Hi Louis

Sounds like you are close enough to ask people.

Forget the mayor and real estate agents and anyone else who has a vested interest.

Walk around and chat to the people you meet – people love to give advice and older people are often eager to chat. Find out if the number of kids at school are increasing or decreasing, look for empty shops, lots of “for sale” signs, check out the rental vacancies and anything else you can think of to give you the “feel” of the place. Ask at the produce store how things are going in the surrounding areas.

Chat to the people in shops, tell them you are thinking of moving to town and what is their opinion.

This should give you some more background information.
Marg

I recall reading about an ATO ruling for an individual that allowed deductions while holding a block of land. From my hazy memory it was a fairly exceptional set of circumstances that involved the intention to build a house, continual delays and then a complete change of circumstances which meant the house was never actually started despite all the approvals, loans etc being obtained.

I would be very wary of simply buying a block of land for investment and claiming all expenses.
Even though I think that you would not be able to claim the expenses as you go along, I would expect them to be taken into account when calculating any CGT liability.

But then again, I am not an accountant so if you plan to take that path I would suggest good professional advice.

Marg

Adam

It is contract date (purchase) to contract date (sale). Some advise waiting another day or two for the sale date just to be absolutely certain.

CGT is only one aspect, if you have a very good price offered you may decide to accept the certainty of the sale and pay the tax. After all, if you procrastinate the purchaser may decide not to buy. A later sale may result in lower CGT but you may be worse off overall if you cannot get the same price again.

Only you can make that decision.

A friend of ours purchased 7 days before the first home owners grant came in – he missed out on the grant but decided that the deal was too good to risk as so many purchasers were waiting for the magic date and he negotiated a price he was more than happy with.

Tax is only one aspect of the deal. And you will never go broke making a profit.

Cheers
Marg

“If anything I wouldnt mind using some of the equity on my parents home. The house is paid off valued at $420k, so since its been paid off does that mean there isnt any equity available?”

My husband and I worked long and hard to pay off our PPOR (as well as having IPs) and I would be very disappointed if one of my adult kids felt that the assets I worked so hard to build up were simple theirs for the taking.

From the sound of it, you have no deposit. I encourage your aspirations to get into property owning, but am concerned that you hope to do it by cruising by on someone else’s efforts. And where will the money come from to pay ongoing costs? CP properties are hard to find these days, and even if you do they are often older houses that will need considerable ongoing maintenance.

Why not save like crazy and put together a deposit yourself? This will have the added benefit of convincing your parents and partner that you are serious and prepared to put in the hard yards. If you are still at uni then get part time jobs to kick-start your savings.

Maybe your parents are negative for the simple reason that without a secure income, you are taking on an enormous burden by borrowing, that is, if you can actually get a loan.

It’s NOT “now or never”, the prices people are paying now would have been unbelieveable to me 5-10 years ago. Prices cannot rise beyond what someone is prepared to pay.

Disasters do happen, and every now and there there is a sad story on TV of an elderly widow (usually a woman unfortunately) about to be evicted because she allowed her home to be used as collateral for a loan by a family member.

Get some solid savings behind you and you will find people far more supportive and your plans more realistic.

As someone very wise once said “you CAN have everything, but you CAN’T have it all at once”.

Keep researching and learning, your time will come. And concentrate on establishing your career, the income you earn will take you where you want to go.

Cheers
Marg

Inner city suburbs show greater increases in median prices than outer suburbs, but I can find no evidence that the cost of renovations are taken into account.

In Brisbane prime suburbs like Auchenflower and Bulimba have had spectacular growth over the last 10-20 years. But the houses of today are vastly different to the houses of 10-20 years ago, most have been extensively raised, extended, modernised and had a lot of money invested into them.

Just drive around the suburbs with the higher increases and you will see the work being undertaken.

Then again, figures in outer suburbs or poorer or run-down areas can be skewed if a new estate goes in, suddenly there are $350K houses in an area that previously had $260K-$300K houses. The suburb shows a leap in values, but that does not mean that individual houses have increased by that amount.

