Hi,
After 2 yrs of waiting my apartment has finally been completed…I have made a 70% capital gains. I would like to know whether to keep the propery or sell it ( its in central area also there are around 4 more developments being completed).
What are the tax implications? A real estate agent told me that if i sold an investment property and than reinvested in another property in the same financial year I wouldn’t have to pay CGT. Is this true or am being taken for a ride.
Is selling privately better? This is my first property…please advise
As you have owned the property for 2 years you would be required to pay CGT on the taxable gain. Reinvesting the money in another property will not help (perhaps the RE agent should stick to selling property!).
Consider the opportunity cost of selling. Consider:
1. What is the likely rental yield?
2. What is the future capital growth going to be like (long and short term)?
3. Is it worth having to pay for selling costs and CGT?
4. Have you considered using the equity in the property to invest in more property? The bank will lend against valuation so you could get access to a lot of money.You need to establish your investing goals. What do you want to achieve?
For what its worth I would probably hang onto it and use the equity to purchase more investment properties. Probably something with a higher yield to balance your portfolio (because I’m guessing that the yield on the apartment is around 5%).
Anyway, that’s my 2 cents.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auMy understanding is that you will always pay capital gains unless you live in the property for 12 months making it you home not an investment property. Note that the minute you rent it out it becomes liable, to a degree, to capital gainseither before or after you’ve lived in it.
The realestate agent is telling a porker.
MJK
That real estate agent seems to be getting taxation advice from a different country (I think what he’s saying may apply in some US States).
Stu is right – he should stick to selling real estate before he gets his nose chopped off (professionally and financially, that is) for making misleading and deceptive statements for financial gain.
There’s no way of avoiding CGT unless, as MJK said, it’s your PPOR you’re selling. You do get a 50% CGT discount if you own the IP for more than 12 months before selling it, which doesn’t seem to apply here, since your IP has only just been completed
If it’s already appreciated 70%, chances are the rent has also gone up (but probably not as much as 70%). This may well mean that if you rent it out, you may get a positive cashflow property, which is a great thing, since it pays for itself. You’d have to do the sums to confirm that, though. I personally would keep it, rent it out, and use the equity in it to buy another IP.
Cheers
MKavita, another option is to purchase more properties using the high equity you have already generated.
Ta, Paul[
]Kavita,
This is what I will do:
Move in temporily say less than a month. Get a valuer to get the highest valuation price as possible. Rent the property out.
By doing this, you don’t to pay the 70% capital gainted on the property when you sell. You only need to pay CGT from the date that you rent out the property ie. the valuation price to date.
Hope what I think is right.
Chandara
Thanks for the advise people. It has helped me out a lot.[
]You’re welcome Kavita – keep asking those questions!
]
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