask to buy 2 m off their boundary (average block length in taperoo around that 40sqm. Ie so buy 70sqm. Blocks of rectanglar land 250sqm would sell for 160-180k in the area. So you could potentially pick up a decent profit in demolishing the existing house and doing a 3 lot subdivision with some neighbors land.
profit – I would be going for the cheapest properties you can find within your area that you think would have a good margin in them. Don't buy a median value or higher end project if this is your first renovation. Learn your basics on a low value house. Because if you do make errors and overvalue your end sale price or overcapitalize your budget or take too long on the renovation. Your risk should be lower and the pain if you make too many mistakes hopefully won't break the bank (equity/ savings etc). Sometimes going for a unit/townhouse might be preferable to a house. Lower entry cost and also minimal money to be spent externally, whilst internally it could be disgusting and generally unpleasant.
In one of your other posts you spoke about were to pick up skills for renovating. You will accumulate more knowledge the the more projects you do. Your first renovation might be just a extremely unattractive cosmetic renovation. Unfortunately there's not many courses out there that will teach you how to install a toilet or a kitchen with sink and work top ect. Learn from tradies. Perhaps you would hire a tiler the first time. You might say hey "if I pay you a extra 200 dollars will you show me what your doing and why" and then you can just assist them and sponge off their knowledge.
In reality I wouldn't say most trades are that difficult to learn. Don't be afraid to try something you don't know. One of the other comments mentioned YouTube. YouTube will pretty much be able to teach you How to tile paint, install toilets, showers, paint, basic carpentry, giprocking (drywall), flooring, carpet laying. Or if you want a more hands on approach I'm pretty sure your local bunnings/masters run info sessions on all these things.
Time – you mention time might be short for yourself. Make it easier for yourself, don't buy a renovation more then 30 minutes away from where you live. As if you have to do the work after work or on weekends you'll find yourself very short on patience driving more then 30 minutes to your project. Perhaps try and tee up your annual leave with settlement date, so you have a solid 4 weeks to get the Majority of the work completed. Also I would comment on time and say. It's 100 percent possible to work fulltime and also work fulltime hours on a renovation just depends how committed you are. With 2 Children that would be a bit harder. I would aim for building up your annual leave.
Also your time during the renovation will be valuable. So maybe whilst your getting educated. Write out a little spread sheet of possible jobs that could come up in a renovation.. Ie painting, changing shower screen, changing light fittings, installing blinds, laying carpet. Ring up the individual trades that would do the particular job. Ie say painting. Ask them how much it would cost per sqm, per linear m, per light globe, per PowerPoint, per blind to get installed etc. Then go to bunnings/masters etc etc and look at costs for materials. You will soon figure out that some jobs have very high labour costs for what might be a relatively low skill level to learn as a beginning. A basic example would be. Paint for a unit might cost 500 in materials. Whilst hiring a painter might cost 2,000-3000 dollars for the same job. Let's assume it takes you 40 hours (way to long) to paint a whole unit. Your going to save/make 1500-2500 dollars be doing this yourself. 2500 might be a acceptable return for those 40 hours of work. It's a low skill level, low tool level ( ie you don't need to buy many tools to complete the job). In reality I would say hire a paint sprayer and you should be able to paint the whole unit/house with 2-3 costs in less then a day. Where as you might discover that for you to learn plumbing, buy appropriate tools, and waste your time figuring out why you can't get your metric pipe fitting to attach to a old imperial pipe fitting. It might be quicker and easier but more expensive then just materials to hire a plumber to come around and attach all your new vanity, taps and waste water. Might be more expensive on the wallet but less taxing on the mind trying to nut out the problems.
Use your time that you have now to investigate areas and get to know sales prices and sales history.
Save your money for renovation/holding costs/ stamp duty/ deposit (if your not going to borrow it)
Watch and learn some basic trade skills.
Terry, What would be your list for structures that provide the greatest to the least amount of asset protection?
1) Are they currently investing in property themselves and making money ? I know many "knowledgeable" people and they all have a lot of opinions and don't have much involvement in property themselves. Im currently doing my 5th renovation/development in this year to be finished by the end of the year and aiming for 10 renovations/developments for the next year so i cant say that I am that worried about the year coming.
2) Research – Discretionary Trusts (aka family trusts) and having a company as trustee for greater asset protection. Also helps if you have brothers or sisters over 18 earning a low wage (you can give them income earned in the family trust). Accountants would be good to speak to about this.
3) How large would your income/tax payments be considering you are currently in University ? Considering you just started your 2nd year and possibly have another 2-3 years to go.
How much profit are you looking to make from doing a renovation project?
How much equity/cash do you have available to use?
How large is your income/serviceability?
How much time do you have?
As for reading "massive profits in real estate by adding value & renovations" would be a good $30 buy over a 5k real estate course.
