Forum Replies Created
Hi CB,
Have you thought of renting a house in the area you currently live and renting out your PPOR? Generally, yields in prime locations are low and so it is cheaper to rent in these areas than to buy in terms of cash flow. You can rent out your current PPOR for up to 6 years I think without losing the CGT exemption, while still enjoying negative gearing benefits. I think this will greatly improve your cash flow position and enable you to service loans to buy another IP or ten. You should run some numbers and see what the result is.
Also, I think you should give Jamie a call. He is a great contributer to the forums, has some excellent ideas, is aproperty investor himself so knows the ins and outs of property investing and is in a position to understand your goals and help you reach them.
Cheers,
LukeIf you are getting a builder to build it for you, then $80k for a decent quality 60m2 unit is not a bad- it works out to about $1300 per square metre which is a reasonable price I think. Obviously if you are going to build it yourself then you will save a bit of money.
Cheers,
Luke$22k for a small granny flat on a slab (so no floor frame included) is an ok price. I have had quotes for $32k for a 60m2 two bedroom one on stumps (so it includes a floor frame).
Cheers,
LukeHi Guys,
I am getting one built at the moment. Total costs will be about $85k, although admittedly my site has a bit of a slope so there is a bit of earthworks. The unit is a 2 bedroom unit and 60 square metres in size and is of good quality, and I am getting a builder to build it (not doing any work myself apart from minor landscaping).
I would be interested in hearing if you could get it done for $40k. It might be possible if it is a small one bedroom unit, services are really really easy to get to and so cheap to connect and you do all of the work yourself as an owner builder. Let us know how you go!!!
Cheers,
LukeYou can only negatively gear in hybrid or unit trusts, not discretionary trusts. Hybrid trusts are a strange animal, so you need to talk to someone who relly knows what they are doing. The ATO is cracking down on hybrid trusts so I did not go down that route when I set up a trust.
If you are using a discretionary trust, you do not 'own' the trust so you can not negatively gear.
Luke.
Without a doubt you need to go to a good tax lawyer to get the deed drawn up. It will cost you a little more than getting one off the shelf from the corner store, but a trust is a 80 year investment vehicle so surely it is worth spending a little money getting it right.
Luke.
I have no experience in this, but common sense would suggest that as long as you were paying your spouse a reasonable hourly rate, and the hours allocated are in line with the amount of work required, than all would be fine.
Cheers,
LukeAnd I believe you will also have to pay GST due to the creation of a new title.
Luke
You really need to ask you accountant in order to get the correct answer. I will give you what I think is right, but I am not an accountant so dont take my word for it!!!
- FHOG- From memory I believe you have to live in the house for a minimum 6 month period commencing within 12 months of settlement. So if you settle on the 1st of July and then move in beofre the 1st of July the following year, you would fulfill the conditions of the FHOG. This does vary from state to state though, this is for a NSW grant.
- CGT- You will not be able to claim the 1st 12 months as CGT exemption under this scenario as it does not become your PPOR untill you move in. So if you rent it out for the 12 months as you have indicated you want to do, then live in the property for 6 months and then choose to sell, you will be liable for capital gains on 66% of the profit (after making allowance for the 50% CGT reduction due to holding it for 12 months or more). Again, check with your accountant.
- Depreciation on the Renovation- If you classify this as capital works, you will be able to depreciate this as per you accountants or QS advice. You will be able to do this as long as it is a rental property. Even if you did the renovation when it is your PPOR, you would still be able to depreciate the works once it reverted to an IP (even if you were still classifying it as your PPOR under the absence rule in order to minimise CGT).
Check with your accountant though, this is just my understanding of the rules.
Cheers,
LukeI would suggest getting a job in the industry, whether it be as a labourer, in a supervisor role, contracts management, project management, as an architect, engineer or anything. This would be really beneficial as you would be immersed in the industry for 5-6 (or 7!!) days a week and you will learn quickly. You will also find and meet people who will be able to guide you on your way. You need to have experience in this field otherwise you may get very badly burned.
One of the problems you may run into is having the capital to start. Without significant experience and/or capital, then it is impossible to develop property.
Congratulations on establishing your goals, you will no doubt achieve them with the right planning and frame of mind!!
Cheers,
LukeYou would need to let your insurer know about this as no doubt your insurance policy does not cover the property if used for this type of activity.
I would also be concerned that the tenant could do some shoddy 'improvements' and then decide in 6 months that they do not want to live there anymore, moving out and leaving you with a property in poor condition that in untenantable with no responsibility to fix it.
Chers,
Luke4.5% yield seems very low post development. It really depends on what you are aiming for- capital growth or rental yields, and is impossible to comment without knowing where the property is located.
Cheers,
LukeI have used Deppro before, I am pretty sure they have offices in every major city. From memory their depreciation schedules cost about $500 to get done. Would like to hear if there are better organisations out there (esp. in Sydney).
Cheers,
LukeSecondary dwellings can be built on blocks of land that do not meet the requirements for subdivision. Sure, if you can subdivide then I would definitely subdivide. But if you are not able to subdivide, then building a secondary dwelling is a way to gain extra income and bring the property to its most profitable use.
For example, some councils require minimum block sizes to be 400m2. This means that you need a minimum of 800m2 blcok to subdivide. However, with a complying development, you can build a secondary dwelling on a 600m2 block of land even though you are not able to subdivide.
Cheers,
LukeIf they transfer the property to you, then they will be liable for CGT and Stamp Duty. Even if no money changes hands (i.e. they gift the property to you), then you will still need to pay Stamnp Duty and CGT on the market value of the property. If they have always had the house as their PPOR then it will likely be CGT exempt. You should also factor in the cost of conveyancing to transfer titles ($1000 to $1200)
If they are on a pension, then they will probably not have a large enough income to service additional loans for property investing.
If you were to be gifted the house, then you could access equity in the house by establighing a Line of Credit against the property in order to fund deposits and purchasing costs of additional property. You will of course need to have a large enough inome in order to service the additional debt.
Cheers,
LukeThese are called granny flats, or secondary dwellings. They are allowed (in NSW at least) provided the land is more than 450m2 and also if the development meets certain other local government criteria. They can also only be a maximum of 60m2 in internal living area.
This is a good way of increasing rental yields on an existing property.
Cheers,
LukeYou can check out the API magazine- that has statistics on what the vacancy rate is. However, as SNM has said, if it is a new development, there is probably not many people renting there and the statistics may not be available yet.
Cheers,
LukeYou should be able to find out who the owners are from council or similar and contact them directly by phone. This will have much more chance of gaining attention that a hastily organised letter drop and show that you are genuinely interested in purchasing the property.
Cheers,
Luke.You can roll property from unit trusts to a SMSF but not from discretionary trusts as far as I am aware.
Cheers,
Luke
