I wouldnt be considering this is we weren't positive if we wanted to keep this house long term or not. Alot of things changed in our plan when we discovered I am pregnant again.
We have never sold a property before so are unsure how much $ we would actually walk away with.
Details:
– prop jointly owned 50:50 between me and my husband.
– paid $250k for it, plus $12k for buying costs and renovations. market appraised at $320 – $330k. so assume that we come to an agreed price of $320k. That is $70k minus expenses …. but what are the expenses???– bought the prop in june 09, so would need to have an extended settlement period to june 10 so we can pay less capital gains tax. by just using an online CGT calculator im allowing $10k estimate for CGT. my taxable income is nil, hubby's is $61k. so its going off those details and other expenses.
– we wouldnt need to use a REA cos we would just organise it through our solicitors so that saves some $i was wondering if those who are in the know could please alert me to the other factors i havent considered yet with costs involved in selling. i know there are more.
also, is there any legal things i can do to try to minimise my CGT?
if its worth my while and i walk away with a decent deposit for another better house Id be happy.
karen. wrote:I wouldnt be considering this is we weren't positive if we wanted to keep this house long term or not. Alot of things changed in our plan when we discovered I am pregnant again.We have never sold a property before so are unsure how much $ we would actually walk away with.
Details:
– prop jointly owned 50:50 between me and my husband.
– paid $250k for it, plus $12k for buying costs and renovations. market appraised at $320 – $330k. so assume that we come to an agreed price of $320k. That is $70k minus expenses …. but what are the expenses???– bought the prop in june 09, so would need to have an extended settlement period to june 10 so we can pay less capital gains tax.
Nope this is worked out from the date you enter into a buy or sell contract rather than settlement date.
Better to wait till after June 30 2010 before entering into a Sell contract so that capital gains proceeds are in next financial year when you are possibly not taxed as much due to not working the full financial year being July 10 to 30 June 2010karen. wrote:by just using an online CGT calculator im allowing $10k estimate for CGT. my taxable income is nil, hubby's is $61k. so its going off those details and other expenses.
– we wouldnt need to use a REA cos we would just organise it through our solicitors so that saves some $i was wondering if those who are in the know could please alert me to the other factors i havent considered yet with costs involved in selling. i know there are more.
also, is there any legal things i can do to try to minimise my CGT?
if its worth my while and i walk away with a decent deposit for another better house Id be happy.
Why do you want to sell it?
Is your cash flow projection telling you you cannot afford to keep the property or is it the effect of the family office rules?
I had to sell a property for a profit of 70k when I could not get a job and had to be a house dad and then I found the bank would not lend me money on one income.
I worked out that it has cost me 70k over the last 6 years in lost capital gain from selling the property. I worked out the growth at 9% compounding per year.
You may find you can't get as much finance once you stop working !My two twin girls go to school 1 FEB 2010 so I can run my business or maybe get a job.
CGT is calculated on the date of the contracts, so having a long settlment could still mean you fall within the 12months.
Not much you can do now to minimise CGT, but if you had the property in the trust all the gain could have went to you and you would have saved a bit.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Why sell? Another idea to throw into the mix is:
Get the bank to revalue the house and try to refinance to give you a cash injection to help you for the next year or so while you can't work
Personally I think there is such a small gain in it if you sell this house, it just isn't worth it. The banks are being quite difficult with dishing out loans at the moment. You might find it hard to jump back into the property market, so I'd hang on to the house if you can. Maybe discuss with the tenants the reason for their interest in buying. Is it because they want to be on the property ladder, or is it because they want more flexibility or a new addition to the property. Perhaps they would prefer for the loungeroom to be purple? Maybe if their reason is something you can accommodate (eg let them buy purple paint and paint the room themselves), then you could keep them as tenants, possibly though hiking up the rent to cover the cost of fixing the purple mess when they eventually leave).
