All Topics / Help Needed! / Vacant Land for CG

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  • Profile photo of dare_to_dreamdare_to_dream
    Join Date: 2006
    Post Count: 88

    Hi guys,

    I recently talked to my first financial planner to see what my best options are based on my current financial position.

    While I found her very useless (probably because it was the first appointment which made it free and thus she didn’t share many incites).

    Anyway, I asked about her methods of gaining financial freedom and how successful she has been.

    While she didn’t say much at all she did mention that she bought vacant land and waited for capital growth to kick in!? She also mentioned that when adopting this method she paid a large deposit up front to reduce the loan.

    My question is: What are the advantages of buying vacant land only over a house and has anyone done this in the past and would recommend it as an option?? Any thoughts would be greatly appreciated.



    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    One disadvantage of land is the high holding costs. There is no income coming in, usually, but you still have to pay interest and rates.

    Having a high deposit is fine, but you should probably only pay a deposit if you have paid off the loan on your home.

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    Profile photo of Richard TaylorRichard Taylor
    Join Date: 2003
    Post Count: 12,024

    As Terry said the high costs of holding the Asset is one thing but also you are unable to claim the interest as a deduction unless you have an intention to build and generate an income from the property.

    Unless you develop the land you would need considerable capital growth to make this strategy worthwhile.

    Funny isnt it that some Financial Advisers are not prepared to tell you how he / she has made their wealth todate( if any).

    I have nothing to hide from my clients.


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    Profile photo of wayne10539wayne10539
    Join Date: 2003
    Post Count: 73

    Hi Paul

    Totally agree with Terry and Richard, why hang on to an asset that is costing you money and doesnt allow deductions.

    What are the advantages of buying vacant land only over a house and has anyone done this in the past and would recommend it as an option?? Any thoughts would be greatly appreciated.

    Saying that i currently am holding 2 residential blocks that have given me a great gain, with not too much financial pain.

    The first block i paid a $2000 deposit on a $90,000 block with settlement expected within 9 months when the titles were to be ready. It has now been 20 months and titles have just been released. I actually on sold it 12 months after my purchase for double the price. I had to pay the stamp duty before the 12 month period had expired, but other than that i have only paid $2000 and have not had the need to draw down a loan.

    The other land i bought in March 06 ($150,000), the banks would not lend me the money, so i had to go with a low doc loan at 70% LVR, i used the redraw facility in my PPOR as the deposit. I knew the land was approximately $20,000 under market value at the time, and believed the WA market was still on the rise at the time. I will sell this block once the 12 months is up, at market value, app $275,000, after all CGT, fees and interests are taken in to account, i should still make $60-$70k.

    I could not save that amount in a year, so they both seemed like good deals at the time. It is not my preferred option, but if your in a boom market and can find land with small deposits and long settlements, there is some money to be made.



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    Profile photo of ShOw_Me_ThE_MoNeYShOw_Me_ThE_MoNeY
    Join Date: 2004
    Post Count: 80

    Hi dare_to_dream (dtd), i agree with Wayne, Terry and Richard. yet another option to consider could be holding on to the land get the plans and permits approved for building on it. If the land is appreciating and you find someone who quickly wants to start a developement and you can make a quick buck out of it.

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