i bought this apartment off the plan last year and is due for completion in a few months…already i have had an offer to sell it off and i was not expecting it…i paid 315K for the apartment and have already paid the stamp duty…now the buyers would throw in some offers…
What do i do ? it is an investment property and i want to make a profit on it but if i sell it now i guess i would have to pay capital gains tax on the total profit ….
any advice…how much should i expect if i sell it or should i sell it ?I would perform a cost benefit analysis.
Do this by getting a bit of paper (or better yet a spreadsheet on computer) and on one side right down all the benefits of keeping it (dollar values). eg: rental income, capital gains, tax benefit of depreciation. and on the other side of the page write down all the costs. eg: interest, rates, body corporate, land tax, stamp duty (that you’ve already paid) and legal fees.
Then add up all the benefits and subtract all the costs. This is the net outcome of the first part of the analysis.Now on a new sheet do the same for selling the property. Eg: benefits include capital gains (well that’s pretty much it) and the costs: legal fees, stamp duty, interest… blah blah.
Add up the benefits and subtract the costs.Now you should have 2 figures. One is the outcome from keeping the property and the other is the outcome from selling. The one that is most positive is the one you should do.
You may have to do some “what if” analysis on this too. That is, if you don’t know how much you can / should sell for you can work out everything else and you should then see what you’d have to sell for to make it worth your while to sell. Likewise you should be able to figure out how much rent you’d need to make it worth keeping.
Numbers are you friend and spreadsheets are the pub you hang out with them at [biggrin]
Remember there are two things that are unavoidable: Death and taxes. Don’t be afraid of either as they are the outcomes of life.[buz2]
If you are paying tax it means you are making profit.bacchu- just out of interest, how did the buyer find you to make an offer?
Another way to work it out is to think of an amount of the top of your head – eg, 40k or something (less? more?)- whatever works for you- and decide if you can walk away from the deal with this amount- after CGT is paid and whatnot. The amount could be whatever is in your plans for future purchases.
Everything depends on your long-term goals. I am surprised that someone would be offering to pay a large amount above the cost of an OTP- to my mind, OTP’s are not “discounted” properties in the frirst place- so your property must be in high demand, or the new buyer would just go and buy an OTP themsemves- plenty still around!
kay henry
From what I have been hearing about OTP apartments you are lucky to make a profit at all in todays market.
Think back to your investment plan? Did you buy for a short term goal or a long term hold?
Has anything changed to warrant a change of plan?
Remember those who fail to plan, plan to fail [blush2]
Cheers,
Simon Macks
Finance Broker
[email protected]
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.
You’ve already paid $315K and stamp duty even though the project isn’t completed yet?
Usually the point of ‘buying’ off the plan is that you don’t pay out anything more than the desposit until final settlement, which occurs upon completion.
You put a clause in your contract that you may onsell the contract (or closed ‘option’) rather than personally purchase the property on settlement date (so it is an ‘option’ from your pov, but you provide security to the developer that SOMEONE will buy it on that date).
If this was the case, then when a purchaser approached you, you could ‘sell’ the unit to them without paying stamp duty etc because you have never actually bought the property. You are in fact selling to them permission to buy the property that was previously reserved for you.
You would still have to pay tax on this amount, but I imagine it would come under regular income tax. (check with tax specialist). Pretty good in theory, because you have doubled or tripled your initial investment (deposit) in a couple of years.
But I guess this is not much use to you now, if you have already paid money to the developer and tax office prior to completion.
As mentioned by others, write up a list of expenses you have paid out, plus a margin for your hard time and the passage of time (when you could have had your money invested elsewhere), and make sure their offer is significantly higher than this amount.
Consider how long it will take you to make a similar profit if you a)hold onto the property, or b) take their money and invest it elsewhere.
Good luck.
Sorry i haven’t paid it yet …i have paid only the stamp duty and the settlement is due in a few months time…
answering a question from henry…the real estate agent who are selling all the apartments contacted me…..If you sell today at least you know the market. Do you have a crystal ball for reading the future?
If you are prepared to bet that 12months time will bring better circumstances then by all means wait and see, but at least take a position in the market.CastleDreamer
NZ Investor
http://www.nzpropertytogo.com
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