G’day,
i’m wondering about the following: is it better to buy a property and sell it after some basic renovations and hopefully make a bit of profit, as a pose to buying, renovation, capital gain and then renting it out (as i believe steve teaches).
Does it depend on the market? Does it depend on tax benefit?
any advice would be great,
thanks,
giladHi Gilad,
You need to invest in both – some ‘buy and hold’ some you want to turn over quickly to capitalise on the gains.
If you were to renovate, you’d look for a run-down house (not to the extreme) in a well-established area that already has value or in an area that is cominp up in value. This way, when you renovate it, it matches the high price of the surrounding properties.
What Steve teaches is goood and this generally used for the lower-scale renovations. That is, find a house, do some simple reno’s to it such as painting, adding in heaters or other fixtures, a bit of landscaping and boost the weekly rent by a value of $5, $10 or $15.
Hope this helps
Kind Regards,
Geo.I’ve found a way to help you save and earn whilst not selling or delivering any product. If interested, drop me an email or PM me to find out how
yeah, its logical that i want to do both. But i think my problem, as with most people, is getting that first one under my belt. Once i’ve got that, i can use the equity in it to pay for the deposit on the second and keep going.
WHat do you fellows recommend for the first? should i be looking for a small 1/2 bedroom home in woop woop? or should i be looking at a 2/3 bedroom in melbourne, where i can live for 6 months +, get the 12 grand first home owners grant and then possibly rent it out?
thanks,
giladfrom a purely cashflow and available cash position i’d say buy your own home first.
(based on your profile – 19 yr old student working p/t – if you have a huge cash deposit then my answer may vary)
cheers
Brendan Heagney
Mortgage Broker
07 3240 4815I have two major factors with this:
The first being that if i want, i can live at home with my parents, and hence pay no rent. However, if i don’t live in the first property for 6 months, then i won’t qualify for the 12k fhog. I think i do need it…
thanks
Originally posted by gilad:I have two major factors with this:
The first being that if i want, i can live at home with my parents, and hence pay no rent. However, if i don’t live in the first property for 6 months, then i won’t qualify for the 12k fhog. I think i do need it…
Whatever you do read this warning first:
https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=12988
Cheers,
Jo
gilad,
If you buy and get a stamp duty exemption, there’ll still be associated costs- maybe a few grand (legals and setting up a mortgage) costs. Then you’ll have selling costs- on a 200k property, that might be 6k- with advertising and RE costs… then you’ll have to pay capital gains tax on any profit- based upon your taxable income. As you’re a fairly low income earner, you’ll be based at a lower rate on your profit… but if you wait for a year, you get taxed at half that rate on the profit.
So say you make 20k on a reno, and the reno cost you 5k… you’ll be paying about:
8k costs (selling/ownership costs)
5k reno cost
4k GST on profit… (if sold within a year)
____
17k costMaking a grand total of you profiting about $3k. That is *if* the property doesn’t lose value in the meantime (in this more volatile market), and the 20k reno profit gets subsumed into a new market value.
Others may have more optimistic views on the numbers, and suggest you’ll make more bucks on the reno.. but really, if you end up with 3k, it’s a pretty labour intensive way to make a very small amount of money.
kay henry
I agree with Kay in that I think you lose too much when selling a property in addition to all selling costs, you have purchase costs agian when you go and buy another property to replace it. And you missout on any future growth. I have sold a few properties years ago and wish I hadn’t now when I think what they would be worth now.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
fair enough. would it not be feasible for me to hold the property and rent it out. Then, provided i have enough equity in that, use it to buy a second property and again and again…
Yep, gilad- that’s the theory
And if you have a rentable place, unless it’s completely wrecked, then you don’t need to reno. Renovating is a fairly specific skill, and some people are happy to buy unrenovated houses- to add their own special touches.A lot of places are already renovated now, so you can buy an IP post-reno’ed (new kitchen, new bathroom, polished floorboards etc…) for probably a similar price to a pre-reno.
I think reno’s (particularly to flip for quick CG) are very 2002.
kay henry
my step-dad is doing our basic home renovations. I am learning about construction at uni, and plan to work on a construction site over summer.
i think that renovating will be a skill that i want to develop. I also believe it is important or additional asset when it comes to property investing.
i hope it is…
And if you have a rentable place, unless it’s completely wrecked, then you don’t need to reno. Renovating is a fairly specific skill, and some people are happy to buy unrenovated houses- to add their own special touches.You must be logged in to reply to this topic. If you don't have an account, you can register here.
