[wilko1Participant@wilko1Join Date: 2010Post Count: 510]

September 5, 2013 - 7:25 am

Your getting married. Even just having a fiance pretty much means your one and the same person unless you actually live apart from each other for work purposes it would be pretty difficult to do the above situation. 

Plus you did just say that your fiance only earns around 35,000 a year and given that she hasnt purchased a property yet. What would you be helping her out with equity? Because you wouldnt be able to help her service the loan. 

Are you trying to claim like a first home owners grant or discounted stamp duty rate ?

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September 3, 2013 - 4:00 am

Hi Dao

Not sure if your working out your usable equity there correctly. Currently property worth 411k with a loan of 385k.  You wish to spend 30k increasing the value to your expected 500k. Your usable equity on a 80% loan is only $15,000. (500k x 0.8 = 400k… 100 k must remain in the property as security. therefore you only have 15k of usable equity afterwards.

I would look first to increase  your salary ie.  to work in the mines, being a electrical engineer you would get paid top dollar easily 100k a year, to begin with and upwards of a 150k in a couple years if you went towards a management position. FIFO work might not be the greatest lifestyle but the pay is excellent and you only have to do it for a couple of years before the results and hard work pay off.

Its all very good to be interested in property for financial security. But a lot of people focus to much on the property investing side and instead if they focused on themselves or their business first investing in property with greater cash/equity and income tends to be a lot easier later.

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August 27, 2013 - 2:34 pm

See if you can look up the general soil classification for the area. Ie clay, sandy etc and that could give a indication of your footings depths for your building. But generally 600mm would cover most residential buildings. So you'd only be tipping 100mm of your footings. Prob wouldn't be much more then one skip worth of extra dumpage. 

Dont go installing a swimming pool though

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August 24, 2013 - 8:01 am

Increase your borrowing capacity by

– refinancing loans to a lower interest rate

– removing credit cards or lowering credit cards and store limits

– paying off personal loans

– getting a second job or other income source

– get a new job that pays more

– reduce debt on your ppor (although not as strong as the above)

-buying properties that rent for greater then the loan repayments. Ie property loan 100k interest rate 5% interest per year 5k. Property rents for $200 week (10,400 a year), Banks consider 80% on average of rental income. Therefore income for serviceability is $8320 therefor increasing your INCOME by $3,320 a year and your borrowing capacity by (If we say interest rates at 5%), by $66,400 a year.

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August 24, 2013 - 7:52 am

100 percent finance would work via the banks or normal lenders lending 95 percent of the property value. Ie 200k purchase price they lend you 190k and charge you 2.65% for LMI on top of that so another 5k. 

You then get a separate loan for the shortfall of stamp duty closing costs and remaining 5 percent. Say 20k.

This is pretty effective if you are earning good money but low on equity. You can then focus your income into reducing the higher interest 20k loan initially. 

It is also effective if you target properties that are as close to cash-flow neutral as possible even when calculating the extra interest for the smaller higher percentage loan. 

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August 24, 2013 - 7:45 am

If you already have a PPOR perhaps you Could rent that property and purchase a less desirable property (ugly) and renovate that and have that as your PPOR for a year. 

But long term if you can rent for 200-300 a week in a suburb you want to live in. Then you'll find that your investing will happen quicker, because the banks would consider your Princical and interest payments on your PPOR to be taking away a large percentage of your income per month. Reducing your borrowing capacity faster. You can still get the PPOR exemption on a property provided you lived in it first for up to 6 years. 

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August 21, 2013 - 3:32 pm

Sorry mate was actually thinking about something else there before.

Yep so your gross profit would be 500k (83k each house)
Still have to take off all your other costs in running ur busines. Like cars petrol to get to site, home office, mobile, accommodation costs if you have to stay overnight close by.
Say 50k (if there’s a couple families involved you might have 3-4 cars) keep the logbooks

if you trusts own shares in your company the income flows to them.
Then you tax effectively distribute that income to persons with lower incomes. It might be your 2, 18 year daughters at uni earning no money. There goes 50k to them
Leaving 400k And might end up giving the rest to another company at 30 % tax of 400k = 120k tax
Earning 400k whilst only paying 120k tax would be better then most Australians
Then if you might have other investment properties and you could choose to
Pay the interest in advance for those in the same tax year. That’ll chop
It down some more. Or one of you stop working for that year to manage the project and would take a income as a wage. That means up to 80k as a wage until you go over paying net 30%.
Pay business costs for next year in advance as well, buy your next car in under the business name and claim it as a deduction- business expense. Use that money to purchase business assets.
Perhaps designing your houses so that you sell the ones with the most cost base and least profit whilst keeping the ones with the least cost base and most profit.. Ie a 4 bed over a 2 bed.
Perhaps it’s better to keep 4 houses and sell the other 4.
Or to acculamate other assets with lots of deprication to offset any profits you make beforehand. Or offsetting it against any tax offsets that you could of accumulated from losses over the years.
Worry less about paying tax then making money. Paying tax is a party of making money.
Or get smart and if you intend to keep your jobs or business that you run. Create developments were you can hold them all long term. Think furnishing, solar power, government schemes to make your dwellings cashflow positive from the start.

