Forum Replies Created
Hi,
An architect is a specific and highly educated professional, they may be more than is needed. Building designers are another profession more usually associated with small development works. They work with builders, serveyors (they may be surveyors themselves) and councils to get approvals.In order to call yourself an “architect” you need to have completed a uni degree of usually 4-6 years in length. As a result they usually charge more and prefer to work on more creative / important / expensive jobs. A block of 4 town houses / units may be low on their list of preferences unless they get creative freedom for interpretation etc… I’d recommend a building designer (they also copmlete a degree, though it is shorter and they combine it with experience) as it may likely be cheaper and they will likely have the correct “level” of connections in the industry. (ie connections with builders and trades involved in building smaller developments rather than 20 storey office buildings).
Just my brain’s production.
Surrey. (ps: my wife and I are currently studying to be building designers)[biggrin]
Hi,
The posts above contain lots of good stuff. I’ll add:1. H&L packs have a much lower stamp duty as you only pay for the land component.
eg: I bought a H&L for a combined $260k and saved about $13k in stamp duty because the land was only $87k
2. On the otherhand, while maintenance costs are basically nill there are a whole slew of extra “hidden” costs: driveway cross-over, landscaping, holding costs during build, letterbox, numbers for your letterbox, cleaner for before tenents move in etc…It can be a bit of a gamble in that if you get in really early (pre-release) you can take the initial surge of cap gain when the estate takes off in later stages or… it may not take off and you have to wait 10-15 years before the area is sufficiently developed to be attaractive as an established house.
The house I mentioned above was bought with a 10-15 year timescale in mind while also buying in pre-release. Time will tell how good an investment it is.
Surrey.The whole CGT vs development income is a shady affair. The definition from the ATO says you pay CGT when an asset you own that is not held as trading stock or production input is sold (a CGT event) NOTE: an abridged summary. So the question comes down to whether your block of land is considered “trading stock/production input” or considered a captial asset. If you buy a house and rent it out then sell it can also be deemed “trading stock” !!! It largely comes down to intent, primary purpose, frequency and regularity.
eg:
I bought a block of land in WA (I’m in VIC). I intend to build a house and rent it out much like I’ve done here in VIC as an investment (presumably to secure my retirement). Once the house is built however I find I can’t afford to add the finishing touches required to rent it out and I can’t afford to maintain the mortgage so I sell it. In this case it would be a CGT event as the intent and purpose of the development was to hold as an income producing asset. Also this is the first and likely the only time I’ve done this, thus it can’t be considered as trading stock as i’m not conducting a business or in an enterprise creating income through development.On the other hand if I buy a block of land, subdivide, build two units, sell and buy another block of land… well the ATO would likely rule that I’m using land as trading stock or as production input to produce income. My intent is to use the land for income purposes and that counts. Just like if I bought a pile of wood and built furniture from it I couldn’t claim CGT when I sell the wood (as a dining table). There are also GST considerations. That is if you register for GST you can claim back GST spent on developing the land but then you must add GST to the sale price.
Having looked into it myself I decided it was best to clearly define what I want to do with each block of land I buy so I can engage the services of an appropriate adviser when/if required.
PS: the above scenario is not true, just an example.
Surrey.
Hi,
If the engineer says it is load bearing the BC needs to know about what you are planning as it may affect the structural integrity of all the other units and may void certain insurances. Also there may be work needed on common property so again the BC needs to know for appropriate work cover and so on.The best way to deal with the body corporate (or government for that matter) is to make their decision easy and remove any additional thought the committee may need. To this end, get the engineers report, put together you plan of what you want to do along with any notes the engineer has about required structural changes. Add in when you want to start work, how long it will take, the hours during which the work be done, the number of people on site, the name of the contractor you’ll use. (so get your quotes done first). And include copies of the contractor’s insurance cover.
As an addition, if you really want to make sure it all goes through without a hitch add a couple estimates of increase in value of you apartment from some “authorities” and demonstrate that this work will likely increase the perceived property value for all apartments, increasing rent and so forth. Money talks.Basically the body corporate’s job is to protect the value of the common property and ensure one unit doesn’t disadvantage any other. so show how you’ll protect the property and if possible how you’ll advantage the other units.
Surrey.
Of course the easy answer is:
There is no such thing as “passive” income. (blah)In my way of seeing things there are three comodities you can use in varying and interchangable quantites to live: time, money and knowledge. If you have the time you don’t need much money or knowledge, if you have money you don’t need much time or knowledge and if you have knowledge you don’t need much time or money.
If you have $2k to invest to live you obviously don’t have much money, so you will need time and or knowledge. As mentioned before you could buy a business with $2k and spend a stack of time and use some knowledge to build it up so you can sell it or have someone else manage it. If you have more money you could just buy an existing big earning business.
