All Topics / Help Needed! / Is this possible?

Viewing 9 posts - 1 through 9 (of 9 total)
  • Profile photo of BonnieBonnie
    Participant
    @bonnie
    Join Date: 2004
    Post Count: 69

    Hi There,
    I have one investment property and wanted to use the equity in that to purchase another property.
    I have found an opportunity where I can buy a property straight off of the plans in a relatively high growth suburb.
    I am required to pay a 10% deposit up front and then make the final payment upon completion of the property in about 8-9 months time.
    Is it possible to pay my deposit and then within about 2 months of completion, put the property on the market and sell it for approx $30,000 more than I “paid” for it?
    Is this legal?
    Any help would be most appreciated.
    Thanks,
    Bonnie

    Profile photo of Mortgage HunterMortgage Hunter
    Participant
    @mortgage-hunter
    Join Date: 2003
    Post Count: 3,781

    Yes it is possible and legal – theideal situation is to settle on the same day.

    Be aware that this was a common tactic to make good money in the last few years. Now that growth has slowed I would advise caution.

    Do your research independent of the marketers claims.

    Cheers,

    Simon Macks
    Mortgage Broker
    http://www.mortgagehunter.com.au
    0425 228 985

    NODOC Loan – 65% Loan – No questions asked! 6.85% Rate!!

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Ask yourself…if it didn’t sell soon after being completed, what would you do?
    rent it?
    move in yoursef?
    How much would you take for it?

    Go into the deal knowing what you want to come out with and look at ‘all’ your options, look at what you’ll pay in CGT with sale also (your only holding for ‘under’ a year), plus buying cost’s.

    If it all looks good and you have a plan your happy with then….[biggrin]

    REDWING

    “Money is a currency, like electricity and it requires momentum to make it Effective”
    Count The Currency With This Online Positive Cashflow Calculator

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Bonnie,

    I would counsel you to undertake very thorough research on your ‘plan and the property.’

    As MH indicated this approach was used by some investors (or is that gamblers) as a means of making a quick buck. It was especially promoted when long building timeframes were in place and while we were experiencing very high growth rates or, at least investors thought they were assured of high growth levels. Nonetheless a lot of home truths have now come home to rest with the inner city market – a hunting ground for many flippers – now being oversupplied and values are falling.

    I would also take some time to include CGT liability in your calculation – you will need a 12 + 1 day duration from time of signing contract to qualify for 50% CGT exemption otherwise you will see approx 25% of your profit disappear in tax.

    I would also encourage you to adopt a longer timeframe to your investing – in my mind now is certainly not the time to invest for the short term – invest for the long term sure.

    Derek
    [email protected]

    Property Investment Support Available. Ongoing and never stopping. PM welcome.

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Yep…

    decide what type of investor you want to be a property trader, speculator, wrapper, developer, renovator or buy and hold?

    Are you looking at – gearing or + gearing?

    I believe you should find a strategy that suits you ‘and’ you feel comfortable with..investigate it, do your sums and ‘do something’..you can work out all kinds of scenarios on paper and look at the figures…costs you nothing..

    REDWING

    “Money is a currency, like electricity and it requires momentum to make it Effective”
    Count The Currency With This Online Positive Cashflow Calculator

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    As the others have said, flipping is strategy that was marketeered a few years ago, by people like Henry Kaye. It was in a very different RE market (a rising market) where people could basically set their own values. It was also in the days hwen OTP properties were considered to be “discount”- as in “you’ll be amazed how much this property is worth when it’s built in 2 years!” That MAY have been the truth during a short period of time, but markets change so rapidly, you would have to have paid a deposit 5 years ago for it to have gained real value. Also, 5 years ago, it wasn’t an oversupplied market, as it is in some areas now.

    Get an independent valuer to see what they think it is worth. You may not be able to sell it for 30k extra on completion. In fact, you may be in a situation, when it is worth 30k LESS than you paid for it on completion- depending on where it is and what it is. There are some people who bought an apartment in an oversupplied area, with dreams of fabulous riches.. and then had to sell it in a damper market a few years later for 100k less than they paid for it.

    I hate to be a pessimist :o) but would you be able to afford it if this was the case?

    kay henry

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I agree with the others that you have to be very very careful – especially in this market.

    One thing some people don’t realise is, even if you can onsell before completion you will not get you deposit back, or the profit until the whole project is complete and settlement occurs.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of elveselves
    Member
    @elves
    Join Date: 2003
    Post Count: 507

    Yep do research, not all off the plan places do well, I have seen a few people stuck with duds

    A lot of people also tend to be more cautious when an election is about to happen, and given the possible interest rate market might be an issue after the election or even a change in government, would make me ponder the situation a little more carefully. You might get a better bargain by waiting….but only you will know this.

    cheers

    Elves

    ” a blind man may see what a sighted man may not”

    Profile photo of rodneyworthingtonrodneyworthington
    Member
    @rodneyworthington
    Join Date: 2004
    Post Count: 3

    do your homework and this type of thing can still work effectively.. be aware though that the market is very slow at the moment and the profits just aren’t there like they were 18 months ago…

    still, if the property is quality it still has some profit to be squuezed!

    rod

    Rodney Worthington – Property Valuations
    http://www.brisbane-property-valuations.com

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