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August 21, 2013 - 9:17 am

If you are operating a company.

and your total costs of developing 8 units is say 2 million 250,000 each dwelling incl land, hardcosts and build cost and interest. If you then Sold 6 units and after gst and sales cost you repaid the full 2 million dollars of costs/loans. Say selling each home at 350k. (100k would cover sales costs and gst component. (2.1mil total)

Your Company then retains the additional 2 dwellings. You have made a net profit that year of zero. Therefore your taxable income is zero.

How your company holds those properties is then up to you, as i said you can allocate those remaining 2 properties to each family trust. As long as you set this up before settlement on the land.

This is why a lot of investors will wait until they are either Not working full time or retired before they sell off properties they have constructed during development.

Or better off Never selling, just keep it forever and live off the rent

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August 21, 2013 - 5:24 am

If you can keep the land LVR percentage on the initial purchase down to say 80%, the finance on the development construction loan would be a lot easier to obtain as well.

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August 21, 2013 - 5:20 am

1) When you initially buy the property if you buy the land in company name (say with you all as directors) you can set up your trusts underneath that company ie have the company as trustee. Then if you roughly know which house/unit you would each be getting.. say off a site plan you marked each house a b c d e f g etc. You can then allocate that property to that trust. Ie .Property A is going into Trust A and Property B is going into Trust B and the rest are being sold. A good Conveyancer or lawyer would know it as a Acknowledgement of Trust. Bascially this says that you bought this land with the intention to create it for this trust.  This avoids the transfer of stamp duty into a long term holding structure like a family trust that gets CGT 50% rule.

2) Trusts would only pay CGT if they sold. And even then you should discuss with a good accountant because there have been cases of people doing developments and selling the properties that they held years later. And the ATO still viewed it as their purpose for entering into the transaction and it was a income tax event and not a realization of capital gains.

3) If you claim GST on properties that you hold… Thats a no no, make sure you only claim gst credits on the properties that are being sold. Claim none for the 2 that you wish to hold.

4) No it doesn't matter if your a director of a company and also a beneficiary of a trust. Ie it could go Director – Company – Family Trust – Individual Beneficiaries.

On the note that  you mention about tax..  If your total expenses equal the total sale price of 6 units sold then you technically wouldn't make a profit because you locked it into the other 2 remaining units. Which is a good thing unless you want sales to borrow against in the future.

5) A) A JV would be between say two companies. which if you wanted to keep everything more separate you could buy a piece of land as Joint tenants between 2 companies 50% each.

If you were all directors of the same company then its just a Venture.

b) unless you have done no developments before this most likely would be seen by the ato as a development and not just a Property investor making the best use of his property. And if you intend to Claim gst credits then it almost certainly is a development. A profit generating activity.

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August 19, 2013 - 1:56 pm

I like how she complains about having a 6 figure balance to repay. What did the bank not inform you of how much you were borrowing mam. I'm sorry that comes as a shock to you.

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August 19, 2013 - 1:51 pm

Have a look at number 69 Springfield drive. The 3 unit development there. You could do something similar perhaps…

Btw sorry i correct myself it wasn't a reserve just another person empty block of land.

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August 19, 2013 - 1:48 pm

Suri if land in the area is 270k without plans (that are big enough to fit 2 homes). IM telling you right now that buying a block of land for 270k and spending the money on the plans you are not going to be over 330k with plans.

It does not cost 60k for plans. At Maximum for a two house plan it could cost 5k-6k plus council application fees of a couple hundred dollars.

Even if you bought a existing home for 270k and demolished it for 10-12k plus interest and holding costs for 4 months whilst you got approval of 10k. That only equals 292K.

40k under if you offered the vendors "non negotiable " price of 330k .

Have you done a feasibility on it? Want to share what you think your numbers are? Obviously your buying with the intention to build and make a profit.

I had a look online and I'm pretty sure i know what block your talking about.

