Went to the bank today to find out how much money they would lend me as i have another itch to build/invest on something. Im pleased to say that the back is willing to give me $260,000. My first thought is to build a unit in my backyard, go live in it and then rent the front propery out.
The rent wouldnt cover the loan repayments, infact they would be around $70 short.If in my position what would you do ? Ihave been looking for positive cashflow properties but cant seem to find any, which is quite fustrating for me as im running out of income to keep investing like this !
dont hesitate to share your views.
If you built the unit then sold the front house live in the unit for a couple of years sell that then you would not have to pay tax on any profits.
But would there be a profit?
If so maybe an option to at least make some sort of a gain. All so were do you live , Im in melbourne and will be selling a property that is positive cash flow , the property is a little different to a normal crental, but you have to think different to achive + cash flow in the current market conditions.Cheers Rickt
Monopoly, my favourite game
hmmm thats an option i have thought of but i always seem to stumble when i think about selling the property. I seem to think of the longer term advantage of having the property, and not the fast money of selling.
Id much prefer to borrow against the property and use that money to reinvest.maybe im just being silly but thats just the way i see it .
Fair enough , I personally have done this and for me it freed up capital, tax free . Then I put the money back into more property.
Cheers Rick
Monopoly, my favourite game
Hi,
Although I am not an expert in property inverstments but I can say one thing that If i was in your situation, I would start building process as soon as possible as you have already invested in land, you have equity / funds / loan available to build unit. Therefore, you must develop right now. Time is money. Sooner you are in the position to finish one project, you can start next.
If your rent does not cover the loan repayment, sell your Principle place of residence after subdividing land and pay no tax on Capital gains. New unit should then become cash positive or very close to it. You should not rent front / origional property out as you would be required to pay Capital Gains Tax.
If you feel like talking to me send me email or telephone me.
Sam Kumar
0403170099Sam
am i thinking backwards in wanting to keep and hold my properties ? All i keep hearing is SELL SELL SELL scary !
sounds i might need to change my thinking a little
[blush2][blush2]
OK…OK, I’ll jump on your side PP…
KEEP…KEEP…KEEP…Whatever you do. Pumping the 260K into a building at the back (IMO) will do nothing to the value of the land that is appreciating for you…but instead depreciate at a great rate of knots in the first couple of years…which the ATO generously allows you to claim some of it back.
Instead of burning a hole in your pocket or sending you crazy, have you thought of this ;
1a. Action – Keep all of your props as is…do nothing. Let the land grow. Heck plant a nice vegie patch and chook run out the back if you have lots of land. They taste better. (High finance here – can’t you tell ??)
1b. Result – land continues to grow.2a. Action – Go buy yourself a nice little shop somewhere for 250K + acquistion costs in your local area and lease it out for 5 years on a 9% nett yield. ($ 5,000 p.a. clear cashflow in your hand)
2b. Result – Use the excess funds (5K p.a.) to lighten the burden on your neg. CF props.All up at the end of the day, no selling costs, no fighting with selling agents, no CGT, no fights with builders, more land growing in your portfolio, exposure to different classes of real estate.
Happy days.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
I tend to agree with Dazzling but only disadvantage I can see with his solution is that you would have to keep servicing your negative gearing properties and you should have capacity to absorb loss of rent, while its vacant. Commercial properties are difficult to rent out unless you are able to find a property already rented with positive cash flow.
Alternatively, you sell your original house after unit completion and subdivision. I say that because capital gains from the house you have lived in for period of more than a year are capital gains tax exempt, if never rented. Once you start renting, ATO would like to take part of capital gain, therefore leave less money in your hand. You may get the new unit completed and move in to that. Sell first house and sell the second after you have lived in for a year and again pocket the profit from unit development. Then you may keep on repeating this formula. One disadvantage with my solution is that you have to sell to release the profits but advantage is “without paying tax on Capital gains”.
A friend of mine has decided to rent his original principle place of residence after having got its valuation from an approved valuer. This certificate would enable him to pay capital gains only on the difference between the valuation done before he started using it as investment property and actual sell price at later point of time. Therefore enjoying keeping his property and using it as IP. However you may only be eligible on claiming Interest costs on Investment Property on the lowest loan amount you have had on the property. If you have toped up that amount for unit constructions etc, may not be eligible for interest cost deduction in your Tax return.
I am not an expert or professional to give any advice, therefore It would be better to check with your accountant or even calling Tax Department and they will tell you exactly, what you are allowed or not allowed. I am giving you few options, you may like to explore.
Keep me posted on your investigations or as we are all learning here and adopting to new creative solutions people are coming up. If my thinking is incorrect, i would like to listen from others so that i can learn further from others experience.
Regards,
Sam Kumar
Sam
Originally posted by Rick Traberg:All so were do you live , Im in melbourne and will be selling a property that is positive cash flow , the property is a little different to a normal crental, but you have to think different to achive + cash flow in the current market conditions.
Cheers Rickt
Monopoly, my favourite game
Hi Rickt
Could you tell me more about this positive cash flow property? Cheers
YadehI’m a supporter of HOLD HOLD HOLD. It doesn’t make any sense to me to sell a property and then buy back into the market. For a start you deplete your asset base by at least the cost of the selling agent’s commission and legals.
I support your idea of using the equity to increase your holdings.
Positive cashflow properties are easier to find in country areas – perhaps you need to widen your scope. As well, you’ll get positive cashflow from wrapping, if you’re open to that, buy, of course, won’t be able to “hold” the asset.
Megan
Property Passion,
Firstly, I think that you’re doing it the other way around. You’d best be finding an investment your convinced of, then getting the finance for it. Don’t just use the money because they’re offering.
Secondly, if they’re willing to give you 260k for ressy IP, then I’m pretty sure they’re not going to give you anything like that for a comm. IP.
Contact me at [email protected]
montrose sent you an email and pm hear from you soon. what about im not too sure, but curious
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