Forum Replies Created
Hi Tom,
Have you had any luck with advice on this Sth Hedland project or do any other members have experience with Sth Hedland development – specifically subdivision ?
I also have a 1,100m2 property in Sth Hedland which I'm currently awaiting approval on subdivision… keeping the existing house (rented at $1,800/week) while creating a new vacant block at the rear of the property.
What I'm hoping to do is firstly gain subdivision approval – then do the work required to create the new block – then have a valuer value the entire property again with rent unchanged in current house plus a new vacant block at rear. I would hope the new 600m2 block will be worth at least 300k while the front house should retain it's current value as the rent won't change and will still represent 10%-11% yield. (Valuations in Hedland seem to be based solely on 10% yield).
The new equity (approx 300k) will be used for deposit funds for bank on new construction (design, approval and building of new 4 x 2 property on the rear block) which will rent for $2k per week, In essence – I guess I'm doing a staged development – acquiring equity to keep moving forward.
That's the plan anyway… hope the bank see's it the same way.
Tom, have you found any goo options on the transportable homes you mentioned ? Obviously building costs in Hedland are incredibly high so like you – I'm looking for the most cost effective solution.
David.
Hi Terry & Michael,
Just a quick note to thank you both for your advice and suggestions – much appreciated.
Apologies for not acknowledging you sooner… I was OS and offline for some time.
My confusion on the tax issue stems from reading one of Jamie McIntyre's books where he states with regard to equity increase on LOC loans – something along the lines of "Take this money out to use however you like – the ATO does not tax you on this as it's money out of thin air" (this isnt word for word – something along those lines).
David.
Thanks Richard – much appreciated.
Yes – the subdivided block will have a separate title.
what I hope to do is have the two titles/houses revalued once subdivision and construction is complete – then sell the older existing house on the now smaller block for the same price I originally paid. That would pay out the orginal loan. Assuming the bank has lent me 160k for the subdivision/2nd title and house build – then on completion the bank values this at $260k – will they allow me to pull out that $100k tax free as equity in a line of credit ? (Money for deposits on further investment properties).
I'm still trying to get my head around this line of credit concept. My understanding is that whatever equity increase there are – say 10% PA (not always obviously) – you can pull this out tax free and use it however you like ?. If I had of known this years ago – I would have focused more on property investment rather than building businesses.
Assuming you have interest only, line of credit loans on 3 x 300k investment properties which increase in value by 10% per year and which are cash flow positive – you can pull 90k per year tax free (equivalent to over 150k before tax) ?
