Forum Replies Created
Hi, after 5 years, there's no GST on sale. If you sell the new house upon completion, you may cop trade profit as well instead of CGT which is 50% of total gain. Eg, if sale price is $380000, then GST is 10%. If you use the margin method of calculating GST, you'll still have to pay a substantial amount.
When you tote up everything, you may find that you have an IP which is CF+ but -ve gearing.
If you do decide to sell the new house immediately, make sure that the contract specifies the margin method of computation of GST.
You can do the depreciation schedule yourself if you keep all records of costs. I did mine like that and my accountant charged me the usual not very high rate of doing my tax return.
KY
hi, you probably can get a construction loan. Since you own the land already, it should be easy. 70% of end value, say $320000, you can borrow $224000, should be enough to build 3BR home + finishing. You might even get higher than 70% LVR or your end value may be higher than $320000.
The entire loan will be tax deductible if you use the new house as an IP. You can also claim the GST paid.
Continuing to live in the old house for 5 years may have a lot of financial benefit, as opposed to living in the new house.
You have to do your own sums to see what works best. Good luck,
KYHi, you seem very sure that house prices will come down when FHBG ends. Did that happen when you bought previously? Do people stop living in houses when FHBG ends?
Sure, sell if you don't need a house but not to anticipate whether prices will come down or go up. It's something that we can only guess.
KY
Hi, tell me when you find a commercial property with good leases selling @ 9% net yield. I'll pay you finders' fee.
KY
Hi Yanhong, if you listen to the likes of Scamp, you'll never in this life ever own any property. Run a check of his posts and you'll see what I mean.
Having said that, you still are faced with a decision. Before your last post about the higher valuation, I was going to say that $40k variation is NOT big. It's less than 10% of the offer price. It's still worrying because it affects your loan amount.
What I'd have suggested was to use the valuation to barter the price down. Since you have a subject to finance clause, you can argue that the finance is available only for the valuation price. If the seller doesn't accept the valuation, then you won't have to lose your deposit.
You can try lodging a withdrawal based on the loan amount you're able to get. i.e. 80% of $460000 = $368000 therefore you can only proceed with the purchase at $460000
If you're VERY uncomfortable with going ahead, then just losing $1250 is not such a big deal.
Good luck,
KYHi, all the comments are right and very kind too, especially Scott.
You have plenty of equity but do not want to risk your house. Then WHY are you considering direct investment at all?
You don't want to put in any cash and you expect a lender to fully fund your purchase?
How are you going to repay the loan?
Commercial loan rates are generally 2-3% higher than home loans. I'm paying 9.5% flat to a private lender.
You need to sort your own confused state of mind so that you ask questions that are more rewarding.
KY
Hi, Duckster is right. $75 p.w. is not difficult to pay down. Increase payments to $400 per month and it gets progressively easier.
KY
Hi, generally council valuation is lower than sale price. Nowadays council has increased valuations significantly.
I once owned a house that council valued at $260000, the bank valued it $330000 and I sold it for $395000.
$350000 is a fairly high price for outer Adelaide suburb, should be new, 4BR
KY
Hi, can you rebuild 2 on your PPOR block? If not, can you reno/extend and put a unit onto existing structure so that you have a large section of your current block to live in and an additional smaller unit to rent out for income?
You can then borrow off your current IP to do all of the above. However, number crunching is essential.
Good luck,
KYUnmester, do you own a house? Have you noticed the cost of cement, bricks, timber etc have ALL gone up? Plus the cost of connections, water, electricity etc etc?
For 5 days, we've been trying to get the tradie to fix the ceiling. And give us quotes on other repairs + painting.
The painter woman we previously asked is booked up to August.
There're a lot of houses requiring updating. That comes with a price tag, attached to the names of the workers who spend their hours and expertise on the job. Who'd want to deny them their income?
Natural wear and tear, inflation and demand for land first and foremost establish the price of a house, not FHB or investors or realtors.
Anyone who feels houses are too expensive, very simple, go live in a tent.
KY
Hi, it happens all the time.
And the ones who can't get ahead are the ones who did not take the 1st step.
Share this experience with you. Someone in 1994 had enough savings to buy an IP. Talked about it, looked at dozens of houses, wanted to squeeze the seller, would not offer the price asked. This one is not good enough, that one is not worth the money.
My 2nd house, [1st IP if we wish to call it that], I offered asking price $175K [which my agent told me was very low] as the owners had divorced and rental was a bit difficult. I later found out they paid $194K two years earlier so they'd have lost about $50000 all in when they sold to me.
I told the 94 couple about it and he [a home maintenance man] said he would not offer more than $160K.
