Hi All,
Just after some opinions on whether to buy, renovate and sell or to build and sell. Im in WA, if i build it would probably be units,duplex’s ect if i buy it will be whatever is underpriced and i think i can renovate for a good profit. Iam looking for the larger return and the quicker turn over rate.
Thanks in Advance
NathanHi Nathan,
I think your question may be a little too general, that may account for the lack of replies. [
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Generally, if you develop a property yourself from scratch, you will make a decent return. However, do not expect this to happen quickly especially if you are inexperienced in dealing with contractors, red tape, etc.
Buying a house to renovate can produce a fairly quick turover, however there is also some hassle with contractors, red tape, etc. (Not such a large scale though)
Also, you need to take into account capital gains tax on the sale. If the property is for investment, you will have to wait 12 months before selling to get 50% discount on CGT.
Hope this helps a little,
Sue []“Be careful not to step on the flowers when you’re reaching for the stars”
Hi Sue,
Thanks for your reply. Iam unexperienced in th red factor but the best way to learn is dive in as i have a pretty sound building knowledge and will go through a builder for my first few. I know about the capital gains side of things also. One question though if you buy land and develop does the 12 months start when i purchase the land or when the structure has been finished and approved by local council. When i say quick i mean 6 to 12 months as opposed to a long term +/- geared property.
Iam currently doing some renovations/improvements around my own home which i purchased earlier this year so iam learnign a lot there which i can apply to building or renovating an investment property.
Cheers Nathan
Gday Nathan
Good luck finding development land at a reasonable price now in Perth, there’s no room for development margin (for small players anyway) and all the risk is on the downside as I see it so be careful. Remember your product won’t be available for 18 months, what will the market be like then?
I have been working on a development for 2 years and haven’t even layed a brick yet. There goes my profit eaten up with interest payments. It’s not necessarily the easy money you might think. 1st builder went under so have had to go through all the hoops again. There is a shortage of materials at the moment as well, particularly bricks.
Regarding CGT on developments, assuming you subdivide and strata you have created new land, so there will be GST to be collected and payed by you the developer. This is offset to some degree by the input credits from cost of construction.
As a simplified example;
Purchase land = 210K.
Closing costs = 10K.
Construction of 3 townhouses = 600K.
Interest @ 7% = 28.7K (Total time = 18 months)
Less GST credit = 10% of 600K = 60K
Total cost = 788.7KSell townhouses for 350K each = 1.05M
Less GST = 10% of 1.05M = 105K
Proceeds from sale = 945K
Profit = 156.3KHope I haven’t put a big dampener on your enthusiasm, just be careful and diligent that’s all.
Regards
Clive
Nathan, our children are both in their late 20’s and have homes at Ellenbrook, top end of the Swan Valley. Presently all written accounts say the market is steady, but in helping our daughter refinance the latest valuation by Herron Todd White has actually come back $10K, so that may be a signal of a price drop starting, which will affect you also.
Another point, we had a number of properties in Perth early 90’s and the price across the board dropped, in all cases for us 39%, so be careful. Perth doesn’t have the same demand inflation as say South East Queensland to pull it through if something causes a slowdown
Thanks a lot for your input guys i really appreciate it. My fisrt venture will be small and i will under take it with others say 2-4 people in total. I know a bucket load of tradesman etc so i have a few hassels ironed out there. As for materials i know all about the shortage, bricks are bad and apparently so is limestone. As for the market it has currently boomed as you all know and as it has boomed so quick it must come down a bit before leveling out and again rising. However money can be made in all types of market conditions so long as you maek the right choices but that of course is the hard part.
I still have a bit( a lot) to do on my own place so that will give me the time to research the path i want to take a little more. There are still a lot of new developments going on and if you can get in at the right time your sure to win. A friend of mine did quite well buying and building in matterly(spelling?) just undedr a year ago.
Cheers nathan
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