Demolish, subdivide and sell

Discussion in 'Property Management' started by property_rookie, 26th Aug, 2018.

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  1. property_rookie

    property_rookie New Member

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    Hi all,

    Most definitely a rookie in this area of property and looking for some advice.

    My parents currently have a house in their name that they bought in 2003 and we've lived in it for 15 years. Now are we deciding to demolish this one and build 2 where they would sell one to me.

    What would be the best approach for this?

    Price bought originally in 2003 - $400,000
    Approximate value now - $1,800,000

    An idea was to demolish the house and convert the PPoR into investment and get an evaluation. This process would not incur a CGT thereby making the new evaluated price your base.

    Following this perform a subdivision of the land and sell one portion to me.

    Eg:
    Original price - $400,000
    Valuation after demolition - $1,500,000
    Divide 50:50 - ($750,000 x 2) and sell me one for $750,000

    Thanks
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Best approach - seek legal advice on all the issues.

    How many houses on it? If they demolish the house it can no longer be a main residence. so your assumption of no CGT may be very wrong.
     
  3. Big Will

    Big Will Well-Known Member

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    Would it be CGT free up until the point they demolished the house?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It may or may not be depending on the circumstances.
     
  5. Brady

    Brady Well-Known Member

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    Am I missing something here??

    Value now $1.8M
    Value after sub/div $1.5M ($750 x 2)

    Why would you do that?
     
    Terry_w likes this.
  6. Chomp

    Chomp Well-Known Member

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    I went to a seminar and a lawyer was discussing this, similarly if you and your neighbour divided up your backyards and split the driveway. I specifically remember him saying "you could scratch their eyeballs with a fork and they wouldn't even blink". He was talking about the ATO.
     
  7. wrexter

    wrexter Active Member

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    Lets not forget subdivision costs.........
     
  8. Brady

    Brady Well-Known Member

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    Yes that makes it worse...

    But if it's valued $1.8M now why would you decrease the value down to $1.5M ($750k x2) along with the costs...
     
  9. wrexter

    wrexter Active Member

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    Yep, may seem obvious but goal of subdivision should be to increase overall value!

    i.e Existing house & land now = 1.8M
    Value of each block after subdivision = $1.1M

    Gain = 2 x $1.1M - 1.8M - 65K (Subdivision Costs etc) = $335K
     
  10. Brady

    Brady Well-Known Member

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    Goal to anything should be to increase value.