I have a block of land bought for 69,000. I owe the bank 20,000. I could sell it for 120,000. I have been advised to build a house on it to rent out. I was advised today to sell the block and invest the money in rental properties. I am now confused. This is my first investment. Has anyone got any opinions that could help me.
Sue Little
Sue,
Have you owned it for more than a year?
Are you on a high tax threshold?
What are your investing goals?
Are you willing to build?
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
In reply to Morgagehunter I have had the block for about 9 months. I am on a very low tax bracket, I want to obtain positive case flow. I would be willing to build if i could see that this would be a good option.
Sue Little
Hi Sue
If you want positive cash flow, you obviously need to do something with the land. Have you got an idea of the cost of building a house there and what rent you would get from it? You can then work out if it will be cash positive or not. Have you had a look around for cash positive rentals? Sounds like you need to do a bit of ground work and go through the figures. You could also ask your “advisors” what they are basing their advice on.Regards
JudiHi Sue,
If you are going to sell wait till you own land for 12 months and 1 day. You will only pay 50% capital gain. If you built for 180k, owing 200k can you get $400 p/w rent. Where are you?
RoboHi Robo,
That is a very dangerous assumption to make – while those figures may apply in your local area – they will not apply to everywhere.
Certinaly agree with the 12 months and 1 day issue as that potentially will save Sue some CGT liabilities – although based on her comment about being on a low income the ‘bill’ may not be that high anyway.
Sue,
I am also curious about who is advising you to build on the block – why is this suggestion being made? how much are building costs? what is the rentla demand like in the area? what is the long term future of the area like? are you better off taking the money and runing? what is your personal plan? where does the block fit into the plan?Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Derek,
What do you mean it may apply in my area but not everywhere?
RoboHi Robo,
Building something for $180K will not always return you $400/week. If I built a property to that value in Perth my rent would be in the $160-$180 range depending upon the area.
If I built the same property in my local area I would get $140-$150/week.
If I built that same property in Brisbane I would get around $180-$200.
If I built that same property in Cairns as a holiday let I may well get that or more.
The property market and Australia is too big for such sweeping statements. There are markets within markets.
Maybe the $400/week gives you a number that meets the 11 sec rule – but that doesn’t necessarily mean it will be achieveable.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
More on To sell or not to sell.
We bought the land at Bundaberg Qld as an investment before we knew about positive cashflow.
The most rent in that area would be about $250 if you spent 180k on a house (not positive cashflow).
We have been advised by finance brokers who are into capital gains to build your future.Sue Little
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