Hi everyone,
I’m hoping that someone here can give me some advice. Before my hubbie and I found out about positive cashflow property investing, we signed a contract on a negatively geared property. The house was built as a spec home by a building company that then went into liqidation before it got it’s final council aproval.
Anyway, we’re buying the property for about $20,000 under the market value. The settlement has been postponed time and time again as the vendor doesn’t want to sell now as the values have gone up more and more and now it’s worth about $50,000 more than the contract price because it’s been going on for almost 6 months now and there’s a boom going on here in brissy.
We’re going to him with an offer today for a little more than the contract price but if he doesn’t take it we’ll have to go to court to get them to settle so we will be able to settle in about a months time.
My question is… Should we hold onto the property for a year and then sell so that we don’t have to pay as much capital gains tax or should we sell straight away and start up the path of financial freedom through positive cashflow investing with the profits? or should we hold onto it and use the equity to fund the poitive cf investing?
ps- we have about 100,000 in equity in our own home.I’d really appreciate you’re thoughts on this as we’re just not sure what to do. I’ve almost finished reading Steves book also.
Thanks, Darrylsgirl.
Darryl’s girl
Watch out as there might be a sunset clause in the contract which may allow the builder to back out of the contract if the building is not complete by certain date.
I am not too keen on selling properties, and bascially beleive in keeping them for the long term. If you sell you have tax and agents fees etc, and then more stamp duty on the one you buy to replace it. I prefer to keep and use the equity for further investing.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi there,
I think that what you may wish to do is to relook at how the figures stack up with the capital gain tht has occured and you may find that is is in quite a good financial position due to the $50000 increase. If not then it certainly was negatively geared highly.
Have the rents increased with this price increase??
If it still is in bad financial shape then you can always cut your losses however i think gains like what you are getting says that it still is a good investment!
Keep me posted.[
]If I were you, I’d go to the vendor with an offer such as what Steve does with his bad tenants. Go to the builder and offer the money you propose and say that they can take the extra money, finish the job and move on, or you can use that money to take them to court. Either way you will end up with the house (hopefully), just hope they take the money so you don’t have to go to court.
darrylsgirl
-ve CF properties can only be bought up to a point where your bank feels you can afford to subsidise these properties whereas +ve CF properties can in effect be purchased ad infinitum.
The deal you mention above sounds like one which you should hold onto as it will assist your equity position and you will not have any problem financing future +ve geared IP’s. To take the $50K now and pay 48.5% tax on it (inside one year) would not be my choice. I would hang onto it. If the rents have increased (unlikely but possible) along the same lines as the CG then it may not be as heavily CF -ve as at first. If however the rent is nowhere near the mortgage payments you may want to consider walking away altogether as you may not get to actually realise the $50K you currently think you can as the market has stalled a bit in the last few weeks.Thanks guys for the info,
The thing is that we’re actually purchasing the property from the second morgagee holder and the bank because as I said the builder went into liquidation before we knew about the property.
The second morgage holder is the one holding things up because he knows he could get more for it if he put it back on the market.
We’ll hear as to when we settle in the next couple of days.
I must say that I like the idea of having neg geared props in good cg aears with pos geared ones else where that will pay the shart fall on the neg geared ones. But have more pos geared ones for some income.
Again I thank you all for your input and if anyone else has some ideas please keep them coming.
Darrylsgirl.
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