Forum Replies Created
Where does the $100 application fee go? If that goes into your pocket, then all it will take is 300 applications for you to get $30,000 for your block. At the moment there is a house on the same size block for sale in Quambone for $30,000.
Seems like a clever way to sell a block of land that is not otherwise selling. Not sure I believe the whole "give something back" and breath (sic) life into the communities" gumph though.
K
For crying out loud, I can't believe that people are still asking for feedback on this group. Have you people not read this thread?
I think that Body Corporate payments attach to the property, not the property owner and therefore you probably don't have any legal obligation to pay it. However, if I was in your position, I would just pay the money. That would seem to be the decent thing to do.
Cheers
K
Let me get this straight. You want to embark on a venture that is going to make you a profit and put extra money in your pocket. You are able to take advantage of a loophole in the tax system by living in one property for 12 months and thereby avoid paying CGT on that property. And yet you are complaining that it's unfair to not be able to use that loophole to avoid paying tax on the second property?
The PPOR CGT exemption is designed to protect everyday homeowners from having to pay tax on the sale of the biggest expense in their lives. It is, in effect, a gift from the government to people who genuinely live in a home. The occupation of a property for 12 months is only an indication to the ATO that you were intending the property to be your PPOR. It the ATO formed the opinion that you were only living in the property for 12 months to avoid paying CGT, you would lose the exemption, regardless of the fact that you have no other PPOR.
Rather than complaining that the ATO are getting something for nothing, how about being grateful that you are able to get something for nothing, that is, full profits on a property that you are only going to live in to avoid paying CGT?
If don't want to pay tax, then don't earn extra income. It's that simple.
K
I think i3ravo is planning on being the developer, so from that perspective, it all looks great! The comments all sound very favourable to you i3ravo!
The problem may be getting purchasers to agree to your terms, which sound far more favourable to the developer than to the purchaser.
Cheers
K
The property manager is your agent. that is, they act in your place. Of course you are entitled to anything that is received by your agent in the course of them acting as your agent.
I think I remember this happening once before on the forum (PM refusing to release documents claiming Privacy Act) but you are entitled to it, in the same way you would have the tenancy application had you done the property management yourself.
Ask the PM what section of the Property Act they are relying on and make them fully justify why they won't give it to you.
K
Another problem (and no offence Vitale) is that market value is not always sale price. Have a look at what properties are selling for, rather than what they are being advertised for.
If you still think your property is worth as much as you think it is, then find out from the bank which valuers are on their panel. All banks have a few valuers that they use. The banks won't accept valuations from valuers not on their panel. Get one of these valuers to come and independently value your property, then present it to the bank, along with evidence of why the other valuation was so low (ie, new sales that were not recorded at the time of the earlier valuation) and see if the bank will reconsider.
Another option is to go to a mortgage broker rather than your bank and see if you can get a higher valuation from another lender.
Good luck
K
And this is where it becomes complicated.
If you are renting out some rooms and still living there then, as Kenny says, you may lose your CGT exempt status. If that is the case, your PPOR will be exempt only up until the time that you started renting it out – earlier this year. You will have to pay CGT on any increase in value since the time you started renting out rooms.
If you get a DA on your property, then obviously that will increase the value of your property. But as the increase has occurred since you have lost your CGT exempt status, then you will be required to pay CGT on that increase in value. The ATO will look at the value of your house immediately prior to when you started renting rooms. If you don't have evidence of an independent valuation, then the ATO may well look at the council valuation, which, as we all know, is often far less than market value. The ATO will then assess your increase in value as the difference between council value at the time you rented out the rooms and your final sale price.
You really need to get some accounting advice on this because my comments are based on your losing your CGT status, which you may or may not lose.
Cheers
K
nataliebranson wrote:However, if you have 1-4 properties, this should be easy enough for one to maintain/manage/sell themselves. It is not that hard….Until something goes wrong. There are probably hundreds of posts on this forum about how managing a property yourself can go terribly wrong.
