Sorry if I mispell anything and for grammatical errors in advance – I will be typing this on ny iPhone.
I was wanting peoples opinions on buying land from a land release, holding onto it until before settlement then selling it. Eg if you purchase in the early stages (eg, stage 2) then sell at around the later stAge (eg, stage 12) before settling.
From what I have heard you put down between 5-10% deposit, and HOPEFULLY by a layer stage (roughly 10-13 months) the value increases. Obviously not looking to make 100k, but I am trying to find ways of making a decent profit with little outlay.
So…anyone?
Hi , In my opinion if a property is making gains why sell it? Leverage off it and acquire more properties .If you choose to sell in a quick turn around you would prefer to hold it more then 12 months to avoid paying full capital gains tax.
I wAs thinking more from a point of view where because I couldn’t afford to hold MANY land banks, sell each one before settlement. Thus 5-15k outlay becomes 35-60k gain in less than 12 months. Then Put the profit toward a develop on my IP?
And if you don’t settle you don’t pay stamp duty or cgt just agent fees and that’s even a maybe….
It all depends where the land is. If there is a land shortage, then you will be likely to be able to sell the land prior to settlement and may make some money. If it is in an area where there is a lot of land, then there is a real risk that you will be left with the property and will have to hold on to it.
I did exactly this a few years ago. I bought in an area where there was very little land and sold most of the blocks of land in a simultaneous settlement (I onsold the block on the same day that I settled the block) and made quite a significant profit on the land. Then I got a bit greedy and bought in another area where there was plenty of land on the market and was left on the day of settlement having not onsold any blocks and having to come up with hundreds of thousands of dollars to buy land that was barely worth what I bought it for. Legal action ensued as I decided not to proceed with the purchase of the blocks and it all turned rather ugly.
It turns out that my strategy was really just speculation; great it if pays off (most likely in a rising market or where the land is significantly undervalued) but disastrous if something like the GFC happens.
If you don't settle, you don't just pay the agent's fees. You forfeit your deposit and potentially have to pay 10% of the purchase costs, plus the agents fees, plus advertising costs, plus potentially stamp duty etc etc. The vendor can even try to get specific performance from you. that is, forcing you the blocks. It is unlikely that a vendor would ever succeed in forcing you to buy the land if you needed to get a mortgage to buy the land, but if you had enough assets to cover the purchase cost, you could be forced to sell your assets to come up with the money to buy the blocks.
Tread very very carefully
Cheers
K
You'll have to pay CGT at the very least. I doubt you'd get out of stamp duty.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks for the input Linar, i was thinking of places like Gisbourne, Merndah, Epping etc..
And JacM – why would i pay stamp duty if i havent even setteld for the block and i do not have title to it.?
I think that JacM was talking about paying CGT and stamp duty if you so onsell the property. In most states, even if there is a same day settlement, you have to take ownership of the property before you can onsell it. This means that you will have to pay stamp duty and any capital gains tax.
Ok I went And spoke to a few people (agents, land developer offices etc) it seems you can go about it 2 ways. Onselling whereby you pay cgt and stamp duty (pointless for what I want) or using the nominee clause (however must sell for same price I am holding for, (again…pointless)
So I will be doing more research as many land developers are only offering less than 2-3 month settlement. Where I am after 10-12+ months and the ability to onsell without paying stamp duty
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