Hi,
An architect is a specific and highly educated professional, they may be more than is needed. Building designers are another profession more usually associated with small development works. They work with builders, serveyors (they may be surveyors themselves) and councils to get approvals.

In order to call yourself an “architect” you need to have completed a uni degree of usually 4-6 years in length. As a result they usually charge more and prefer to work on more creative / important / expensive jobs. A block of 4 town houses / units may be low on their list of preferences unless they get creative freedom for interpretation etc… I’d recommend a building designer (they also copmlete a degree, though it is shorter and they combine it with experience) as it may likely be cheaper and they will likely have the correct “level” of connections in the industry. (ie connections with builders and trades involved in building smaller developments rather than 20 storey office buildings).

Just my brain’s production.

Surrey. (ps: my wife and I are currently studying to be building designers)[biggrin]

The whole CGT vs development income is a shady affair. The definition from the ATO says you pay CGT when an asset you own that is not held as trading stock or production input is sold (a CGT event) NOTE: an abridged summary. So the question comes down to whether your block of land is considered “trading stock/production input” or considered a captial asset. If you buy a house and rent it out then sell it can also be deemed “trading stock” !!! It largely comes down to intent, primary purpose, frequency and regularity.

eg:
I bought a block of land in WA (I’m in VIC). I intend to build a house and rent it out much like I’ve done here in VIC as an investment (presumably to secure my retirement). Once the house is built however I find I can’t afford to add the finishing touches required to rent it out and I can’t afford to maintain the mortgage so I sell it. In this case it would be a CGT event as the intent and purpose of the development was to hold as an income producing asset. Also this is the first and likely the only time I’ve done this, thus it can’t be considered as trading stock as i’m not conducting a business or in an enterprise creating income through development.

On the other hand if I buy a block of land, subdivide, build two units, sell and buy another block of land… well the ATO would likely rule that I’m using land as trading stock or as production input to produce income. My intent is to use the land for income purposes and that counts. Just like if I bought a pile of wood and built furniture from it I couldn’t claim CGT when I sell the wood (as a dining table). There are also GST considerations. That is if you register for GST you can claim back GST spent on developing the land but then you must add GST to the sale price.

Having looked into it myself I decided it was best to clearly define what I want to do with each block of land I buy so I can engage the services of an appropriate adviser when/if required.

PS: the above scenario is not true, just an example.

Surrey.

Of course the easy answer is:
There is no such thing as “passive” income. (blah)

In my way of seeing things there are three comodities you can use in varying and interchangable quantites to live: time, money and knowledge. If you have the time you don’t need much money or knowledge, if you have money you don’t need much time or knowledge and if you have knowledge you don’t need much time or money.

If you have $2k to invest to live you obviously don’t have much money, so you will need time and or knowledge. As mentioned before you could buy a business with $2k and spend a stack of time and use some knowledge to build it up so you can sell it or have someone else manage it. If you have more money you could just buy an existing big earning business.

Property isn’t the only way, I would argue the amount of resource I’ve put into aquiring and maitaining my property (not much but hay) certainly fails the “passive” qualifier for income. Same with the shares I’ve owned. There is always paperwork to fill, questions that need answering, managers to fire and so on. So no real passive income (please just go with me on this one), but given a loose definition property can fit the bill. Is it the only way? Heck no. Is it the safest way? Not really, or not necesarily. It is a relatively easy way to make money in the same way buying blue chip shares is an easy way to make money. To make the big bucks (like steve 0-130 in 3.5 years) you need to expend big resources (money, time, knowledge). So: 3.5 years is not much time therefore I’d say big money and/or big knowledge was used. From reading the book it looks like knowledge was the main component (at least initially).

Rambling by:
Surrey.

Hi,
1. The deposit can be held by a real estate agent if one is working for you in the sale. Otherwise you can employ a solicitor to act as agent to hold the deposit in trust or you open a joint account with both yourself and the purchaser as signatories .
2.Vacant land can be considered primary residence for up to 4 years prior to building, assuming you are not currently in a primary residence (which in this case you aren’t).
3. Primary residency status for CGT begin when you settle and the time spent vacant is considered at this point. However if you never move in and sell or rent it out you can claim the interest expense against the cost base for purposes of CGT.
4. The portion of the land you live on is CGT free. The one you sell is not. Cost base generally speaking would be aportioned based on percentage size. So if you split the land in half the cost base of the bit you sell would be half the purchase price plus half the interest paid plus half the other costs associated (see your accountant or tax professional).
5. With only 8 points in the plan one could say you’ve missed a lot or it could be that you’ve missed nothing… My father-in-law essentially did this. He bought a large block, built two places and sold the back one for the total dev costs thus effectively getting a free house (though he had to work bloody hard on managing the project).
6. There is a lot of stress and effort in subdividing and building. There is no such thing as money for nothing. The current owner may value their free time more highly or maybe there are easements and or caveats on the property. Maybe it isn’t zoned correctly or maybe they just haven’t thought of it or are afraid to do it.
7. Selling one block as vacant land would probably be more cost efficient. You may consider selling the land with plans already approved. That way the purchaser can save on stamp duty and you don’t need to spend all that time and money building a house.