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
basically we are unsure if we want to keep this house long enough now that our future plans are unexpectedly changing.
current situation: one income and living in a company house in a mining town. the original plan was for us to move back to mackay in 1 year and live in the house we bought in June. because i would have been returning to the workforce we were planning to undergo renovations then, when we had more cashflow. we bought it knowing it needed a restump but because it was going to be our "home" we were wanting to restump, raise the height, and build in underneith. we got the house way under market value and its on a large slab of land in a great location. it was going to be our PPOR for maybe 5 or 6 yrs after we move.
then we discovered we are expecting again.
now the plan is to live in said mining town for another 5 yrs (hubby's work permitting) and me not return to work for that time. its a personal choice of my husband and mine, but we prefer the kids to be at home til school age. so these are the problems now:
1. now we are back to one income for 5 years. we can still afford to do the restump while its an investment prop – but itd be putting alot of pressure on finances with me not returning for awhile. it really needs to be done soon – the stumps are pretty bad. we can afford the extra repayments for now, but if the rates get up above 8% it would affect our $ bigtime. we were anticipating me working when we had planned out the renovations.
2. the house no longer suits us as a PPOR because we have another child on the way. we wouldnt fit. so its lost some of its appeal to us. it will never be a PPOR, just an IP.
3. we have another IP (a unit) which we still owe $165k on, and its value is about $280k. its very low maintenance and doesnt need any major renos to be done. we could put the profit into an offset account linked to this mortgage and work on building up our savings in there, in anticipation for the next purchase … a PPOR that we will actually fit into! so we would work on those savings over the next yr or so, then start to look for a bigger house to buy.
4. when we relocate in 5 yrs time for me to start working again the houses will have gone up in price obviously. we are thinking maybe its best we find a home we would fit into some time over the next 18 months and use it as an IP until ready to move, rather than waiting til later. but we cant afford to purchase another prop while we already have 2 others. i doubt the banks would touch us anyways if we tried to buy a 3rd IP on one income.
i hope ive worded above right and it makes sence. but thanks for the heads up about CGT going off contract date not settlement, this gives us 6 months to think about it and consider our options.
If you had lived in that house before moving out and renting it, it could be CGT exempt if your absence is less than 6 years. s 118-145 ITAA
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
yep we know. but we arent in the position to live in mky just yet. rather buy earlier than expected and take advantage of capital gains … but we just are picky and take our time buying
if we buy again some time over the next 18 months the house we would get would cost about $400k (we've seen a few ideal houses of this price lately). if we buy this same house in 5 yrs time instead, it would probably cost us over $500k. so the amount to gain is more than the amount to lose through CGT.
karen. wrote:current situation:
we bought it knowing it needed a restump but because it was going to be our "home" we were wanting to restump, raise the height, and build in underneith.Being in Mackay did you check whether you were in the cyclone flood plain.
It happens rarely but that is why many houses in the area are built on stumps.
Never becomes a problem unless someone buids in underneath.
Same goes for those looking at Brisvegas properties.
+ you lose the breezes underneath that help keep these old houses coolkaren. wrote:current situation:
we bought it knowing it needed a restump but because it was going to be our "home" we were wanting to restump, raise the height, and build in underneith.Being in Mackay did you check whether you were in the cyclone flood plain.
It happens rarely but that is why many houses in the area are built on stumps.
Never becomes a problem unless someone builds in underneath.
Same goes for those looking at Brisvegas properties.
+ you lose the breezes underneath that help keep these old houses coolyeah the house's yard got mildly flooded during last yr's feb flood but it wasnt too bad. my dad ran the disaster relief centres so it was great having him on call for when we were looking to buy. the house as it currently sits didnt get affected tho cos its quite high off the ground already. with building in underneith we werent too worried because it does happen so little. I grew up in Mackay (lived there 25 years) and that flood last year is the only one I can remember of significance.
but we arent going to be doing all the building in underneith now anyways. just dont know whether to hold or sell.
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