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  • Profile photo of nadaimeenadaimee
    Member
    @nadaimee
    Join Date: 2010
    Post Count: 9
    December 21, 2010 - 8:26 am
    Terryw wrote:
    hi Nadaimee

    I think you may find SMSF can't do this sort of thing. Property held by a SMSF is unable to be developed or substantially renovated. Any profit would also be locked in the fund until you are able to retire or take a pension etc.

    The DT should be a good option and any land tax or negative cashflow initially shouldn't matter too much if you are selling and making a profit.

    Thanks Terryw,

    Looks as though Discretionary Trust is the go! Time to do some reading. I look forward to communicating with you further on this forum.
    Regards

    Profile photo of nadaimeenadaimee
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    @nadaimee
    Join Date: 2010
    Post Count: 9
    December 20, 2010 - 1:07 pm
    Terryw wrote:
    Don't forget you cannot access the equity in a smsf owned property.

    For trusts there are basically 2 types units and discretionary. Trust Magic is a nice general intro, but it doesn't go into the topic in any depth. For that you will need the trust structure guide which costs a few hundred.

    Hi Terryw,

    Thanks for your reply to an earlier post. It seems that all members of this forum really value your advice, so I was hoping you could give me some further advice.
    In the next 12 months I am considering buying 3 IP's to buy-reno-hold (for at least 12 months) and then sell.

    For an example if I was to make 60K profit on the 3 properties after re-sale what would be my best structure:
    1. Set-up a discretionary trust with the following:
    – Myself (high income earner on top tax bracket)
    – Wife, Son (both low income earners)
    – Daughter (Uni student)
    Distribute the funds to the beneficiaries and then get the money back and repeat the process.

    2. Set-up SMSF and use my super to purchase properties to renovate and when re-sold put the money back into my super.
    If I use this option am I able to repeat the process and take money out of super for IP's

    Profile photo of nadaimeenadaimee
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    @nadaimee
    Join Date: 2010
    Post Count: 9
    December 20, 2010 - 12:28 pm
    Catalyst wrote:
    We do a lot at nights and weekends (besides our day jobs), We rip everything out ourselves. We paint, do kitchen tiling, put vanity, laundry etc in, rip out walls.
    Builder friend helps with new walls.

    After bathroom is prepared we pay for bathroom to be waterproofed and tiled (then we put in vanity etc) and kitchen installed and electrical (of course) and to get floor sanded.

    Really unless you are doing lots structural stuff I don't see how it runs into months.

     We love doing it. To pay tradies to do everything would more than double the cost. We figure saving $15-20K is worth 3-4 weeks of our lives. Saving $15K on each reno adds up over time. So on 4 reno's thats $60-80K that you are ahead and $60-80K you are not paying interest on.

    Hi Catalyst,

    Like you I enjoy working on the tools. I have been re-building my new home after the bushfires in 2009 as an owner builder but employing trades to keep the project moving. I am a project manager by trade and know the flow of processes in a building project. Plaster finally starts tomorrow. I am anticipating moving in mid-to-late February 2011. I have been involved on the tools throughout the whole project as well as working a full-time. As I have the project management skills and practical skills on the tools, I am considering changing my career and doing this full time as buy-renovate-hold for 12 months, and then if the market is right and the numbers stack up sell and move on to another project. I am fortunate enough to be in a very good financial position which would enable me to do this.
    What I would like to know is if there is a formula you need to work to when renovating, ie: if I spend $1 dollar what is the expected $ return in value adding. Once again like you I would only be doing quick turnaround renos ie: paint, polished floorboards, kitchen and bathroom (the kitchen and bathroom would be new and modern and nothing too expensive).
    Also, would I be better concentrating on 15K from CBD (Melbourne), or are the returns better further out in the lower valued properties?

    Profile photo of nadaimeenadaimee
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    @nadaimee
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    Post Count: 9
    December 16, 2010 - 12:37 pm
    James2118 wrote:
    Hi Liv,

    I am in a similar position to you, trying to figure out how to make as much money as I can to try and set myself up for the future to hopefully have a comfortable and financially secure life.

    I have been looking a lot at the US property market due to the low level entry prices, as well as high rental yields and potential for high capital gains, if they reach the prices they were just 4 years ago saw one property for sale for $40,000 which was sold for $180,000 in 2007. The property is exactly the same as it was 3 years ago. Seeing this sort of thing gets me very interested over there.

    As for capital gains regarding buying off the plan, seeing as you do not settle on the property until the project is complete, unless the completion date gets pushed back, I would assume that you do not hold the asset so the 12 month concession period would not start until the settlement date, which most of the time is the project completion date.

    Spreadsheets and dicussions with accountants and financial planners are always good, accoutants and financial planners are normally able to tell you what you can and can't do, whether obtaining finance in a certain position, or paying certain taxes etc. And spreadsheets are obviously good so you can compare different scenarios and see what expected returns you can achieve, I know myself I make a whole lot of spreadsheets regarding my investment future, and I am getting excited about putting them into practice.

    Hope everything works out well for you

    Cheers

    James

    Hi James,

    Are the spreadsheets you mentioned accessible on the NET, or is it possible for you to send me a copy. I have tried constructing my own spreadsheet with formulas etc but it got too hard and gave me a headache. I would sooner be working on the reno.

    Regards,
    Craig

    Profile photo of nadaimeenadaimee
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    @nadaimee
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    Post Count: 9
    December 16, 2010 - 10:46 am
    Jamie M wrote:

    With buy-renovate-sell, you'll miss out on the 50% CGT concession if you sell within the first year. Also, if you turn over a few properties per year it could be viewed as business like activity.

    Also, the idea of buy-reno-sell sounds great – and it can be. But from experience, it's also a lot of hardwork. Especially when you're working full-time and trying to carry out the reno's on your own.

    If you do go down this path, try and gain access to the property after exchange and before settlement to carry out the renos. That way, you might be able to avoid paying interest on the property while your carrying out the work.

    Cheers

    Jamie

    Hi Jamie,

    Thanks for the advice in your reply. I agree with you in regards to not missing out on the 50% GST concession. If I 'Buy-Reno-Hold' for at least a year I will be better off. I could still have the IP re-valued after reno and borrow for another property using equity. What is the amount of properties in a year which would be deemed as business activity, and what are the consequences ie: tax.

    It is a good idea re: trying to access the property immediately to do renos and avoid additional interest, but is this a common purchasing strategy when acquiring investment properties to renovate?

    Regards

    Craig

    Profile photo of nadaimeenadaimee
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    @nadaimee
    Join Date: 2010
    Post Count: 9
    December 16, 2010 - 10:25 am

    Hi Alistair,

    Thanks for the reply. As I am in a good position I am open to purchasing a number of properties to 'Reno-and-Hold' and then use the equity from the valuations post renovations. I have been reading about SMSF and trusts, but there seems to be a number of different trusts (family, property, unit) etc, etc. I don't know if these are the same thing and people give them differnent names, or if they are all different. As I said in my original post, I am aware that I need to go and see an accountant, but I would like to have some knowledge prior to speaking to the accountant. Do you know of any links or books which explain it thoroughly rather than just basic explanations?

    Regards
    Craig

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