With a decent land size and overlooking what looks to be a park/reserve. You should look at the development plan of the local council to see if you could get more then 2 4br homes on there. Perhaps you could get 3 2br (or 1 3br and 2 2br homes). That option would be attractive for me. Most councils can give considerations for being next to open spaces and thus can give you lower block sizes and private open space. Ie if the standard POS (private open space) is 20% per dwelling they might let you have 10% or 15%.

Perhaps there is a better use of the current design. I think you should investigate it and perhaps get a building designer to sit down with you and say is it possible to get more then 2 dwellings on this block.

How long is your settlement period?

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August 19, 2013 - 1:24 pm

Even when you do simultaneous settlements you still have to apply to the banks to purchase the property even if you plan to resell it later that day ie after a development application has been approved in the previous couple months when you had a long settlement.  The only way you can sign up a property and assign it to someone else.

Is to

A) take a option on a property, (improve the value and onsell for a profit)

take a option on a property knowing your the only person there on the day bidding for example and that you can flog it off to someone else for a couple grand more as your "spotters fee"

C) having a long settlement on a property that you signed and/or nominee on and then getting a potential buyer to buy that property off you and you sign over your nomination to them.

I'm just going to say that I don't know many people that make a sole income on just spotting. I know a few developers that also take a spotting fee if they see something good that another person hasn't seen and recommends it to them.

To be honest. I think a masters in landscape architecture you could start a business is designing landscaping for developments. Hell if your only in retail currently i would start ringing small to medium to large development companies and say Hey do you need a landscaping design done for your 4 unit, 6 unit, 10 unit block development. Ill do it for free. This is something you could do after hours at home. Give a couple designs away to a few small to medium size developers and build a business around it. Word will spread, set up a nice business doing something your qualified in and that use your business income to invest into property. It would be a low set cost low capital business. What do you really need a computer, your own brain.  Plus being around these people that might even share some of their knowledge with you. You wouldn't of done a masters in something unless you were good at it or at least enjoyed the work.

You should do whatever makes  you wake up in the morning and actually jump out of bed and not roll over dreading the coming day.

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August 18, 2013 - 10:55 am

Prob your best method is to purchase property/land were you can develop and end up with a couple; 2 at least or more homes at the end.

That way you can each have your own independent home with separate mortgage and separate security at the end of the project.

then it's your choice if you wish to do another project again.

Things start to get difficult when one person wishes to sell another to keep, one gets married, the other wants to draw down equity, where do you keep your LVR levels.

With 100k a year income. I would 100 percent rather go myself if I was a buying a single home, or Doing a renovate to hold.

anything that you want to sell is fair game for a JV. Or as I said before at least 2 new homes resulting for the Joint venture (JV)

Depends on any other debts you have owing how you would structure it.

If it was me with 200k income. I'd be looking at small subdivisions, keeping original  home and subdividing and building 2 or more dwellings (total 3) if its your first time.

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August 16, 2013 - 1:05 pm

The definition for Financially Free is different for everyone.

But if you wanted to at least have the ability to pay all your bills on time, live in the home your currently in and go on one holiday  in a year or so.

Then financially free would be the amount of income needed on a passive or near passive nature that supported that lifestyle. I would say thats between 30k for individual to 50-60k for a family unit.

And you could get there with 1 Mil invested at 5 %.

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August 16, 2013 - 4:55 am

A builders minor defects liability period is only usually 3 – 6 months after completion. 

What defects are you talking about? Could you list a few of the problems?

Only structural issues are able to be brought up for up to 5 years after construction.

If your issues are things like giprock flushing cracking or chipped tiles. This should of been addressed immediately after purchase.

You might have limited recourse if your defects fit into the minor defect category as it has been 3 years 

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August 11, 2013 - 10:08 am

If its a brand new apartment or close to your depreciation might be a lot higher.

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August 11, 2013 - 10:06 am

You  have a positive cash flow of $300 ish a month and whilst this is a good result. With depreciation, insurance, your previously stated bills, driving costs to visit your property, advertising for Tennant, any allowances for repairs and maintenance you properly will receive some tax offsets from the depreciation, should at least be 2.5 percent of the properties construction cost. So after depreciation it will null the positive cash flow (from a tax prospective). 

Changing the ownership percentages could incur stamp duty costs again.

Keep track of records of when you visit your property for inspections or when you visit your agent etc. anything purchased for the property, any maintenance and repairs to ensure you can maximize your return going forward.

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August 11, 2013 - 9:53 am

The only word of warning is that the asbestos roof has to actually deteriorate whilst you own the property.

So you couldn't buy a home that needed the asbestos repaired at the point of sale.