Forum Replies Created
Hi, the land is non-performing thus robbing the owner of income rightfully deriving from 100K (even sitting in the bank @ 5% you should get a few hundred dollars every month)
After building, the property should be @ approx 50% LVR because you’ve paid for the land. It’ll be a self-funding propspect.
However, I do realise that I’m not aware of other variables so do get advice from others.
Alot of people, myself included, would give an arm and a leg to be in your position at a young age. Well done & good luck,
Kum YinHi, the e-mail address is
[email protected]
Steve (can’t remember his surname) is the tax consultant. He used to work for Ernst & Young. Currently he does heaps of work for overseas investors.
Get an appointment & go to their office & TALK to somebody.
I now do sub-divisions in Adelaide although I still keep the NZ investment properties. I’ll be going to Singapore in November. A couple of young fellows (one was my PA) are keen to invest in property.
I’ll let you know when I go back & if time allows, maybe have a chat.
Cheers,
Kum YinHi, sounds Singaporean to me.
a) AUD is still very strong – highly unlikely to appreciate further against the SGD
b) tax : have someone calculate the tax for you. There’s an accountant in Singapore [at the Concord building]. He is very good. Ask his advice. He is also not expensive.Personally, I would take the profit and run but there are so many variables & you have to decide for yourself. The rental is very low vs the equity. Again, you need an accountant to help you work this out.
You can possibly locate Steve’s contact in the yellow pages. Look for Australasian Taxation Services.
The best advice I can give you is at least talk to him. If I had known about him before, I would have made tens of thousands of dollars more just from the taxation angle.
Good luck & well done!!
Kum YinHi, just a word of caution. Impt stuff to consider :
a) purchase price [you know this]
b) cost of building : $150000 per townhouse approx. [depends on who the builder is]
c) the sale price : IMPORTANT. Most of us especially novices (I’m one myself even though I bought my 4 properties before the boom) tend to inflate the sale price. Look, it might even be that they can’t sell. Then you have to look at the rental yield.
d) the holding period is very important. This is where you pay interest costs without any income.
e) tax considerations are also importantGood luck
Kum YinHi, I don’t mean to dampen your enthusiasm but if you want to develop property for other people, they might want to investigate your ‘portfolio’ before they give you any work.
Indemnity insurance doesn’t come into it until you have a building licence.
Why not start by doing a small development of your own? Then you can make a profit & learn along the way.
Kum Yin
Hi, I lodge the returns electronically myself. I have to wait till the tax dept send me the paper returns because I’ve to use the number they assign. The paper return they sent me 2 weeks ago says I have until 8 July or something like that. I intend to lodge mine end May because I’ve done all the calculations already.
I suggest you get the web-site of the NZ tax office & take it from there.
Hope this helps.
Kum YinHi,
just to remind you the building costs may be more than many people realise unless you can be a hands on builder yourself. I’m a complete novice & I’ve found that major builders have got it down to a fine art.What I’ve done is choose an established builder (been around for 100 years), not too expensive as advertised & put everything into their hands. They give a fixed price quotation so there’s no nasty surprises.
Re funding, once you’ve got your application approved by Council, the banks are quite good about construction loans. They loan up to 80% of the end valuation of the project i.e. the houses you build may be worth 1 million (4 x $250000 each) for 4 houses for instance, then they loan you up to $800000. This is generally more than enough to complete the building plus interest & other costs.
However, to be very conservative, a 60%LVR is much better. I try to gear only 50% myself.
Most importantly, can you sell the finished product easily? If not, can you rent them easily? What will the yield be?
Good luck with your plans
Kum YinHi, interesting stories you all share. I have the same problem, mostly with family. They usually say “What do you want so much money for?”
I’ve looked into myself & discovered the greatest joy I experienced was when I studied the layout plans for a re-development project. It suddenly hit me that in high school all I wanted was to be a writer or an architect (to design houses). I became an English teacher.
Now the banks & immigration people have me down as a self-employed businesswoman in education services & property investment!
I say with great conviction at parties that I invest in property because it gives me much joy & satisfaction.
Incidentally, if my properties cannot sell, I hold them for the rental income.
Kum Yin
Hi foundation, thanks for the info.
I went to some suburbs, literally pounding the pavement. Clearview is quite rebuilt & from what my eyes could tell, most of the rebuilding would be at least 50% of the houses there, many one new one for an old one. Along Hampstead Rd, one old block may be rebuilt into 3 courtyard homes.And then I do see some evidence of ‘overbuilding’ and get quite confused as to what to believe.
I’m still building but getting increasingly worried whether we may be in over supply. Any input from you would be appreciated. Doesn’t matter whether I agree or not, any observation or opinion is still useful.
Kum Yin
Hi, I’m responding to the info that we built 157000 houses while our population grew by 200000. I think that these figures may bear checking for veracity depending on what categories of building is under consideration.
