Buy PPOR renovate sell repeat

Does any do this?

I've come up with pro and cons

Pros
Save on cgt when selling
If you have cash when buying it you are saving on IR
Spending more on 1 property means you could find a better deal and be more likely to make a bigger profit.
Less market exposure during falling market

Cons
Less market exposure in rising market
Have to move into each house while you Reno
Have to move family around often, kids schools etc


Anything else?

 

Biggest con for me is that you wouldnt have a home. Just some construction site that you live in for a little while.

I would consider doing it very early on when you dont have the finances to hold multiple properties long term. But I wouldnt do it more than a couple of times.

 

This can be considered a business and not domestic in nature and subject to CGT even if PPOR

 

That sounds like a business. You could lose your main residence exemption and pay tax on what you are doing.

Main residence exemption only applies to capital gains tax assets: not trading stock.

Take care.

 

I have clients that do this Johnny. There are 2 of them doing renos and have no kids

 

Also depends on the suburbs/area you buy into, could make a massive difference.

We have friends with children been doing this for years, continually renovating and selling all in the same suburb. Has worked out very well for them, husband does most of the work, first accountant ever met that can renovate.

MTR

 

Income tax?

 

Not CGT but income tax because on revenue account.

 

I thought to be an accountant you arent allowed to have any practical construction skills.

I was playing a board game with an accountant and her partner once. It was that game where you have to describe something without saying what it is and your partner has to guess it. This is how it went down.

Accountant's partner says: "you use it for screws"

Accountant replies: "a hammer!"

And the amazing part was that "a hammer" was the correct answer. Let that sink in for a moment....

I really wish I was making that up...

 

When is it considered a business? The frequency in which you sell the property?

 

Their are about 14 factors to consider if you are running a business and it is on income account.

There are variations on this concept but your risk is that their is no main residence exemption.

Take care....

 

Just to clarify this one Terry, if my PAYG income is 80k a year and i sell my PPOR and make 250k profit, do i have to pay income tax on that 250k?

 

Two part answer
Selling PPOR, no
Selling PPOR that is considered to be a business (reno & turn over ) yes, total PAYG income $330k

 

I have a client who had done this very well, each time he has made decent profit and upgraded to bigger size block, bigger house, better area. Onto his 3rd or 4th house.
I'm not accountant so no idea on the implications. But given he's moved area, style of property, costs etc would hope that he didn't have an issue.
He has spoken to his accountant who has advised what he's doing should be fine.

 

You might get away with it for a few properties, but the correct answer would be that it is taxable if you are doing it with money making motives. I have heard of a guy who doesn't work, but only does this - buying one property per year, doing it up and selling it and not declaring any income from it (or anywhere else). He will eventually be audited.

 

Thinking of trying this but whilst keeping a couple of IPs

 

This client only had 1 property at a time, he was living there the whole time. Would work during day and renovate most nights and weekends. Carpenter.

 

That doesn't mean it would be tax free under tax law. I think Paul mentioned an ATO ID above where they actually give the example of the owner being a builder and doing this.

But it would come down to the specific siutation - just because someone is a builder doesn't mean they cannot have a main residence.

 

My mates parents do this but in no rush though, they spend a 2-3 years in a house, do full top to bottom reno high end big $$ in expensive suburbs. They seem to be doing alright for themselves but yeah always a construction site at their place. Thats as far as my knowledge goes on their situation though.

 

Wasn't meaning just because he was doing that it was exempt. More so that it he was living in the property the whole time, 12-24months.
Not like he just bought the place, stated was PPOR, lived at home with family/friends and renovated then sold.

As always I would suggest speaking to a professional, especially if there is any doubt.
Be a pretty quick way to chew into profits if you got it wrong.