Forums / Property Investing / Help Needed! / Buy,reno,subdivide,sell?,build?equity?

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  • Profile photo of Dtermnd89Dtermnd89
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    @dtermnd89
    Join Date: 2013
    Post Count: 6

    I am currently renovating (qualified tradie) my excisting house and subdividing back block. I bought the house at a good price in a good area at 380 000 6 months ago and spent 50 000 to date on subdivision and renos. Idealy I would like to build on the back, is it possible to build through the equity of front home and value of the back block? is this something a bank looks at? What would be best for my situation? Blocks simliar to my rear block in area are selling for ave 200 000, im hoping once complete front house will be re evaluated at min 400 000, to build a basic home im looking at 160 000.
    Help, opinions, thoughts appreciated.

    Profile photo of christianbchristianb
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    @christianb
    Join Date: 2009
    Post Count: 386

    Dtermined, add it all up and see if it makes sense.

    You need to understand the fundamentals before you approach a lender.

    If it is profitable and secure, and makes sense, you should be able to fund it.

    Best of luck with the project.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Yes it is – which state is this?

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
    Email Me | Phone Me

    Residential and Commercial Brokerage

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    I might be missing something, but I don't think the numbers work on this project. You would have to spend $160k to build, you've spent a fair portion of $50k on the subdivision (I'm guessing $25k+) and more on the interest on the borrowings…. only to sell at around $200k.  Not worth pursuing really…

    Apologies if I'm missing something?

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
    Email Me | Phone Me

    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    I don't think he quoted the end sale price of the new build.

    He did say the original house is now hoping for 400k reval. 

    I do agree that he prob spent at least half of that 50k on the subdivision. 

    So you paid 380k plus stamp duty 

    spent say 20-25 on sub and 2same on Reno 

    you original house now 400k or expected.

    land worth 200k and to build is going to cost 160k. 

    Whats the expected sale price or value of the new dwelling ?

    If your land has now a seperate title now at the LTO then you can use it as security for the new dwelling. 

    As your equity would be 400+200 minus your loan on original house and Reno/sub costs. 

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    In my opinion. I would now sell your existing house receive your PPOR exemption 

    go build on the back block. Whilst using you trade skills to perhaps do some of the 2nd fix to keep the costs down if you have the spare time. Living in that property would then give you a PPOR exemption for that  property.  Then you could either live in a brand new home.  Sell the home with no tax, or rent a brand new home with any positive cash-flow being offset my depreciation in the first couple years 

    Profile photo of Dtermnd89Dtermnd89
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    @dtermnd89
    Join Date: 2013
    Post Count: 6

    Thanks for replies.
    I am in perth. I am a first home buyer and did not have to pay stamp duty for purchase under 500k. Est value of new dwelling i believe will be 425 000 plus. 27 000 to date on the subdivision (survey strata) and related works, 15 000 to date on renos not including my hours spent there.
    How long must a house be my primary resident before i am exempt from prop gains tax?
    Sorry if im a little behind people, still learning the basics

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    Not sure 100 percent on Perth but your original house do you have to live in it for 6 months to still get the stamp duty concession. If so you have done that. There is no real time limit on how long you have to live in a home before a property is your ppor. But it should be something believable. Ie if you lived there for 1 month and then sold it and claimed PPOR exemption. It might be a bit difficult to believe. 

    But in terms of records. Changing your drivers licence, voting address, power under your name there are things that indicate its your PPOR. 

    Profile photo of Dtermnd89Dtermnd89
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    @dtermnd89
    Join Date: 2013
    Post Count: 6

    I have live in it for 6 months to keep the grant and not pay stamp duty, so for the past 6 months my mail, license details, medicare etc has been under this address so i should be safe from cgt if i were to sell in next 6 months then. I was under the impression that you had to be in the house for 2-3 years before being exempt from cgt

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    There's no time limit on what qualifies as the time period needed to be deemed PPOR. 

    I had a friend. Who bought a house so he could live in and renovate whilst living in. His intention was to stay there. About 2 months into living it he had enough of the neighours who regular played loud music and had parties on week nights and he just said iM not living here anymore. He sold made money on the renovation it was exempt because of his intentions. He also had about 4 police inquiry numbers to prove his story 

    Profile photo of Dtermnd89Dtermnd89
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    @dtermnd89
    Join Date: 2013
    Post Count: 6

    Thanks again, good stuff, helps alot.

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