Those of you who get Foxtel in Australia will be familiar with the British TV show ‘Property Ladder’ http://www.channel4.com/4homes/ontv/property-ladder/index.html. In Property Ladder, the perennially pregnant host Sarah Beeny follows budding property developers through property flips involving various renovation types, offering advice and wisdom. The investors appearing on the show often do exceptionally well, selling on at enormous profits, despite initial foolish forays into not following Beeny’s advice.
One of Sarah Beeny’s mantras is to complete the home improvement and sell as quickly as possible (targeting the ‘young professional market’). Capital gain through appreciation over time is not desired, as subsequent purchase costs will also have risen. Beeny strongly prefers a ‘brand new’ appearance than one that is ‘lived in’ (i.e. currently tenanted).
The tax conditions in the UK seem to favour this business model. Can such a model be profitable in Australia given the high stamp duty, capital gains tax, and other costs?
Holding a property for 12 months to lower capital gains tax would reduce the turnover of property, increase costs, and tenants would ruin ‘the look’.
[chill]Originally posted by andy28:Those of you who get Foxtel in Australia will be familiar with the British TV show ‘Property Ladder’ http://www.channel4.com/4homes/ontv/property-ladder/index.html. In Property Ladder, the perennially pregnant host Sarah Beeny follows budding property developers through property flips involving various renovation types, offering advice and wisdom. The investors appearing on the show often do exceptionally well, selling on at enormous profits, despite initial foolish forays into not following Beeny’s advice.
One of Sarah Beeny’s mantras is to complete the home improvement and sell as quickly as possible (targeting the ‘young professional market’). Capital gain through appreciation over time is not desired, as subsequent purchase costs will also have risen. Beeny strongly prefers a ‘brand new’ appearance than one that is ‘lived in’ (i.e. currently tenanted).
The tax conditions in the UK seem to favour this business model. Can such a model be profitable in Australia given the high stamp duty, capital gains tax, and other costs?
Holding a property for 12 months to lower capital gains tax would reduce the turnover of property, increase costs, and tenants would ruin ‘the look’.
[chill]Unfortunately, quite often, especially in a flat/down market the increase in the value of the property is about the same as the reno costs. This strategy works well in an up market, but so does doing nothing to the property if it is the right one in the right area.
Let’s keep the right perspective about theses property shows; their job is to get ratings, and to do that they glamorise the process. If you’ve ever renovated a property you would know it’s not that glamorous.
Also, notice that these property shows forget to mention the NETT profit after ALL of the costs, taxes etc are considered. If they did this it would look far less glamorous, and for a lot of viewers too complicated to understand. The ratings would dive. Theses shows have a nack of making the reno/flipping experience look very easy and lots of fun. It is fun; it’s my favourite hobby, but not always easy.
Holding the property for 12 mths will lower the c.g tax, but the main factor to maximise returns with this strategy is buying an undervalued property needing some work in an area that is going up or about to. That is another boring factor the shows forget to mention – the weeks/months of d.d required to select the right area and property at the right price.Cheers,
Marc.
[email protected]sorry andy, you are mistaken. I agree a lot of shows DONT show the true costs, but this one does.
I watch it religiously. It is my bible.
Its a business model that does not work in Oz. Thats why Im moving to NZ.
http://www.posigear.8k.com
Positive Geared Share Investingoops, that was to L.A Aussie, not andy
http://www.posigear.8k.com
Positive Geared Share InvestingWe also watch this show and I have to say it in no way glamourises the process of renovating. Quite the opposite.
I think they are really clear about the costs. The fact that at the end the renovators make a profit (or not) before tax cannot be made any clearer because everyone’s tax position is different.
Sarah also does spell out at times that had the buyers done nothing, they still would have made a good profit because the market had moved.
I think it is very realistic, but having never done a flip, don’t know about doing it here.
If you want to do it, and don’t want tenants in to sell, buy a rundown place, rent it out for six months or a year and then renovate. That way you have passed the magic twelve months and can half the profit for capital gains tax purposes.
By the way, I am always gobsmacked at how cheap kitchens and bathrooms are over in the UK and that owners often do their own plumbing and electrics.
Wylie
We chose not to get Pay TV so I have never seen it. When I say we I mean my wife [blink]
Maybe I need to argue for Pay TV on the basis that it will help my investing?
Unlikely to get that one past the boss…
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I am also a big fan of the show. It amazes me how many people are tossing good advice away yet still make a profit [blink]……
I’d LOVE to have someone like Sarah Beeny as my mentor [inlove]!!
Originally posted by crashy:Its a business model that does not work in Oz. Thats why Im moving to NZ.
Hey Cashy,
I’m intrigued by your comment. Care to expand…..? Pretty please [blush2]…??
Australia has:
1. capital gains tax
2. stamp duty
3. high agent commissions
4. land tax
5. expensive tradesmen
6. low rental yields
7. breathing tax [biggrin]http://www.posigear.8k.com
Positive Geared Share Investinganyone know if the series is available on DVD?
http://www.cashflowproperties.co.nz
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
Yer she definately seems to know what shes doing hey! and shes not afraid to tell it like she sees it on camera.
They dont tell you exactly how much tax and legals,and advertising cost at the end though.
of course everyones tax rates are different of course and they do make it clear that the profits are without tax etc.
it does look alot easier on the show than it is for sure!Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Originally posted by crashy:sorry andy, you are mistaken. I agree a lot of shows DONT show the true costs, but this one does.
I watch it religiously. It is my bible.
Its a business model that does not work in Oz. Thats why Im moving to NZ.
http://www.posigear.8k.com
Positive Geared Share InvestingSorry guys – I’ve been scarred by groundforce, extreme make-over and the like. sheesh! [grrr] I love ‘reality’ shows (not).
I must admit I haven’t seen Sarah Beeny. Sounds good from what you all say.
Hey crashy; you’re not really going to move to N.Z are you?
The breathing tax is not that high yet.Cheers,
Marc.
[email protected]I find the show very interesting also. Used to watch it religiously every night at 11pm. I think it is now on perdiodically. There is another called Property Developer. I often laugh at the end of a show and think how glad I am to not be involved with what she calls “property development”. All they are doing are reno jobs. Some even quit their day jobs to take on the projects. Thats crazy trying to project manage and deal with tradies, suppliers..etc.. No thanks! Shes also an avid supporter of flips. Get your money out and move on to the next deal they all say. I wonder why when buy to let is so much more profitable over in the UK. Their rental returns are a lot higher than ours, most are cash neutral plus resi tenants also pick up taxes and rates as well. Plus UK rates are lower than ours. I know buy to let rates a slightly higher than owner occupiers over there. Why I don’t know. If you lose your job, you can’t pay your mortgage. If your tenant loses their job, you kick them out and get another in. Other wise you are the back-up. I don’t understand why its higher risk when someone else pays your mortgage. Go figure!
Simon
Foxtel is an essential tool for investing tell your good lady wife.
The 27 sports channels are incidential and not compulsory viewing 24 hours a day.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
portion of the pay tv should be tax deductible [blink] other professions do it – “research” ??
http://www.cashflowproperties.co.nz
Don Nicolussi | Mortgage Broker - Home Loan Warehouse
http://homeloanwarehouse.com.au
Email Me | Phone Me"I think of finance as a technology, a way of getting things done." Robert Shiller
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