Property isn’t the only way, I would argue the amount of resource I’ve put into aquiring and maitaining my property (not much but hay) certainly fails the “passive” qualifier for income. Same with the shares I’ve owned. There is always paperwork to fill, questions that need answering, managers to fire and so on. So no real passive income (please just go with me on this one), but given a loose definition property can fit the bill. Is it the only way? Heck no. Is it the safest way? Not really, or not necesarily. It is a relatively easy way to make money in the same way buying blue chip shares is an easy way to make money. To make the big bucks (like steve 0-130 in 3.5 years) you need to expend big resources (money, time, knowledge). So: 3.5 years is not much time therefore I’d say big money and/or big knowledge was used. From reading the book it looks like knowledge was the main component (at least initially).
Rambling by:
Surrey.The house and drive were built by Devine and they don’t deal with council land if they can avoid it. The crossover is in the wrong spot because the council required the developer to put one in, but didn’t specify when or where. So the dev pu a single crossover in right at the boundary of the block. Of course the dev then requires each property to have a double garage with double driveway. Also, the minimum set back from teh edge of the proprety is such that it isn’t possible for me to build a driveway that could line up with the crossover.
So I’ve learned the hardway [blush2] to check such things first. I’m going to have a go at getting the developer to at least remove the one they put in as it is in no way reasonable.
To add to my trouble the council engineer I’ve spoken to doesn’t seem to know anything about what specifications / standards need to be met regarding the crossover. I asked about what sort of drain cover is needed for the side entry pit and how I can go about demolishing the existing crossover (do I have to remove the footpath and replace it or just cut the crossover off). This of course makes it tough getting a reasonable quote because I can’t tell the contractor specifics of what they should do (it’s left to their imagination, and they seem to imagine gold is involved).
Luckily my father-in-law is a developer and my brother-in-law is a builder and through them I’ve got a contact who will at least be sympathetic to my cause (said he can probably do it for half what the other guy said).
Anyway I’m not overly concerned as Devine have given me a rental gaurentee…
Hi,
Further to this issue:
I’ve spoken with the council and they say that when a subdivision is made that has a median strip between it and the road the person doing the subdivision is responsible for providing at least a single plain concrete crossover. Except for the basic engineering aspects (eg weight bearing ability, material, min and max width etc…) the council has no requirements as regards the location.
It was explained to me that the developer presents their plan of subdivision including a crossover that meets the basic requirements and they approve it.
In fact due to the large number of cases where the council is now having to approve variations to crossover because of the very same issue I outlined they are in discussion about altering the approval rules to stop all those rates payers having to demolish and re-pour their crossovers.However in the meantime the best I can hope for is to badger the developer enough to at least demolish the one they provided so I can put in a new one.
Surrey.
I’m in Melbourne and have to pay for water usage. When I was in ACT I had to pay water as well.
I think you’re being shafted.
Hi,
1. The deposit can be held by a real estate agent if one is working for you in the sale. Otherwise you can employ a solicitor to act as agent to hold the deposit in trust or you open a joint account with both yourself and the purchaser as signatories .
2.Vacant land can be considered primary residence for up to 4 years prior to building, assuming you are not currently in a primary residence (which in this case you aren’t).
3. Primary residency status for CGT begin when you settle and the time spent vacant is considered at this point. However if you never move in and sell or rent it out you can claim the interest expense against the cost base for purposes of CGT.
4. The portion of the land you live on is CGT free. The one you sell is not. Cost base generally speaking would be aportioned based on percentage size. So if you split the land in half the cost base of the bit you sell would be half the purchase price plus half the interest paid plus half the other costs associated (see your accountant or tax professional).
5. With only 8 points in the plan one could say you’ve missed a lot or it could be that you’ve missed nothing… My father-in-law essentially did this. He bought a large block, built two places and sold the back one for the total dev costs thus effectively getting a free house (though he had to work bloody hard on managing the project).
6. There is a lot of stress and effort in subdividing and building. There is no such thing as money for nothing. The current owner may value their free time more highly or maybe there are easements and or caveats on the property. Maybe it isn’t zoned correctly or maybe they just haven’t thought of it or are afraid to do it.
7. Selling one block as vacant land would probably be more cost efficient. You may consider selling the land with plans already approved. That way the purchaser can save on stamp duty and you don’t need to spend all that time and money building a house.You will need to check everything above with real law and accounting professionals or be satisfied for yourself that I’ve got it right as I make no warranty as to the accuracy of what I say. [biggrin]
Having just gone through getting a project house built I have a greater appreciation for development. It actually takes a heck of a lot of effort and running around.
