Would really value opinions of some seasoned investors out there.
My current position is
Have 1 IP that is neutrally geared on a 80% LVR.. plan to hold for another 4 years pending market.
Have just sold, as part of a buy, Reno, Sell strategy and made 80k net profit in 12 months. Was working full time while renovating and living in the property while renovating. I make about 110k p/a in my current job.
Am a bit stuck as to what to do next.
I am keen to do another buy , Reno , sell but unsure of how many you can so without it being audited by the tax man??
Also with more relaxed work hours and it being the second Reno I’ve allocated 6 months for the next Reno. But to avoid stamp duty and ctg is there anyway to buy, Reno, rent and sell and get a similar outcome. If you get the property revalued at the end of the Reno while its still at PPOR will you only pay CGT on any increase in value during the time that it was rented?
Also have the option of buying some land in an up and coming suburb in Mackay which I think will do really well in terms of CG but unsure if building with the aim of selling a few years later after the build is a good option…
End goal is to own a PPOR outright worth about 500k in 5 years.
Thanks in advance for any help or advice.
Jess
Hi
If your intention is to buy reno and sell than your property may be treated as merely trading stock and you won't get the 50% CGT discount anyway.
Owning PPOR outright is a great goal to have.
Good luck
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Hi Jess,
Regular renos and move out may see the ATO look at your operations differently and you may miss the 50% CGT discount. Really think you need a terrific accountant for some definitive answers on that one.
Barring the ATO ruling you are a trader then the property will be CGT free while you live in it. You can retain it as your PPOR for a further 6 years and your CGT exemption status will remain provided you don't have another PPOR during this period of time.
Not sure I like the buy land and hope strategy. Seems to me that your existing strategy worked for you once. Is there any reason it won't work a second time for you as I am sure you made some mistakes with the first effort which, through experience, you'll avoid with the second reno. What attracted you to land banking as a strategy? Is it the hands off style of investment?
Nothing wrong with your plan – to achieve this you will probably be looking at high cashflow properties or a value adding and quick sale option as the basis of your investment decisions.
PS – PPOR in five years time.
Are you able to grab something suitable now, keep it as an IP, and use profits from your current strategies to pay it off in your stated timeframe?
Hi Jess,
You mentioned "End goal is to own a PPOR outright worth about 500k in 5 years.". On one hand that is the goal but what is the real goal or motivation behind this? For instance, is there a particular suburb that you just love or where all your family and friends are and thus you want to live there… and the standard price around that area is $500k?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for all your replies.
i have decided against the land option. The reason I initially considered this is I have seen new estate in good areas increase significantly in value. One example is Ooralea where development started maybe 5 years ago and at stage one you could pick up a 4bedroom 2bath for about 420k …now similar houses in the now established estate at selling for 600k upwards. I was offered a property 5 years ago at a bargain price and I wished I had went for it back then.
For now, I'm sticking with a live in Reno strategy as I think that's the way to go as I don't have a lot of equity behind me.
Thanks Derek for your advice. I didn't think of buying something suitable now to live in in 5 years time and rent it out in the meantime. Definitely a good suggestion especially if there might be some capital growth during that time. Will look into it.
Jacqui my 'end' goal is motivated by the fact that I don't want the financial stress of mortgage repayment down the track when we might be considering having a family (i am now 26) And by having a PPOR with a small or no mortgage can then give us the leverage and security to start planning for an early retirement by looking at cash flow positive long term hold properties…..fingers crossed!
Find it quite hard to come up with that elusive thing called 'a strategy' so if anyone has any suggestions please feel free to comment.
Thanks again everyone.
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