And even if these factors do not play a part, it is also a simple fact that the houses sold in one year are not the same properties that are sold the next year, even though a comparison is made.

Statistics are a basic guide only.
Marg

Hi Daniko

You will definitely get better capital gain from a house, but if you cannot afford a house then I think buying a unit is better than doing nothing.

Our first two IPs were units, we still have them. After 15 years they are worth about two and a half times what we paid for them.

It has been pointed out that that equals about 6% a year, not much better than bank interest. But we only put around $40K cash into them with deposits and costs, and they have paid themselves off and are worth a combined total of well above $440K. This means that our cash contribution has increased about 10 times, far better than any bank could do.

The advantages of units are that you are only responsible for the inside of the unit, exteriors and grounds are the responsibility of the body corporate. Check out the body corp fees and the sinking fund. Avoid lifts. Either buy in a small complex (4- or a larger complex of 40+ (to share the cost of a manager). Be wary of smaller complexes with managers as there are not enough units to share the manager costs.

One of our units is in a block of 8 (no manager, pool or other facilities) and the other is in a large complex of 80 with a manager, two pools, on about 2 acres of canal front land with boat ramp and jetty. The smaller block has lower rent and lower costs.

I don’t know the Sydney market at all so can’t help you with areas.

Good luck!
marg

Hi Tera

I am no expert – you will be best to consult a solicitor and an accountant.

But for what they are worth, here are a few things that I have thought of.

My understanding is that you bought the unit for $170K with your partner, renovated it and it is now worth $200K.

You own 50% and will have to buy your partner’s 50%, which is now worth $100K. This purchase will attract stamp duty and conveyancing costs, but these should be minimal as you have done all the searches when you first bought. Your solicitor can draw up the appropriate contract.

If the mortgage is in joint names then you will have to go to the lender to find out their requirements – i.e., can you “take over 100% of the mortgage” or do you have to pay out the “old” mortgage and take out a completely new one? There are finance experts on this forum who will know far more about this than I do. But I suggest you talk to your lender as a first step to find out where you stand with them, and what charges (if any) will be involved. If a completely new mortgage is required, you may want to consider a different lender.

As far as capital gains go, you will add up what you have spent: to obtain your “purchase price”:

$85K half purchase price
half of stamp duty/conveyancing costs
half of renovation costs
$100K for the 50% you are purchasing
all stamp duty and associated costs
any further renovation/capital costs that you may undertake.

Make sure you keep good records so that your outlays are clearly substantiated.

Your partner will be responsible for the capital gains on his 50% if there are any after allowing for costs.

As I said, consult the experts – there may be other issues that I am not aware of.

Cheers
Marg

If you watched that program to the end you would have learned that the Rental Tribunal ordered that the tenants be released from their lease.

You are legally obliged to remedy any situations concerning safety, e.g., dodgy electricals. Apart from that, I work on the basis of maintaining the property in the condition it was in when the tenants entered into the lease.

Other requests we treat on their merits, always listening to our managers. In general, if the repair is one that we would have to do before the next tenant moves in, then it is reasonable to do it.

From the way you say “the property is in NZ” I presume you don’t live nearby. Checking with the property manager would be my first action. We have set a low limit with our managers on the amount they can spend without referral to us ($100).

We have found that close supervision of property managers is essential – get on first name basis, send Christmas cards, call in for a brief chat – in other words, become a “face” rather than a “name”.

Occasionally get independent quotes yourself to ensure that best prices are being obtained by property managers – unfortunately there is sometimes the knowledge that “it’s tax deductible for the landlord” translates to higher prices.
Marg

Our first two IPs are units, purchased 1990 and 1991. Units generally have slightly less capital gains than a house, but as you have found you require less money to get into the market. Each is now worth a bit over two and a half times what we paid for them.

In many ways they are an ideal first IP. The body corporate is responsible for all the external area, so basically you are only responsible for the insides of your exterior walls.

Good luck
Marg

Check out the finance – some lenders require larger deposits if the floor area is less than a certain figure.
Marg