Forum Replies Created
Hi Noobugawa,
I have some experience with this. I have posted some forum questions too but no one has answered either of our questions yet. It’s a great site with fantastic members so I am sure that someone, in the know, will answer us within a week or so.
I am answering your post, with my limited experience, but it may be sufficient.Short answer is “Yes”, that cost sounds reasonable.
However, I have more details below that include some extra costs on top of your 1), 2), 3).My past quotes,
1). Design of three townhouses &
2). Documentation & submission of a planning permit application.
$ 9,000. I write (APPLICATION) as I had no guarantees of approval. The Architect/Drafts-person should have a very good understanding of the council requirements/regulations to make the best application possible & to work with council with amendments if required. I suggest that you call the council and ask for a list of Architects/Draft-persons that they “mainly” deal with. The council cannot & will not give you information regarding which architects they “prefer” to approve & they will not order the list in any way for you. It’s just a list of “mainly” dealt with architects but that’s a good start to get a 2nd quote. Interview a few from that list (that are close to your development property) and pick the one that you feel more comfortable with.
(I believe that steps 1 & 2 can be done for as little as $ 5,000 but I’d rather pay $9,000 to an Architect/Drafts-person that understands the customer’s needs & the needs of the council).3) $ 11,000 for engineering sounds reasonable so your total of $20,000 appears be at least average. :)
I am thinking that getting a Building permit requires more work than just getting engineering plans drawn up & approved but I cannot give you details about this because I do not know. I would like to make it clear that there are even more costs to gaining Subdivision – see below.There may be a “Public Open Space Contribution fee”. (My council requires the fee paid for 3 or more dwellings but some councils may have the fee for a 2 lot subdivision). It may not be applicable to you but you should ask them for confirmation. There are some exceptions to paying this fee however exceptions are rare. I think it can be a fee from 2% to 5% of the cost of your land. It can be a considerable amount. Note: Individual councils use a different percentages.
Then there are subdivision costs paid to the land surveyor for the creation & lodging to authorities all of the requirements. I have not reached the subdivision stage yet but I believe the costs could be from $5,000 to $10,000 for that part alone.
There may be more costs than the ones that I have mentioned above – I am only answering from my limited experience so that you can still move forward until you get more accurate feedback.
I hope that this information assists you. More happiness & wealth to you. Good luck.
Cheers.
Great advice, thanks again Terry.
Just like to know, are there any insurances (that I could buy) to cover unfortunate events such as this?
Cheers.
Thanks Richard, I appreciate your reply.
Yes I am sure that there could be many other factors like whether a developer could service the loan, experience in developing etc.Cheers and thank you.
@terryw – Thanks again for clarifying and supplying your valuable insight – great thinker.
@Reenee – Living as a one income family and having a combined risk profile (from what I read) as quite low – I am hoping that you read Terryw's comments about "asset protection".
Everyone's situation and goals are different and you will have to find your own "right" way to manage your fantastic opportunity but it is well worth it to educate yourselves on some asset protection strategies (even if you do not decide to take them up).
Eliminating the options that you do NOT want to take just makes it easier to become successful.
Either way, I think that you are in a commanding position and I really love how you want to keep the legacy going…you are being helped by your mum and now you want to boost your family's wealth by investing it rather than just wasting it.
See ya & good luck.
Hi Reneebol10,
Congrats on your new baby.
A question for the more knowledgeable forum locals:
Would it be more beneficial for mum to sell the property (at market value) and to gift the money instead?
It looks to me that mums property is currently being used as an investment and that it will remain an investment after it is sold at a "favorable purchase" price to daughter.
Because of this "favorable purchase" price, I am guessing that there is a larger CGT exposure if/when it is sold again (at market value).
Does it always make sense to buy property at a "favorable purchase" price?
Sorry, I know that these questions sounds silly but I’d like to know your views.
Cheers.
Hey wilko1, thanks for clearing that up even further,
I do have a better understanding of it now, thanks to you and to terryw. Still a long way to go for me but like anything that is worthwhile, it takes time to achieve. I am sure that I still have tons to learn and will make many mistakes during the journey – hopefully just small mistakes. It looks like making some mistakes is all part and parcel of property investment – this forum must be helping a heck of a lot of people to minimize their mistakes, learning what others have done and learning from the comments from yourselves. Can't avoid every mistake made in life but at least this forum can limit good people making the really big mistakes that can affect their entire families etc. What's the price on that? Must be big!
Thanks again. Something that you and terryw have taught me, by reading your entries, is to look further ahead at what I'm planning and try to orchestrate it so that it is in tune with our goals – sorry about the pun – obviously I am no poet. hehe.
See ya, thanks again.
Half your luck – being in Krabi Thailand. That would be awesome. It's mandate to get spelling and grammar wrong when doing such things so, yet again, you are correctly "in the zone".. hehe
Your comments still make more sense than mine do and I am not on a beach.