After I'd bought IP 4, they urgently phoned to ask me [1 year later] what I paid for it – $88K. They refused to pay more than $88K for the one in the same suburb that they'd seen with an asking price of $105K and she said 'it's mad'
That was in 2001. And guess what? That house is $300K now.
They are bitter and jealous and I don't mention property in their hearing.
He's been on carer's pension for a few years and she works in aged care.
I can go on and on but I won't.
KY
hi digit, good to hear you're able to buy it 1st and just mosey along with the holding costs as -ve gearing.
I did one [my 1st ever subdivision] like that.
The property was quite horrendous [hence the low price] but the lenders classified it commercial. I went ahead & bought it knocking off another tenK. Holding costs were very high in my case but I could manage as I had no debt.
Once the approvals were all done, CBA gave me a 75% loan on END VALUE which was enough to cover all costs and more.
So if you do your sums based on even 4 townhouses, your end value will still be high enough to give you what you need.
Good luck,
KYHi, can this be done?
Buy it as a residential property [house and land] I'd go through another lender.
Then with all the permits etc, apply for construction loan. The construction loan will most likely be classified as a business loan. Fees are appreciably higher but interest is charged only when building costs build up.
If you can't manage the holding costs, be very vary. It might be that you're position can be precarious.
Good luck,
KYHi, this is why our FHB is not subprime.
Husband & wife just bought house & land package. Borrowed $290000.
At 5%, their repayment interest = $14500 p.a.
Their current rental = $320 pw = $16640 p.a.
The whole family is currently working more hours to set aside some more for when their new home is ready.
KY
Hi, is this possible? Buy acreage property now. Use it as IP and improve as in what you'd like when you transfer family there. While it's an IP, milk all the tax benefits you can get eg. if you renovate, the renovation cost can be partly recovered by tax claims.
Then, say in 2 years' time, you move into acreage property [having claimed GST + depreciation] as well as sell your current PPOR at optimum price.
By deferring your move, you can save quite a lot of money but of course, you miss immediately living where you want.
You'd have to do your own sums, I don't know whether it'd work for you.
KY
Hi, you sound really stressed. Can you sell PPOR instead? $30000 drop is not dire but not being able to make repayments is.
You might take a pasting on the price though. You might want to consider selling on a leaseback i.e. you rent back the house and pay the investor enough to make it worthwhile for them.
I did that last year and used my repayment as the starting point to figure out how to present the investment. Sold on the 1st open.
I pay $350 p.w. but the rent [market rate] is $285-290.
I got a quick sale, the proceeds of which saved me a lot of money & unnecessary stress. I'm repaying the same amount only I don't pay to the bank, I pay my landlord. He's not having any capital gain at the moment & the house will be hard to sell but he's getting steady cashflow from me and will do so for 5 years.
Good luck,
KYHi Ajay, I live in Adelaide and I DO NOT BELIEVE that Adelaide prices will go up the way that they did in 07.
I further think that they won't go down much either. So if you're buying 1st home with govt grant, not much point waiting. Buy as good as you can.
What I would not do is buy believing that after I buy, the capital gain will be such and such.
There were long periods when Adelaide prices languished [up to ten years] and who knows if we're going into such a period?
I bought in 98/99, caught the 03/04 boom and bought again in 05/06 and caught the 07 boom.
The reason I bought in 05/06 was I sold in 04. I saw that prices didn't go down and I wondered why. Based on those reasons, I had to buy again in 05. You can look through my posts in 06.
You'd do far better if you go and look at the houses for sale for a few months and then choose what to buy.
Good luck,
KYHi, this has been discussed elsewhere. In my opinion, it's a lot of projection and speculation based on inadequate analysis.
1 are all FHB young? Did anyone do a breakdown on this?
2 what is the result of extrapolating current rent to repayment?Anecdotal instances go against the sensationalist headlines about FHB spiralling into a subprime situation.
FHB I know. Loan = $290000
Current rent = $1300 pm
Age = husband 51 wife 49 daughter 20 son 22
Both husband and wife were unemployed when they applied for loan
Husband immediately found a job after loan approvalOne of my current tenants have Centrelink pay the rent direct into my account.
It suggests that there are more tenants than Housing Trust can find accommodation for. It also suggests that Housing Trust cannot supply CHEAP housing. Ain't such animal in the world.The only cheap housing is to pitch a tent in the park.
KY
Hi, well done. Exactly how it's done and you can look for the best property you can get for the amount that you've allocated. Have you considered that you can also leverage off your properties to buy shares? You get the same -ve gearing advantages and have potential to get a lot of capital gain.
Please understand that I'm not giving advice. You have to do your own calculations which you obviously have been doing.
Good luck,
KYHi, why are you thinking of a PPOR loan instead of an investment loan?
KY