You will need to check everything above with real law and accounting professionals or be satisfied for yourself that I’ve got it right as I make no warranty as to the accuracy of what I say. [biggrin]

Having just gone through getting a project house built I have a greater appreciation for development. It actually takes a heck of a lot of effort and running around.

The most time effective method is (for me):
1. Know your limit for the property.
2. Have a low end and a high end price (high end being your limit).
3. Start by going straight to the low end price.
4. If someone bids against you, go to your half way price then your limit.

If anyone out bids, they just paid too much.

This only works if you choose your limit well and make a reasonable assessment of the price. Never go to an auction thinking you’ll get a major bargain. People generally wont sell for way below market, if they do you may well have bought a lemon. So research is important.

Interest is only deductible for money used to generate income. You can’t deduct interest for money used to pay off your PPR no matter what secures that loan.

Just pay out the PPR loan to reduce the interest paid.

Or you could move out and rent while leasing your PPR to someone else thus making it an IP. This may work out if the rent you pay is less than the rent you get from your PPR.

surrey

Oh, and no I don’t really know what my point is either.

[confused2]

Economic downturn affects the perceived value, not the intrinsic value. Intrinsic value remains relativley constant in that it is the value one places on having a home. Perceived value is all the other stuff like prestige, convenience, luxury etc… That’s the stuff people don’t want when they have a shrinking budget.

My 5 cents,
High traffic areas can benefit from tiles/floor boards. I chose timber veneer laminate (a couple of mm of timber over a high density fibre composite) because it looks good but lasts forever and is cheap (natural timber does look better, but more expensive and gets dints etc…). I put the laminate in the hall way which connects to the kitchen (tiles) and the meals area which connects off the kitchen and has external access to the backyard and entertaining area. My theory being that traffic will normally flow most down the hall, through the kitchen and in and out the back door.
I left carpet in the living room to keep it feeling cosy. I find tiles/wood in the living room where I sit and watch telly on a cold night just isn’t as nice. Also carpet in the bedrooms.
Light fittings of some sort are a must. bare globes are ok, but you really notice the difference with proper fittings.
Spa and pool: personally I would never buy a house with such things unless I was buying a really expensive house and I was quite rich. Spas and, in particular, pools take heaps of work and money to keep clean and they just don’t get used that much.

If I had a choice of only one place to put high ceilings I’d say dining / meals. That “vaulted” feeling seems to work best there.

I wouldn’t worry about “wiring” your house for computing / internet / entertainment. You can do it all much more easily, with greater flexibility and cheaper using wireless technology.

I can’t really comment on air-conditioning. I live in Melbourne in a very well insulated flat that doesn’t get above 27 even on the hottest days (I like 27 degrees too). I do like ceiling fans however. You can combine them with lights and kill two birds with one stone.

My tips for the building:
Read your plans carefully. If there is anything at all you aren’t 100% sure of then ask about it. Get everything in writing, signed and agreed to. Not because people will try to rip you off (though some might) but because your plans will go through so many hands in the process of building that if it isn’t all spelled out in obvious places you will miss out on stuff. If you want a phone jack in the study, make sure it is marked on the plan, in the cable diagram and written into the contract somewhere. The electrician will see one part of the plan, the plasterer another, the frame joiner another and the foreman yet another. If it isn’t in all of those then someone will miss it and it will cost extra. Also, if you block doesn’t butt directly up to the road (and it probably doesn’t) make sure your driveway will be finished including “cross-over”. Otherwise the builder will only finish up to the edge of your property and you’ll have dirt between your drive and the road. The reason is the council may well own the nature strip and you’ll need another permit to build a “cross-over” between the road and your property. (can you tell I got caught out on this?)

Also, don’t assume anything about jargon written in the contract, again if you don’t understand it or you think it is ambiguous get it defined and write the definition in the contract. Make sure all prices are quoted including GST and builder’s mark up. Get final prices where possible. And be prepared to pay an extra couple thousand at the end as there will certainly be one or two things extra to be done (like landscaping) regardless how diligent you are.[buz2]

Surrey

Hi,
I would treat this as a “what goes around comes around” situation. Play nice with the owners trying to sell. If you make things difficult so you can put in a low offer you may find the difficulty could be thrown back at you later down the track.

I’d say use your knoweldge of the house to make a good judgement about whether to buy or not. Obstructing a sale is not very nice, I’m sure you wouldn’t appreciate it, and you never know when that sort of thing will blow up in your face. Like what if the owner doesn’t like your difficulty and evicts you? That’s not good [glum2]