I think the more fundamental question is why is it difficult to get someone to lend against a <50sqm property?
I think the answer lies in the old saying: “location, location, location”
Little dogbox accomodation fails to afford any unique qualities. They depreciate over time and at the same time new doxboxes are built that are exactly the same or better (as they are newer).I think when it comes to investing in these types of units it’s all about cashflow. As it stands in Melbourne this type of coffin-like accomodation presents little or no real cashflow positive opportunity. Every few years a new tower goes up and all the existing ones suffer from no growth.
Further out in the suburbs I think there will still be demand for multi-bedroom dwellings. In lifestyle locations I could see a demand for smaller, easier to maintain units with good location could become more popular.
I think the problem, from an investment point of view, is that without a uniqueness about it a property wont grow in capital value which is where the real money comes from.
The most time effective method is (for me):
1. Know your limit for the property.
2. Have a low end and a high end price (high end being your limit).
3. Start by going straight to the low end price.
4. If someone bids against you, go to your half way price then your limit.If anyone out bids, they just paid too much.
This only works if you choose your limit well and make a reasonable assessment of the price. Never go to an auction thinking you’ll get a major bargain. People generally wont sell for way below market, if they do you may well have bought a lemon. So research is important.
“Allow” ourselves to be judged by others?
[biggrin]
How will you stop me from judging you by your rather naive outlook and probably foolish behaviour? Now I’ll treat you differently and all because of what I’ve observed externally. Try to not “allow” that if you will…
We are judged by our appearance and demeanor whether we like it or not (I like it, but then I appear to the world the way I want to be judged). The impression people get when they see your home is important, especially if your are to do business with them or you want them to take your seriously. Despite the urban legends of the bum millionaire I would not likely do business with or associate with a person who lived in a dump with a wrecked Datsun 180 in the front yard. More likely they are a slovenly person with little self respect and little concern about other people or their feelings.
Interest is only deductible for money used to generate income. You can’t deduct interest for money used to pay off your PPR no matter what secures that loan.
Just pay out the PPR loan to reduce the interest paid.
Or you could move out and rent while leasing your PPR to someone else thus making it an IP. This may work out if the rent you pay is less than the rent you get from your PPR.
surrey
Hi,
I think the terms being used to describe the size of block are a marketing use of those terms and so may be a little misleading.I think what is termed a “duplex” block is old-school property talk to refer to a block that is 800 – 1000square metres, large 600-800 and cottage 300-600. These are just sizes I’ve picked up in my research. The actual allowed usage of the block has nothing to do with the names (it used to is some places) and I think you’ll find they all come with a covenant saying “one residential dwelling only”. Having said that, in general teh more land you’ve got the better. That is only in general and doesn’t take into account your particular needs or use.
To work out which will grow in value better for your time frame you’ll need to know what the local demographic wants. If it is near hospital and or university then a smaller block is probably going to return faster. If it is in a fairly well developed location with family homes a larger block may be better.
You’ll have to go over those details yourself.
Oh, and no I don’t really know what my point is either.
[confused2]
Economic downturn affects the perceived value, not the intrinsic value. Intrinsic value remains relativley constant in that it is the value one places on having a home. Perceived value is all the other stuff like prestige, convenience, luxury etc… That’s the stuff people don’t want when they have a shrinking budget.
A young couple can afford a $350k house because their combined income allows them to?
Seems the obvious answer. Prices are only as high as people will pay. If the prices say the most common price paid for a house in suburban Melbourne is $350k then the most common amount people can afford must be $350k.
A young couple on a combined income of $100k could afford that without too much drama and still invest as well. Now if you are talking a “traditional” young couple with only one partner working and on the minimum wage or close to it then obviously they don’t buy suburban Melbourne houses or they don’t exist! I’d say they do exist and buy the smaller outer region new houses that go for closer to $200k or they buy an older smaller place that needs to be “done up” for around the same price.
I keep hearing that houses have become unreachable for the “Aussie Battler” but fail to understand who these “Battlers” are and why they are trying to buy expensive homes in fancy pants suburbs. I don’t go looking in Toorak for a neat 3br house when all I can afford is a 2br cottage in Sunshine.
I think as more unskilled work goes overseas Australia’s workers will take on more skilled jobs and earn a higher wage for greater productivity. Does anyone seriously grow up hoping to be a production line factory worker in a textile mill for 40 years then retire? More likely they will be a factory robot technician or outsource liason officer or such.[biggrin]
The intrinsic value of a home is less than the perceived value of the location and size of the home. I could live an hour out of Melbourne in a small cottage built in the 20’s and have a happy full life and work in the city earning big bucks, but I perceive greater value in an East Melbourne apartment I can’t afford to buy! Such is life.
