Hi all,
Am reading Nickerson's famed book on making money through real estate..'How I turned $1000 into…..in my spare time'.
Was wondering if with the introduction of CGT if one can still use this startegy of doing up run down properties and then gradually buying larger houses and blocks of units with compounding capital growth.
It seems with the CGT that you must pay that maybe buy and hold is far better maybe mixed with PCF properties IF you can find them.
Would love to hear others thoughts / ideas?
Regards,
Scott
It sounds as though in his book (I haven't read it) that he is referring to a "1031 exchange"? Robert Kiyosaki mentions it in his books as well.
This is a mechanism in the USA whereby you can defer paying CGT indefinitely as long as you keep re-investing the gains from an investment sale into an equivalent or higher value investment – usually property.
We don't have that arrangement in Aus.
It is not advantagous to continually buy and sell properties in Aus because of the CGT rules, plus the costs incurred in buying and selling. Not only that; you lose out on future cap growth if you continually "flip".
You will find that most of the wealthiest people in the world have kept on increasing their wealth through buying or creating good real estate and keeping it.
Hello,
Thanks for your thoughts.
Yes, that is basically what he suggests.
Workable in America but not really suitable for Australia as an investment strategy it seems.He suggests buying run down properties in good areas and then improving them and reselling and buying larger properties with increased capital gains.
You may be able to do this on your own house the first few times without having to pay capital gains tax but in the time it took to do this you could establish investment properties also.
Regards,
Scott.
It's the old cliche of buying the worst house in the best street and doing it up, which does work.
Many people do this and end up with a very nice PPoR, but not necessarily any I.P's or other investments.
Nothing wrong with that, but you can do far better by using the increased equity for deposits on I.P's than you can by doing up the PPoR, then selling it , buying another and doing it again. A lot of the cap gain is eaten away in buying and selling costs.
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