Let’s accept the accuracy of the figures. Can someone tell me whether the 157000 are additional homes or a portion of them are replacement homes? I read an ‘expert’ who said that based on housing starts and population growth, Adelaide is in over supply and he finds that Adelaide defies logic. It is a fact that in Adelaide, a lot of old houses are knocked down, often to be sub-divided into 2 or 3 dwellings. In many cases though, especially in the few years before housing prices went crazy, people just knocked an old house and built a new one in its place. Would that new house have been included in the housing start figures?
If Adelaide is in over supply, why do I not see empty houses? I wish the ‘experts’ especially those from other states, please check their data and their conclusions before they make public statements.
My take on the rate rise is this: it’ll take longer to sell a house but the cost of a house is not going to go down very much unless it has been overpriced. The reason is it is not going to cost less to build a new house. It used to cost $50000 to build a cheap 3BR room home. It now costs $110000, no matter if you build it in the country. If you can buy a block of land for $20000, you will have to spend $250000 to build a house, because building a road will cost $100000.
So we have to accept the fact that the days of ‘cheap’ houses is a thing of the past.
Sorry for such a wordy post,
Kum YinHi, some thoughts on your numbers.
Deal 1
1) You may need more than $120K to build a new house. I’m going to build 4 on flat ground and each costs $140K including interest costs & infrastructure.2) Your profit margin may need to be a tad higher. I’d look for a minimum of $50K gain for each house.
3) Look into the rental potential. I’m now preparing to hold all my properties for 5 years for the depreciation benefits. I calculate that they’d be neutral gearing at least.
Deal 2
I’d look at the rental yield first. If it’s close to neutral or +ve, then strat titling is icing on the cake. You can then choose to have your cake & eat it at the same time. If the rental yield is very negative, then beware!Good luck
Kum YinHi David, do you live in Adelaide? I just bought a small old house fairly good condition & should rent easily. It costs less than $250K and there’s enough land to extend or sub-divide. This property settles on 1 May.
If you’re interested, I saw another one, asking price around $250K in the same suburb on roughly the same size block. I don’t know if it’s sub-dividable but it’s definitely possible to extend for rental potential.
Let me know if you’re interested. I bought my 1st house in Adealaide in 1998 & the next 3 in 1999, then in 2002/2003, I got into commercial property. If nothing else, I can tell you some things to beware of.
Good luck,
Kum YinHi, this is interesting cos I’ve been considering DHA properties & finally rejected it – same numbers : about 6% yield on an inflated price. The price has built in 10 years of +ve appreciation. I worked this on the actual houses advertised here in Adelaide. I was interested in the double-storey houses, those in Windsor Gdns and Greenacres. The reason is the building cost of 2-storey houses is very high & therefore, at the end of the tenancy, this type of residential building will still command the price. I’m not particularly rapt with the suburb though. The location is not the best. In Adelaide, Mawson Lakes is the supposedly new ‘hip’ location. The houses there are new and big and overpriced. The suburb is outer suburb Northern. My property manager specializes in these N suburbs & he says that Golden Grove has been devalued by the hordes of young hooligans who live there now. Even the police do not want to be working there. He reckons that these people will move to Mawson Lakes next. If I’m not mistaken, Mawson Lakes has large numbers of DHA housing.
Maybe someone from Adelaide has something to add.
Dear Andy, if you do rent out your unit, do take up the generous offer of help with the depreciation schedule. It can obliterate your tax bill. I know because I learned the hard way – I paid $800+ for a quick depreciation schedule & boy was I happy with the tax refunds! I missed out on more $10K worth of refunds but I’m still happy.
Good luck & please don’t be put off. I was in the same situation with my 1st house (mum offered to sell her jewellery) and I put my head in my arms & wept!!!
Today I own more than 10 investment properties & my retirement income comes from them.
Kum Yin
Hi,
You’re right. Just build & make the profit then. I realised that from the sale of my 1st property that the break cost is 20% i.e. if the sale price is less than 20% higher than the purchase price, then I might as well keep my money in the bank.
Good luck.
Kum YinHi, I’m from Adelaide & am currently running scared (started investing in 1998, bought 4 houses in one go) but just bought 3 development properties.
My ‘advice’ is to do the numbers thoroughly & throw in some contingency funds or financials. My building consultant says it’s hard to make an unprofitable deal profitable.
The latest one I bought (not settled yet) costs $223K (I put in 20% cash) and will rent for $200 per week. What I can do is extend by building a bathroom & kitchen and divide the property into 2 units, thereby increasing the yield to $320 per week. A more exciting prospect is to sub-divide and build an adjacent house, sell the old one and keep the new one.
Try to look for something like this in Perth. It exists & can be done. My contract fell through and is re-ignited because the vendor is motivated to sell.
Good luck.
Kum Yin
