Hi all
Purchased last year a block of land overlooking the golf course at Dunsborough Lakes Estate. Had it valued in March and the bank valuation came in at 100K over what we paid. Our dilemma now is whether we sell it or build a house on it and rent it out, thus getting rent, depreciation and some tax breaks.
Any info would be appreciated.
Thank youSimon
Your choice, depends on your end goals.
PErsonally I would consider selling and then using the cash for deposits on two more places in areas that you feel there is some growth, that way you’d have two appreciating in value over time rather than the one.
PK
Hi PK
That’s what we thought. Although the tax benefits would be an incentive if we built, we might do better if we took the money and ran. That way we can put the money towards other properties.
Thanks for the advice.Simon
Hi there
Why would you take the money and run when you can have the cake and eat it too?Just look at the BIG picture – how much will Dunsborough be worth in 12 months? $100,000 (-CG tax) is really peanuts considering future potential growth in this area. Conservatively you could be making around 20% pa over the next 2-3 years.
By building on this block you can use the equity to keep purchasing additional properties. Also I believe there is great demand for long term rentals in this area.
I would only consider selling if you need to rationalise debt, that is if you are struggling, or you have purchased a complete lemon.
Regards, M
PS
If you decide to sell, I would be interested in details, pm me.thanksThere is the other grey area of GST.
You may be liable for gst as well as cgt upon the sale of the block.
Puts a huge dent in your profit (assuming you declare, and pay the dual taxes, and/or do not cop an ATO audit if you decide not to declare the profit)I would be looking at the market rent you could expect to get for a house down there, vs what it cost you to ( house plus land cost) build and complete a house, ready for occupation.
If it is a reasonable yield, then I would consider building and renting, and tapping the equity as previously suggested, for further investing.Bear in mind that if your intention was to build a rental property on the land, then you are within your rights to claim the interest incurred to date on the land only, even though you have not generated any rent from the property yet.
This can be a huge windfall in the form of a tax refund.
kp
OK, so why not take teh profit and buy two in teh area and build on both (if it’s financailly possible and then have teh captial gains Marissa is talkinga bout on two properties instead of one?)
On the other hand, not having bought blocks myself I had consider the CGT, but I hadn’t considered GST implications.
Do a forecast over say 5 years on what you whoudl achieve both ways based on expected gains, expected rents etc. The figures take the emotion out of decisions.
Good Luck
PKBear in mind even with a production house it will take another 6-7 mths min to get permits & build. If doing a home-owner suby it will take an enormous amount of your time to keep it all on track, decisions etc. Have you this time to spend every day. And where will the market be when you have finished? I’d take the money & buy 2-3 more properties.
Fern
fernfurn,
no need to get too stressed about the Dunsborough market, this is where the rich and not too famous hang out. Values only go up in this area.In fact if simond11 sells, I would say there is a good chance he wont get back into this market.
Hi all
Thank you so much with all your ideas. Certainly food for thought. Main reason for selling (though we don’t really want to) is so we can get our debt down on our unit in Clovelly, NSW. Paying quite a bit off our mortgage and we would like to really shave a big chunk off it.
Regarding the GST component, I thought GST was only payable on new land that was sold by a vendor such as a developer. You didn’t pay GST if you re-sold the land. Can anyone confirm this please?
Thank youSimon
yes reselling land is an enterprise that is captured by the GST legislation. as your turnover is above the threshold the entitie/s that purchased the land would be forced to register for GST. You should be able to sell under the margin scheme, hence GST payable would roughly be $200k-$100k / 11 = $9k. YOu may be able to slip the remaining $91k thru as CGT (check with a tax accountant) depending on how many of these you have done – sounds like just the one.
this thread has depressed me – i recall sitting in the carpark debating whether to buy one of these blocks for $100k. decided the blocks were too far from the beach, had little appeal and it was a lot of money for a block so far from Perth and left it. doh! and to think that was only Easter 2004.
http://www.megapropertygroup.comINVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT
lol Ausprop, I can relate. We had a property we sold in Balga for $74,000 8 years ago, it now has the origanal house and 2 units on it and each valued at aroudn the $200,000.
Ah well, just get the next one I guess!
PK
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