My 5 cents,
High traffic areas can benefit from tiles/floor boards. I chose timber veneer laminate (a couple of mm of timber over a high density fibre composite) because it looks good but lasts forever and is cheap (natural timber does look better, but more expensive and gets dints etc…). I put the laminate in the hall way which connects to the kitchen (tiles) and the meals area which connects off the kitchen and has external access to the backyard and entertaining area. My theory being that traffic will normally flow most down the hall, through the kitchen and in and out the back door.
I left carpet in the living room to keep it feeling cosy. I find tiles/wood in the living room where I sit and watch telly on a cold night just isn’t as nice. Also carpet in the bedrooms.
Light fittings of some sort are a must. bare globes are ok, but you really notice the difference with proper fittings.
Spa and pool: personally I would never buy a house with such things unless I was buying a really expensive house and I was quite rich. Spas and, in particular, pools take heaps of work and money to keep clean and they just don’t get used that much.If I had a choice of only one place to put high ceilings I’d say dining / meals. That “vaulted” feeling seems to work best there.
I wouldn’t worry about “wiring” your house for computing / internet / entertainment. You can do it all much more easily, with greater flexibility and cheaper using wireless technology.
I can’t really comment on air-conditioning. I live in Melbourne in a very well insulated flat that doesn’t get above 27 even on the hottest days (I like 27 degrees too). I do like ceiling fans however. You can combine them with lights and kill two birds with one stone.
My tips for the building:
Read your plans carefully. If there is anything at all you aren’t 100% sure of then ask about it. Get everything in writing, signed and agreed to. Not because people will try to rip you off (though some might) but because your plans will go through so many hands in the process of building that if it isn’t all spelled out in obvious places you will miss out on stuff. If you want a phone jack in the study, make sure it is marked on the plan, in the cable diagram and written into the contract somewhere. The electrician will see one part of the plan, the plasterer another, the frame joiner another and the foreman yet another. If it isn’t in all of those then someone will miss it and it will cost extra. Also, if you block doesn’t butt directly up to the road (and it probably doesn’t) make sure your driveway will be finished including “cross-over”. Otherwise the builder will only finish up to the edge of your property and you’ll have dirt between your drive and the road. The reason is the council may well own the nature strip and you’ll need another permit to build a “cross-over” between the road and your property. (can you tell I got caught out on this?)Also, don’t assume anything about jargon written in the contract, again if you don’t understand it or you think it is ambiguous get it defined and write the definition in the contract. Make sure all prices are quoted including GST and builder’s mark up. Get final prices where possible. And be prepared to pay an extra couple thousand at the end as there will certainly be one or two things extra to be done (like landscaping) regardless how diligent you are.[buz2]
Surrey
Hi,
I have to agree that if you are concerned about making it difficult for the bank to sell your property you should re-assess your position. I’d like to mention some benefits from sticking with one lender:
1. You can get a single loan manager with whom you can develop a relationship with. this makes it easier to ask questions and stay in the loop.
2. You are more likely to be targeted by loyalty schemes or discounts.
3. You have greater leverage when it comes to negotiating rates. Yes! You can negotiate rates!
4. NAB (and no doubt others will follow) have introduced “Total Finance” which is a pilot program for working with high value clients to manage their finance from a single platform. This allows access to total equity without cross collatoralisation in the “classical” sense. Only a select few high value clients were selected for this pilot… (not me though[glum2])However while all that is nice and grand I’d say you should go with whoever gives you the best deal. I personally find great value in a single point of contact for managing my finances. It saves me plenty of time and I value my time very highly.
Surrey.
PS: I don’t work for NAB nor do I recommend you necessarily go with them, just giving an example of something I know about. (my partner works for NAB and tells me all sorts of things)
Hi,
I would treat this as a “what goes around comes around” situation. Play nice with the owners trying to sell. If you make things difficult so you can put in a low offer you may find the difficulty could be thrown back at you later down the track.I’d say use your knoweldge of the house to make a good judgement about whether to buy or not. Obstructing a sale is not very nice, I’m sure you wouldn’t appreciate it, and you never know when that sort of thing will blow up in your face. Like what if the owner doesn’t like your difficulty and evicts you? That’s not good [glum2]
Hi,
Have you looked at non-direct property investment? With that level of equity you could pick up a diversified portfolio of income bearing investments that return about 9% with risk not too dissimilar to what you’ve got currently. You should be able to pick up a loan for less than 9% right? So the excess can be used to offset the small loss. I estimate you’d need about $220k in assets at this rate assuming a loan interst cost of 7%.
