** I have re-posted this as a new topic, 'cos I'm not sure if people saw it the first time
Hi,
I'm looking for any ideas people have about what I should do with a block.
My wife and I have recently bought a 2200 sq.m. block in the SE metropolitan area of Brisbane that has a development permit to subdivide into 3 lots. The block runs between two parallel roads and the lots following subdivsion, will be one in front of the other, with one having frontage onto one road, another having frontage onto the other road, and the middle lot will have driveway-only access. There is an average 25yo house on the block where the middle lot will be, that can be retained during the subdivision.
The area is a moderately established area, with a large number of owner-occupiers living in 3 & 4 bedroom homes. The area has been pretty flat over the last couple of years and my understanding of the area suggests to me that there should be good growth over the next 2-3 years.
The main option we are thinking of is onselling the vacant blocks shortly after completing the subdivision & the titles are released, which I'm expecting to be in early 2008. At this stage, we are thinking of keeping the original house, improve it cosmetically, increase the rent and hold it for a while.
One other main option is to build on the blocks following subdivision and sell off the house & land. I have asked the agent through whom we bought the property to provide me with information of current and potential values of the vacant blocks as well as completed houses. We have also asked her about what type of housing will be desireable in the area and what are the potential construction costs we could be looking at. We have bought the property in a corporate-trust structure that is registered for GST, so we can minimise our GST bill with the margin scheme.
I have heard of the idea of "house & land packages". I'm not sure if this applies to the situation I am in, whether buyers are really interested in this sort of thing, or whether this is too much hassle in terms of time or money. At least one of the vacant lots (and maybe both of them) we will be targeting an owner-occupier because it has a great view. Do owner-occupiers go for "house & land packages" or is it better to just sell them the land so they can build whatever fits their personal needs?
This will be our first subdivision, and I was wondering if anyone could give me any advice about how whether we should just sell the vacant blocks, or build, or something else? Any creative ideas to improve our end-profit?
Thanks
People are inherently lazy and don't like to make decisions; they take the path of least resistance.
So a house and land package could prove very easy to sell.
The problem is there may be lots of competition in the area from major building companies which may make it more difficult to get a good price. You will need to research this.There are also a good deal of people who like the idea of buying raw land and building their dream home on it.
Another option might be to;
1. renovate the older house first.
2. while this is going on, start the subdividision process on the the block into the 3 parcels.
3. after subdivision is complete, sell the vacant block and the renovated house.
4. use funds from the sale of the house and block to build a brand new house/townhouse etc on the remaining block.
5. retain this property as an I.P which would be probably pos cashflowed and almost debt free.
6. the on-paper deductions from this property would be significant as it is new (keeping the older house instead will not have the same amount of on-paper deductions and won't have the building guarantee)
7. use the equity from this property to go again.
8. as above.
9. as above.
10. you get the picture.After 4 or 5 of these projects you would probably have enough passive income from your pos cashflow properties that you retain to retire if you want.
Hi Marc,
Thank you very much.
I hadn't thought of selling the old house sooner.
I had just thought of getting the profit from the vacant blocks and holding onto the old house.
But the old house doesn't have street frontage, so it won't appreciate in value as much as a new house on one of the street frontage blocks.Pete
The fact that you have bought under a Corporate Trust structure will have no bearing on the GST caluation as you could have purchased indivually and registered for GST and still claim the Input credits under the Margin Scheme.
The bigger issue would have been the potential Capital Gains Tax. Had the house been purchased in your individual names you could have looked at the CGT concession available if the contract dates between the purchase and sale where greater than 366 days. Now any profit will be treated as trading income and Taxed at 30% under Corporation Tax.
Richard Taylor | Australia's leading private lender
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