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  • Profile photo of louiseelouisee
    Member
    @louisee
    Join Date: 2009
    Post Count: 2
    August 2, 2010 - 2:28 am
    duckster wrote:
    Was the subdivision already done when you purchased the investment or did you sub divide it.
    If you sub divided it you need to work out the vacant land value originally so you can work out the capital gains implications of selling the vacant land.
    Also you need to factor in holding costs if no rental income has come from the vacant land as this can be added to the cost base.
    You need to factor in sales commission if selling through a real estate agent as a cost of selling.

    Residential property doesn't go up in value just because the rent went up.
    You need to look at comparative recent sales in your area with similar houses to get an idea of the possible value or look at the council rates notice it gets revalued every two years.
     
    Can you afford more debt ?
    As you may be able to take a line of credit loan against the investment property  as security or against the property you live in for the extension. The LOC separates the original investment loan from the new private use loan (LOC) for tax purposes and is usually up to 80% LVR
    475k + new LOC   = 80 /100
    / 855k
    new loc = (855k* .8) -475k (existing debt)
    new loc = 209k
    This is not money it is a loan so you need to be able to service the loan to be able to borrow it as a line of credit.

    Thanks Duckster and others for your response, its either we sell our residential property or renovate it. It really needs renovations. This will definitely add value to the residential property which we purchased over 10 years ago for 145k in Carnegie! I guess my answer is currently we cant afford to loan to pay for the res property renos. In just over 12 months the IP has increased in value almost 100%. We have looked at CGtax implications and it works out well as we brought the IP with the subdivisions. The Capital Gains is only based on the % the land (Lot 2 38%) is to the full purchase price (land with house 62%). It seems like the best option and we will put aside $$ for a deposit on the next IP. This way we are funding the renos and still building our investment portfolio?

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