Thanks for the info. Will look into trusts further as there are many opportunities to explore. I have always liked what trust do and their purpose. I know that some trusts only for tax purposes etc but in particular I like the asset protection and how it can increase the wealth of a whole family. It's something that resonates as being right for me. I think that I read somewhere that trusts were created before tax was ever collected which makes sense to me as I feel that they have an independent and many purposes.
I think that I may have figured out where my initial confusion was concerning "PPOR" concerns and how they affected our situation (I may still be wrong but I'll give it a try to explain what I think happens).
One nominates if a property is or isn't there PPOR (and for how long) at a time after the sale of that property. There can only be one PPOR at any given time (even though there can be a small overlap in some circumstances). There are rules like the 6 year rule etc however that rule doesn't negate the fact that it is not your PPOR as there are legitimate reasons why someone would want to rent out there PPOR whilst they are working abroad etc. All that matters is that, at the end of the day, one cannot have their cake and eat it too with respect to not having to pay CGT for the sale of their PPOR and still trying to claim rental expenses against their income by declaring that the same property was also an investment property. That situation is avoided and rightly so as one can only really be deemed as living in one place at any one time and we are rewarded by that fact by still having that "living in" property as being CGT free upon its sale (I am guessing that this PPOR CGT free is Aus tax law and can change sometime in the future – however unlikely). *grin*. On a serious note: Whether a property is rented out or not rented out does not always mean that it is an investment property or a PPOR (as illustrated by the 6 year rule). What matters is that the owner follows the rules, in the way that they were intended to be followed, not trying to "trick" the system. Sorry if I am lost but that's what makes sense to me (at this point) regarding investment property and PPOR and how they are to be treated.
Have fun in the sun.
I should have entered this forum ages ago – wow – thanks to both of you, for the updates.
Just on trusts, I ruled out creating a unit trusts because I didn't feel that it was at arms length (I could be wrong) so I thought that it wouldn't help my situation to get where I wanted it to. Then again, maybe I should create a separate entity to perform the development process – Company, trust – will have to investigate further on that.
My plan is to get a smart mob to draw up plans, present it to council for approval, walk me through the sub process and then I can look for a builder to build them. Sounds like I am doing nothing but putting in the money !! Well I guess that is right as I'm also doing it this way to learn the process from head to toe (even though that means missing out on potential savings). It also reduces the risks for us so it is attractive in our 1st situation.
Hybrid trusts had the same feel as it was a mix of a unit trust and a family trust (from what I remember). Again, there must be very good situations when setting up a hybrid trust would be affective but I don't believe that it included my situation at this point in time.
Family trusts, on the other hand, looked like they ticked all the boxes, for my circumstances, but there was an issue I believe with how loses are managed within the trust. As I am starting out with investment and development I feel that I need to have more assets before such a setup would match my end goal. I am confident that I will eventually setup a family trust or similar or many trusts and company's but I think that I'll have to wear the negatives of not creating them now to gain some of the positives of being able to claim against my personal income and taxes.
I am hoping that I end up spreading assets between all natural and artificial entities, ie: some in my name, some in wife's name, some in both names, some in trusts, some in company's, some in a combination of both. It looks like I have to start accumulating assets mostly in my name to begin with to try and get a possible boost giving me an opportunity to have enough wealth for further asset protection strategies to function as I want them to. Sorry if you happen to disagree, just an opinion with the limited knowledge I have on these matters.
BTW: Do you have experience setting up "blood line" trusts? Is there such a thing? They sound a lot like family trusts to me but are more restrictive. I can't see the reasoning in restricting a trust that is primarily created to add options. Let me know what you think.
Thanks again to all.
We agree 100% Terryw,
We think that protecting what we have is paramount too.
We have looked and discussed a few avenues that we could take.
I have a fair understanding of unit, discretionary or hybrid trusts to control our assets but "fair" understanding doesn't cut it because it's far more complicated than I suppose or even more complicated that I can suppose. Maybe I just haven't spoken to the right trust experts yet. I'll investigate my options in more detail soon because we do trust your opinions.
We have looked at best protection from banks etc by not cross contaminating our loans but we should look deeper at "arms length" ownership protection strategies as what we are planning to do regarding development will expose us to more risks that what we are used to as plain employees.
I can tell that there is no one answer to asset protection as they all have their pro's and con's – Do you think that you can come up with a strategy for us based on what you have read about my status above that incorporates a good balance of protection and retains the ability for us to cope with losses? Pardon me if this is impossible to do without knowing more details about my situation and my goals, I just wanted to know whether you have something on your mind regarding what I should be doing in particular. Maybe a simpler way to answer is: Does anything sand out to you as a must do in my situation?
Cheers.
Thanks Terryw.
I knew that writing that we were debt free (on our PPOR) would get us some unwanted attention! We did it the "delayed gratification" style – No flat screen TV's. A bit boring but works a treat if you want to buy property sooner.
Fortunately, wife and I are pretty good savers and that means knowing how to hold onto our money. Saving money for the sake of just saving didn't feel right to me as it felt easy and that's when I knew that something was wrong. I don't think that investment should always be difficult but making money takes quite a bit of mind power and effort or all of us would be wealthy by now.
