Hi Wade,

One of my clients bought some land with the intention to develop as soon as he could, he started getting building plans together and obtaining a DA. He was able to negative gear on this block as there was intention to build a dwelling. However, the advice he received from his account was that if he did not have these plans/milestones he wouldn't have been able to claim the negative gearing.

As there isn't an asset to depreciate, he wasn't able to claim any deprecation.

I would advise checking with your accountant what the ATO deems acceptable time-line's between achieving certain construction milestones.

Alternately, many of my client's purchase a development site where there is an exceptionally old house on it. This house could be worth no more than the cost of demolition, but as long as they're deriving an income from it they can claim negative gearing.

Taking a step back, have you looked into your strategy?

The reason for this is different people specialise in different areas and just because they succeed in one strategy doesn't always mean that it would suit you.

The main three strategies include:
Buying and holding
Flipping
repackaging

Then there are subcategories within these main strategies:

Buying and holding

• Buying, renovating and holding (last two are interchangeable)
• Buying, developing and holding (last two are interchangeable)
• Buying at a discount and holding
• Cash flow property
• Capital growth property
• Commercial property
• The list goes on…

Flipping

• Renovate and sell
• Develop and sell
• Discount to market value, re-advertise and sell
• Again, the list goes on…

Repackaging

• Buy and lease option
• Vanilla Options
• Rent to buy
• Again & again, the list goes on…

I'm not arguing at the merit of each different strategy as I have my own personal biases as to what's better/worse. However, always consider that the team you put together for one strategy is not always the best team for another strategy. All to often we want and easy solution, and remember you are part of the team too.

It is a little cheeky, but what can you bring to the table which will help the team?

Best of luck,

Kent

We are a Buyers' Agency in Perth. Feel free to request an info pack below and I can invite you along to one of our seminars.

Also, have a clause to fix minor defects too. I have seen too many times many minor defects adding up to being a lot. However, it isn't major defect on its own so technically it's a grey area if you can pull out. A 1960s house I purchased on a development site the other week had to have $2500 worth of "minor" electrical attention.

Hi,

Firstly, have you put your own contract clauses into the offer and acceptance – please don't use the selling agents? I would recommend 2 clauses, first being a "get out" or renegotiate clause if something is seriously wrong with the property. Not just structurally unsound within the dwelling, i.e. if a retaining wall is falling down – most times this does not affect the dwelling, but can cost you plenty of money to fix. Under most contract clauses, this is not considered a structural defect to the house.

The second clause is a good working order clause. Not just limited to items which are working, but items that meet the current Australian Standards – these change over time. We often find older properties have systems/items which are unsafe compared to the current standards – i.e. wiring.

The inspections I always recommend to my clients is a building report and pest inspection report. However, the one which comes up with the most faults is ALWAYS the electrical report. Nothing can be 100% when buying older homes but most problems come from not knowing these problems and hitting budget blow outs.

Good luck!

Hey Jack,

It sounds like you have done very well repaying all your debt down.

We recently picked up a Triplex site, rentable condition, opposite a park about 8k's from the city for $380k. The deals are out there to be had. They don’t come up all the time, but when they do we are quick to jump on them.

I would suggest looking into the City of Belmont or City of Cockburn. The things to watch out for in City of Belmont are, busy roads that don't look busy at the home open, heaps of pocketed state housing and aeroplane noise. There are also some industrial pockets to keep away from, not because they are bad but because they will detract from resale price. Make sure you clearly understand the requirements about zoning, because we see a lot of blocks in this area advertised as something you can’t do. With the real estate agent’s get out of being sued tagline of, “STCA”.

In the City of Cockburn you should watch out for the slopes of blocks, the state housing is a lot more dispersed throughout the suburb which is annoying and there is a rail line/major roads making a lot of noise.

Hope that helps.

There is also a group called Active Property Network.

http://www.activepropertynetwork.com.au/perth.html

You should speak with Aaron Sice, I know that he has organised things like this in the past.

http://bluecardindustries.com/

The short answer is yes.

My vote is with a Buyers' Agent and that is Metropole. They don't even compare as competition, one works for you the other sells you stock. If you have enough equity you would be able to finance the BA fee into the deal – this should help with cash flow.