I congratulate you for being so proactive at such a young age but I think that for most people, property management is out of their realm. I have always had a property manager (and good ones are absolutely worth their fees). Even now, when I only have one tenanted property, I still have it managed. I am just not good at it and would much rather pay someone else to manage it than do it myself. It's all fine and good when you have an easygoing tenant, but if you have a tenant who is late paying rent, or has a pet when the lease says no pet, or has friends who trash the house, or takes you to the Residential Tenancies Tribunal as soon as you something that is not within the legislation (however inadvertantly) …; that's when things get hard.
And I don't know whether this is the case any more, so I am happy to be corrected, but my understanding was that the majority of insurance companies won't give you Landlord Protection Insurance if you manage the property yourself.
Just my two cents' worth.
K
Thanks Kylie
That's a very clever tricky clause! I have since found out that, while you can cool off in Qld, there is a cost penalty, albeit quite small. I have also found out that you can use the and/or nominee addition, but there is a whole ream of paperwork, stat decs etc involved. Your change of entity clause sounds much simpler.
Cheers
K
Hi Anthony
That was the deal that I gave you the details of earlier in the post. Purchase price was $251,000 with a reno, subdivision and sale of the vacant block.
K
Get the October Australian Property Investor. There is an article on exactly this topic.
Cheers
K
Come on Scott
Surely you have been around long enough to know that agents don't act in the vendors' best interests; they act in their own best interests!
K
ouch!! What an incredibly risky and silly thing to do for about 15 grand, which is probably all he would have made on the deal after stamp duty, legals and tax.
K
And one more thing. We settled today on the deal that I mentioned above and the total profit before GST was $117,000. And this was a property that had been sitting on the market for about 6 weeks. No-one else saw the potential. In fact it took us a while to realise just how profitable the deal was.
Cheers
K
Just on KYL's post, we also agree that building carries much higher risk, not to mention hassle and stress. We recently subdivided and built three new homes on a development site and made no more money than if we had just sold the vacant blocks right at the beginning. By far the majority of money in the deal was in the subdivision of the land. Basically the profit from building paid for the extra holding costs. In the meantime our ability to lend was compromised because we had a $750,000 mortgage to cover the build, rather than a $250,000 mortgage to just cover the land.
Our dream properties these days are houses on subdividable blocks where you don't have to demolish the house. We then just subdivide and sell the vacant block. While we renovated the last house, next time I would be inclined to just sell the unrenovated house. There just doesn't seem to be enough money in renovating houses at the moment. It seems like you have to spend $30,000 to make $40,000 which really isn't enough profit to warrant the extra hassle. I am about one million months pregnant and I also have two young children and I don't have the time to be around at the house every day and be on the contractors' backs. If you can do a lot of the reno yourself then there is probably merit in doing the reno, but we are after the quick turnaround these days and think it would just be easier to sell the unrenovated house.
A strategy that several friends of mine are adopting at the moment is to build two houses, sell one and hold on to the other, using the profits from the first house to pay down the loan from the second house. While this doesn't actually put money in your pocket, it does make the house you hold on to positively geared.
I'm having an argument with my husband at the moment about buy and holds versus developing and selling. Having gone from holding about 20 properties a couple of years ago to now just having two, I would like to start having some more long term holds that are positively geared, but my husband is more interested in the cashflow. I don't think that there is any urgency in collecting buy and holds at the moment because I expect that the market will be stagnant for a couple of years at least, I do think that the way to REAL financial independence is through positively geared properties that are bringing in an income while still appreciating in value. I think that the compromise we make will be to continue to develop for a couple more years and then start adopting the above strategy of building and selling one.
I guess in summary I am saying that there are lots of ways to go about making money from property and you can combine several different strategies. Unfortunately, as you have found out, would be developers are not doing their sums and are outbidding each other to buy sites that are unprofitable.
