Forum Replies Created
You can avoid CGT completely by completing the building, finishing it off, putting all the bills in your name – it is now your primary place of residence & you can sell the property almost immediately with no tax liability at all. If your accountant can’t work this out, you need a new accountant. Also, I don’t see why GST would be payable in your circumstances.
Also, I question your estimate of rental income – rents in Perth are rising fast but $400 a week is an unlikely number and it will be closer to $300. You need to do some serious sums on what it will actually cost you to hold this property.
So, you might be able to take $140K profit out of this and pay no tax…
The question is, should you hold or sell?
IMO, you should only sell if you have a clear plan to re-invest the $140K into something else with an even better yield. For example, use the bulk of the money as deposits to purchase several more investment properties that can be positively geared… You will probably need to look somewhere like Melbourne for these types of opportunities.
If you can’t be bothered with all that, just hold it and probably have good capital growth in the medium term.
Good luck..
You are correct in your assumption – in this situation there is very little profit to be made from subdividing TODAY (but may be possible in the future).
In many areas where subdivision is permissable, you will find that the value of the second block has already been factored into the market price of the older houses on large blocks. Holding it for six months is unlikely to change the scenario.
I believe in this situation you have a few options:
1. If you truly believe the area has long term growth potential, you could buy it and hold long term in the hope that increasing property values in the area will make your duplex block more valuable. Some investors swear by this strategy and it can work well over time, but sometimes it might not work so well.
2. Look in a different location – one in which subdivision is likely to happen soon, but has not yet been formally approved. You need to get into a large block before it becomes a duplex block to make significant money in a relatively short time frame. You must think ahead and beat the investor rush into these types of locations in order to buy low and sell high.
3. Give up on the idea of buying a large block – poor rental returns and big maintenance issues could be a headache. Look for something smaller with better rental yields.
Best Wishes.
The Donald.
In 1999 I divorced my wife & walked away with $10K worth of Telstra shares – which in time halved in value to be worth $5K. She kept the house & everything else we owned which was fair enough because she would be the primary care-giver to our one year old daughter.
In 2007 I own four properties with minimal debt and feel like I have come a long way since 1999….
I got here thanks to three main principles / approaches:1. Always spend less than you earn. Never own a credit card. Always pay cash. Don’t get sucked in to being a consumer. I went without plenty of stuff at the time…But I don’t really remember what it was now – I don’t go without much at all now.
2. Invest what you save in growth assets. Wealth might not happen overnight but you will get there.
3. I happened to invest in real estate in Perth during the biggest real-estate boom we have ever seen. A fair bit of luck at play here.
I just hope all the “experts” who have made money in Perth real estate (like me) take the time to use the money wisely & make it last a lifetime. There probably won’t be another chance to do what we have done in the short time we have done it.
We are not experts. We just got lucky. It’s now up to us to use our brains and improve our lives & the lives of our family.
[biggrin]So, let me get this straight…. The “sheep” are all planning on selling WA property – and you agree this is a good move.
The “sheep” are all charging into super – you have also loaded up your super but you were super-clever and did it at the start of the year (Beat the sheep by almost 12 months!!)
Are you trying to say that you are not a sheep?… Or are you trying to say that all sheep were created equal, but you are the cleverest sheep of all?
Very little changing in Perth.
REIWA tells us there has been @ 45% median capital growth over the last 12 months – which is staggering… But there are very few negative indicators in the market, although it does appear to be slowly returning to “normal” levels of activity.
The average sale time for homes has increased from 7 days (at it’s peak) to around 3-4 weeks. Plus the number of homes on the market available for sale has increased up towards normal levels. At the market peak (July) there was very little to choose from.
We are not big on auctions over here so our auction clearance rate is never a good indicator of the market.
Capital growth in Perth will remain reasonably strong for a while yet IMHO.
I am sub-dividing in Perth right now.
Estimated costs of subdivision by Celeste are a little high – but my development does not involve any demolition.
I have done my DD and am expecting to pay $15K – $20K for the full process including infrastructure charges etc. etc. etc. It’s not cheap and there is no avoiding some large fees & charges.
My advice is to get it surveyed & a diagram drawn up, talk to the surveyor about your options for subdivision – there is sometimes more than one way to skin a cat.
The surveying process will cost around $1K – if you decide not to go ahead with it, it’s a small price to pay and you can keep the diagrams for the future.
I can recommend the surveyor I used: Midland Survey Services (08)9274 2545. I have no financial interest in their business – just a satisfied customer.Good Luck – if you can create a green title or strata title block of land in Perth you will do very well with demand for blocks exceptionally high in Perth right now.
The Donald.[grad]
