I live on a block where i am able to build a unit in my backyard. My question is on the basis that im able to finance the project, is it best to build the unit and sell the front property to pay off the unit ? Build the unit and try and balance 3 morgages (havent crunched the numbers yet)Knowing that primary home is 1/2 way paid, investment was only purchased late last year, and obviously the unit in question which would be 100% financed.
Im not asking for answers, just an opinion of “if you were in this position” type view .
What would you do ?
It may depend on where you are. Bulding costs can be high. If you intend to keep both, thats one thing but idf you intend to sell you could sell the backyard to a builder. In many cases you may make as much without going to the hassle of building it yourself. Michael Yardney from Metrople does a lot of this and he posts on a regular bases. You could also speak to Alistair Perry who is a town planner who also posts here a lot
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hmm, the cost of building the unit would be around 130K and know that the market value for it once built would be around the 340-350k mark.
Ik now that the money is there to be made. I guess my question is to sell or keep? For some reason i dont really like selling, but it might just be the best option.?!?!Think about your longer term plans.
Consider your serviceability with both properties.
Have a think about your local market – will it make more sense to sell or hold.
Without knowing a whole lot more about you and your situation it is impossible to give advice.
Some people sell the existing home CGT free and move into the new one and establish a CGT exemption there….then build another!
Cheers,
Simon Macks
Residential and Commercial Finance Broker
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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.
Hello Passion,
I am in a similar position and asked similar questions in this post:
https://www.propertyinvesting.com/forum/topic/18339.htmlI don’t want to have to sell to get my hands on the profit.
your post was helpful dirtcheap
thankyouDo the Tax effective way you can always buy more property ,. sell front house once unit is finished then live in unit for 12 months then sell that , no tax what an easy way to put capital in your pocket , then re invest
Capital gains you will pay one day . And if the propertys are neg geared you are throughing away money every week.Take advantage of the no tax and move your money into somthing else.Cheers Rick
Monopoly, my favourite game
Hello all,
Unit in backyard OK, I have done this. Watch out for Council who will maybe want you to replace sewer. Also significant headworks charges sometimes, not to mention surveyors, solicitors etc. watch out for your new neighbours – will you be comfortable having close neighbours when it is done?
Like Rick,I would sell house then move into unit and then sell it next year.Maybe then go and do it all again!
Giddogiddo, rick its something that im really considering, i know that it would be the most tax effective way of doing things but when do i buy my dream home ? i guess it depends on whets more important to my wife and I
Im 34years old and yes it can be a worrie , I still am not in my dream home , but will be soon. Oh yeh and I can pay cash for my dream home not to many people I know live in there dream home yet and the ones that do will be a long time before they pay them off.
Delayed gratifcation is my way, But everyone has different gaols it has to suit your live . No good being misserable trying to make a buck , for me I do what I do for the love of it and it pays good divedends.Cheers Rick
Monopoly, my favourite game
PP one consideration is if you never sell it you will never pay CGT Tax on it.
On the basis that you would be able to sell the property and make a profit look at the profit as Tax free equity. You can always borrow against this for future deals.
New property has several advatages over second hand which include:
1)The GST which you will be able to claim along the way by Tax credits and will only be payable on the end price if you sell.
2) The Depreciation and Building Write off which will aid your Tax position especially in the early years.
3) It will be easier to rent being new and likely to attract a greater yield.
4) Structured correctly you will find that you maybe able to save interest on your own non tax deductible principal home and this pay off the loan quicker freeing up more equity.
5) Sensible gearing can multiply your gains but can also multiply your loses so use this as a firm foundation to create long term wealth.We started with one single home in 1996 which we offered on Vendor Finance terms and now as a Company own 187 houses throughout Qld which produce an income which helped me retire in my late 30’s. It is only boredom that got me back to work.
Start slowly and you too could build up equity and achieve a life long income stream.
Cheers Richard
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Agree with Rick. If it’s only going to cost you $130K to build and yet will be worth $350K when finished, I can’t understand why you would sell.
You certainly don’t need to sell to unlock the capital – you can borrow it – tax-free – and also don’t have to worry about GST and CGT.
If it were me, there’s no way I’d sell.
Megan
im now about to start looking for a designer and will hopefully have a more accurate quote on how much the unit will cost me.
i will keep you posted[biggrin]
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