Hi Dao

Not sure if your working out your usable equity there correctly. Currently property worth 411k with a loan of 385k.  You wish to spend 30k increasing the value to your expected 500k. Your usable equity on a 80% loan is only $15,000. (500k x 0.8 = 400k… 100 k must remain in the property as security. therefore you only have 15k of usable equity afterwards.

I would look first to increase  your salary ie.  to work in the mines, being a electrical engineer you would get paid top dollar easily 100k a year, to begin with and upwards of a 150k in a couple years if you went towards a management position. FIFO work might not be the greatest lifestyle but the pay is excellent and you only have to do it for a couple of years before the results and hard work pay off.

Its all very good to be interested in property for financial security. But a lot of people focus to much on the property investing side and instead if they focused on themselves or their business first investing in property with greater cash/equity and income tends to be a lot easier later.

Increase your borrowing capacity by

– refinancing loans to a lower interest rate

– removing credit cards or lowering credit cards and store limits

– paying off personal loans

– getting a second job or other income source

– get a new job that pays more

– reduce debt on your ppor (although not as strong as the above)

-buying properties that rent for greater then the loan repayments. Ie property loan 100k interest rate 5% interest per year 5k. Property rents for $200 week (10,400 a year), Banks consider 80% on average of rental income. Therefore income for serviceability is $8320 therefor increasing your INCOME by $3,320 a year and your borrowing capacity by (If we say interest rates at 5%), by $66,400 a year.

If you already have a PPOR perhaps you Could rent that property and purchase a less desirable property (ugly) and renovate that and have that as your PPOR for a year. 

But long term if you can rent for 200-300 a week in a suburb you want to live in. Then you'll find that your investing will happen quicker, because the banks would consider your Princical and interest payments on your PPOR to be taking away a large percentage of your income per month. Reducing your borrowing capacity faster. You can still get the PPOR exemption on a property provided you lived in it first for up to 6 years. 

If you are operating a company.

and your total costs of developing 8 units is say 2 million 250,000 each dwelling incl land, hardcosts and build cost and interest. If you then Sold 6 units and after gst and sales cost you repaid the full 2 million dollars of costs/loans. Say selling each home at 350k. (100k would cover sales costs and gst component. (2.1mil total)

Your Company then retains the additional 2 dwellings. You have made a net profit that year of zero. Therefore your taxable income is zero.

How your company holds those properties is then up to you, as i said you can allocate those remaining 2 properties to each family trust. As long as you set this up before settlement on the land.

This is why a lot of investors will wait until they are either Not working full time or retired before they sell off properties they have constructed during development.

Or better off Never selling, just keep it forever and live off the rent

1) When you initially buy the property if you buy the land in company name (say with you all as directors) you can set up your trusts underneath that company ie have the company as trustee. Then if you roughly know which house/unit you would each be getting.. say off a site plan you marked each house a b c d e f g etc. You can then allocate that property to that trust. Ie .Property A is going into Trust A and Property B is going into Trust B and the rest are being sold. A good Conveyancer or lawyer would know it as a Acknowledgement of Trust. Bascially this says that you bought this land with the intention to create it for this trust.  This avoids the transfer of stamp duty into a long term holding structure like a family trust that gets CGT 50% rule.

2) Trusts would only pay CGT if they sold. And even then you should discuss with a good accountant because there have been cases of people doing developments and selling the properties that they held years later. And the ATO still viewed it as their purpose for entering into the transaction and it was a income tax event and not a realization of capital gains.

3) If you claim GST on properties that you hold… Thats a no no, make sure you only claim gst credits on the properties that are being sold. Claim none for the 2 that you wish to hold.

4) No it doesn't matter if your a director of a company and also a beneficiary of a trust. Ie it could go Director – Company – Family Trust – Individual Beneficiaries.

On the note that  you mention about tax..  If your total expenses equal the total sale price of 6 units sold then you technically wouldn't make a profit because you locked it into the other 2 remaining units. Which is a good thing unless you want sales to borrow against in the future.

5) A) A JV would be between say two companies. which if you wanted to keep everything more separate you could buy a piece of land as Joint tenants between 2 companies 50% each.

If you were all directors of the same company then its just a Venture.

b) unless you have done no developments before this most likely would be seen by the ato as a development and not just a Property investor making the best use of his property. And if you intend to Claim gst credits then it almost certainly is a development. A profit generating activity.

Have a look at number 69 Springfield drive. The 3 unit development there. You could do something similar perhaps…

Btw sorry i correct myself it wasn't a reserve just another person empty block of land.

Even when you do simultaneous settlements you still have to apply to the banks to purchase the property even if you plan to resell it later that day ie after a development application has been approved in the previous couple months when you had a long settlement.  The only way you can sign up a property and assign it to someone else.

Is to

A) take a option on a property, (improve the value and onsell for a profit)

take a option on a property knowing your the only person there on the day bidding for example and that you can flog it off to someone else for a couple grand more as your "spotters fee"

C) having a long settlement on a property that you signed and/or nominee on and then getting a potential buyer to buy that property off you and you sign over your nomination to them.

I'm just going to say that I don't know many people that make a sole income on just spotting. I know a few developers that also take a spotting fee if they see something good that another person hasn't seen and recommends it to them.

To be honest. I think a masters in landscape architecture you could start a business is designing landscaping for developments. Hell if your only in retail currently i would start ringing small to medium to large development companies and say Hey do you need a landscaping design done for your 4 unit, 6 unit, 10 unit block development. Ill do it for free. This is something you could do after hours at home. Give a couple designs away to a few small to medium size developers and build a business around it. Word will spread, set up a nice business doing something your qualified in and that use your business income to invest into property. It would be a low set cost low capital business. What do you really need a computer, your own brain.  Plus being around these people that might even share some of their knowledge with you. You wouldn't of done a masters in something unless you were good at it or at least enjoyed the work.

You should do whatever makes  you wake up in the morning and actually jump out of bed and not roll over dreading the coming day.

The definition for Financially Free is different for everyone.

But if you wanted to at least have the ability to pay all your bills on time, live in the home your currently in and go on one holiday  in a year or so.

Then financially free would be the amount of income needed on a passive or near passive nature that supported that lifestyle. I would say thats between 30k for individual to 50-60k for a family unit.

And you could get there with 1 Mil invested at 5 %.

If its a brand new apartment or close to your depreciation might be a lot higher.

The only word of warning is that the asbestos roof has to actually deteriorate whilst you own the property.

So you couldn't buy a home that needed the asbestos repaired at the point of sale.