When I first joined this website a few years back, I remember my first post was asking where the cashflow positive properties were because I couldn't find any. But when I started looking I found they were everywhere and I went on to make enough money for us both to quit our jobs. It's the same with development sites. Just keep looking and you will eventually find the profitable ones. And more often than not, they turn out to be sites that have been sitting on the market for months because no-one can see the value in them. If you are creative and have a good team around you, these sites end up being the bargains.
Cheers
Beware of standard building inspections. I know that in some states (NT for one) all a building inspection does is check that the building complies with Council requirements. It doesn't check that things are in working order, quality of the build, salt damp etc. I also recommend that you get your building and pest inspection clauses written up by your solicitor/conveyancer. I have recently seen some pest inspection clauses restrict the getting out clause to evidence of "major" damage. This means that if the place is crawling with termites but they haven't yet caused "major" damage, you can't get out of the contract and you can't force the vendor to spray. The cost of doing that will be borne by the purchaser.
Buying and selling property is a tricky business. I have been doing it for quite a while and even I got rapped over the knuckles by my conveyancer the other day for having some clumsy wording in a contract that prevented me from claiming default interest when the purchaser was dragging his heels.
My advice is to surround yourself with the best people, the best conveyancers, property managers, tradies etc. And if you ever want to venture into development, make sure that the town planners at the local Council are your friends. One upon a time I was a lawyer and the best advice I ever got was to remember that the most important people in the Courts are the Court Registry staff. I saw them make life hell for solicitors who were rude and dismissive towards them. Same goes with local Councils.
I hope all goes well with the inspections.
K
Hi ajsc79
I have my own little turf in Adelaide so I am not going to disclose where I do my deals. One of the benefits of doing what we do where we do it is that there we have a really good relationship with the local real estate agents and I normally get the first call. The lack of serious competiton enables us to sit back and really look at the deal and do sums and due diligence before we make an offer. I will say that iwe don't work in the metropolitan area.
I have a friend who is doing a development in Parafield Gardens and he has just had to reconfigure the houses to make the deal work. He doesn't normally work in that area and originally he was going to build quite good houses. He then realised that the market in that area is completely price driven so he dropped the quality of the houses and dropped the prices to below $300,000 and has had a lot of interest since then.
I agree wholeheartedly with KYL. In a market where there are a lot of people competing for development sites, you have to be very careful not to pay too much. I recently went to an open inspection for a subdividable property with a house that needed to be demolished. The marketed price was about $380 – $420,000. To make the deal work, I was not prepared to pay any more than $370,000. The place was crawling with potential buyers and I heard later that it sold at above asking price on the same day. At the maximum asking price the profit margin dropped to about 12%.
I am just in the process of signing a contract to buy another property. When the contract is stitched up I will email you the proposed figures on that site.
I suggest that you get involved in Investors meetings, of which there are a few in Adelaide. Pick the brains of the people there.
I think you are on the right track, and while your deal is not as profitable as some out there, $45,000 for 9 months work is not to be sneezed at.
Cheers
K
I'm in Adelaide also
Even if you didn't buy the property at a bargain price, there is still nothing you can do. Your solicitor is right – what you sign up to buy is what you get. If some of those things happened between the time you signed the contract and the date of settlement, then you would have some recourse, but you have no evidence of that.
I wouldn't even bother with an arbitrator. You will just end up forking out more money for a hearing that you won't win.
You are right. It is a valuable lesson. Buying a property is the most expensive item you will ever buy. If you buy a car you take it for a test drive and check that everything is working. Why wouldn't you do the same for a house? You are very fortunate that it is only small issues costing $1 – $2,000. Consider it a relatively inexpensive learing experience and perhaps start a checklist for the next property you buy. Write down everything that you think you should check in a potential property. That way, if there are any problems, you can negotiate repairs/cheaper price, BEFORE you sign a contract. Also, documenting issues will help if damage occurs between signing of contract and settlement.
Cheers
K
