Hi Drewboy,

If it were me and I had the cash or equity available, I would choose a commercial property. In your example you are netting $12,000 PA from the commercial property. If you were to spend hours looking on the net and talking to agents in regional centres trying to find 10% yielding residential properties, you would need to find multiple properties to get the same returns.

I would much rather spend time putting together one good deal on a commercial property, than punishing myself looking for hours for multiple residential.

But that’s just me, look at what your own goals are and how you want to utilise your own time.

Cheers,

Matt.

Hi Michael,

I looked at the links you provided however they had no information about the current topic. Are we talking about adding a new room or some other major works, or a simple kitchen renovation as being classed OB and requiring insurance?

I have been involved in a few deals where simple works were done before the property was resold and knew nothing about OB insurance.

Cheers,

Mathew.

Hi,

How does anyone know that the boom will continue? All you can do is look at the current economic climate, which is still looking very positive, look at the growth trend in the area and take each deal on its own merits.

My personal strategy is based on buying smart and reselling for a profit. That could mean buying on a long settlement, doing some renovations or simply getting the right property at the right time.

In regards to your question new investor, if I was going to look at the strategy that you mention, I would make sure I had finance in place in case I could not re-sell before settlement. I would also look at the area’s growth for the past 12 months, look at the cost of the property to build and then forward plan to the potential gain on completion.

If you know the area and do your sums well, you should be able to plan within a small margin what your profit should be. Don’t just jump in though, do your research.

Cheers,

Mathew.

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In NSW you can not use “and/or nominee”, so the name you put on the Contract for Sale can not be changed.

So if you purchase the IP in the companies name you can not add the words “as trustee for …..” after the company, it cannot be owned within the trust structure.

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Hi Whj,

If you can’t buy a property “abc company as trustee for xyz trust”, why do accountants recommend this corporate trustee structure when buying IP’s?

This is quite new to me as I have been told by people that this is ok to do. I would appreciate you telling me where you heard this as I want to clarify what is correct.

Cheers,

Mathew.

Do you think if we all sent them an email with the correct definition of positive gearing, they might realise what tossers they are. []

Cheers,

Mathew.

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Basically, if you can prove that you are in the business of trading properties and class the properties as ‘trading stock’ then yes no CGT would be payable as the houses would be classed similar to any item such as a toothbrush at a supermarket.

Unfortunately, it ain’t that simple because you must pay GST on the properties, get taxed on all the gains (where as assets owned in a persons name which have CGT payable are entitled to a 50% discount), so you will not pay CGT but will pay tax on your earning like any other shop/business. plus there are a few other issues..

Hope this has given light…

Pete

…Beware of the dreamtakers…

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Hi Willi,

So if I had a company or trust that bought, renovated and sold properties, I would be paying GST and income tax but not CGT? I assume I would have to prove this to the ATO but could I do this when I have done say 2-5 or would I need to do say 20 to be seen as a trader? Or would it be determined by the time held for the properties?

You mentioned that there where other issues associated with it, what would these be?

Cheers,

Mathew.

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Hi Mathew,

I am trying to understand why someone would hand over control of their property to me as part of my sandwich trade given they will only receive maybe 1K straight up from me as my option premium and not receive any benefit from the property for a couple of years until the trade is exercised. [xx(]

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No offence Polaris, but did you even read my post?
If I did a lease option to you, you would be paying the following:

– $3,000 – $5,000 for the option fee to be rebated from the strike price
– Approximately 20% (depending on the length of option) above my buy price as a strike price to be exercised any time during the option period
– Between $50-$100 per week above my weekly payment (depending on the deal and also market rents) of which a portion will be rebated from the strike price

So you see, I am making money in 3 ways from day 1 until the day you excercise the option. And if you don’t take your option, I keep everything as rent and do it all over again.

Mathew.

P.S This works exactly the same on a straight L/O or a sandwich L/O.

I was under the impression you could assign to anyone by doing the and/or nominee as long as you paid the stamp duty on the purchase you intended to make. Can anyone comment?

Cheers,

Mathew.

Hi,

When it comes to valuers, it is up to YOU to sell the property to them by using any information you can. This may be in the form of comparible sales, historical growth, anything happening in the area that would increase growth and even in the form of current land prices and building costs.

I recently had my western sydney property revalued and prepeared a 3 page report on why I thought my property was worth a certain price. Did it work? You betcha. I calculated my sums on 400k but provided evidence for 410k. He split it at 405k so I was happy.

Its funny, I had 4 agents come through for apparisels to assist me and got figures that varied from 360k to 450k…..go figure.

Cheers,

Mathew. []

Hi Westan,

I do agree that $50,000 would be better put to use in your own property as you will get a better return if you do the right research and buy wisely. If you don’t have the knowledge to purchase wisely and create a good deal, you may be better investing in a fund with a 12% return as is will be better than losing 20% per year because of a bad purchase.

I think it is a little optimistic of you to say that “Most places in Oz should have doubled over this time”. To say that most of Astralia has a growth rate of 20% per year every year is a bit misleading don’t you think? While over the past few years, certain areas have experienced extremely high growth, this is not the “norm” and has caused an artificially inflated property market in my opinion.

Cheers,

Mathew.