These overseas (and some closer to home) offerings don't penetrate through to us easily. Always happy for your advice though as it seems that your understand of asset protection supersedes ours by a factor of 10 or more. Your tax law knowledge (especially in trusts) has been golden to read about. We certainly think a lot about asset protection and we hope that most others are doing the same. Some of that knowledge was very handy when we got the loan for our land. I still haven't created a trust but it'll happen when the time becomes right for us – knowing how to keep money can sometimes mean that, the ones who are able to take it away from us, are the most cunning of all. A bit like how the only germs people get from hospitals are the strongest, deadliness and the most resilient (all the weaker germs are easily killed by bleach). Can a trust keep assets protected from germs too? Kidding.
Anyhow, sorry to digress – just felt like having fun typing.
Cheers.
Thanks wilko1,
It's always great to read your updates. I appreciate the time you have taken – you do make sense.
I've setup another meeting with my accountant to hash out all my options so that I can see which one works best for our situation and risk profile.
You are right, development is a business and it should be profitable whether the market is up or down. I guess the onus is on the developer to have the skills to put it all together and add value either way. I am just starting and wanted to forge some exit strategies in case things go a little haywire.
Thanks again for helping out. Best of luck to you.
Hi Terryw,
Thank-you for your update.
Yes, I have organized time with my accountant (this week) to discuss many matters.
I also want to add that your online entries are fantastic and would have helped so many lives.
I wish you all the best.
Hi wilko1,
Thanks for your reply. Ok, that makes a bit more sense to me – please excuse my ignorance about it all.
I will meet with my accountant this week to discuss. If you are able to reply again – My scenario is this.
*Wife and I own our current PPOR outright.
*GST registered business was setup.
*Land purchased with wife as tenants in common 99%, 1%. Security is the land itself, deposit paid for in cash. LVR 80%
*Land attracted GST as it was originally a council reserve.
*GST was paid in cash and credits were claimed back in BAS (after ATO performed a small audit to confirm that we are running a business enterprise).
*I'm an employee of a large organization. Wife works as a casual.
*Our future plans are to get DA and to sub the land into 3 lots & to build 3 detached houses. We'll also be claiming the GST credits during the building process.
*If all works out, we would sell to make a profit and return 1/11th of the profits to ATO.
*If selling after the build is not a profitable option, we may need to rent out all 3. (rent 1 to my son and the other 2 to lease applicants).
*We were wondering what would happen if we were to sell our current PPOR and just stay with our son. I am guessing that this happens all the time but I'm unsure about how it is perceived by ATO. I don't want to make any big mistakes tax wise. I think that renting to son and living with him gives me more options down the track when the market becomes suited for selling – I'd still be able to claim building depreciation and the income loss against my income tax (I think that's correct). I am not sure about your answer to Q1. If I make a loss, can I still claim a tax deduction for that?
Overall, from what I think you are saying with your reply, I am not obligated to make this 3rd my PPOR (I have the choice because I am the owner and can do that if I want or not). I can choose to keep renting it out until it is ready to sell.
Can I not rent out the 3rd dwelling to my son and still stay at the location (with my family) and not make it my PPOR either? It is obviously not available as a rental if that is the case, does that mean that I would be subject to the same restrictions as a Property investor has if they do not make a property available for rent?
Sorry again. My accountant may have to help me understand this, using simple pictures. hehe.
Cheers.
Hi dodo_lurker
I haven't seen another reply yet so I thought that I'd make another comment.
Yes, you are right about it being possible because many subdivided lots have been sold by developers without an OC.
eg: A subdivision that retains direct street access (for all of the lots) may or may not need an OC. It really depends on whether there is other common property involved.
Pathways & driveways can easily be made to have separate access if the sub was done in that way but the shape of your block and the building designs that suit it would be the most significant reason why an OC would become automatically created or not.
Is this project setup as a business to develop real estate or setup for property investment?
Regards.
Hi dodo_lurker,
This is my 1st entry in this forum. There are many others that would answer your question in far greater detail and accuracy but I've always wanted to answer a call.
BTW: I have my own questions to ask but I'll ask them in another entry.
My understanding is that Body Corp became an "Owners Corporation" at the end of 2007.
An "Owners Corporation" is automatically created when a plan of subdivision containing common property is registered at Land Victoria. The lot owners are the members of the Owners corporation and they manage the common property between them. There has to be common property for the Owners corporation to be automatically registered.
There is a list of what could constitute as common property and they are: driveways, lifts, fences, walls, gardens etc.
Search for "Owners corporation" for all the info you will need.
If common property is not longer present, removing an "Owners corporation" is not something that I could tell you about. My guess would be that the members would make a final decision to dissolve it and to make the application changes at land Victoria – just a guess.
An owners corporation is not registered if there is no common property. Battle-axe sub looks like Owners corporation is a must – in my opinion.
I hope this helps you.
Best of luck and great wealth to you.
Pimobpi
