WA First time subdividing - which suburbs on a budget?

Good idea @JohnPropChat! Minor renno for the 6 months i live in it sounds good, dont mind getting my hands dirty! Some of the ones i was looking at would need a bit of a paint job!

 

I am always looking for houses where all you need is a cosmetic touch up, and are structurally sound. Rather have that than a fully renovated house with no value add opportunities.

 

If I wanted to buy a 3x2x2 new built unit for under $400k. I wouldn't be looking to buy in any of the suburbs mentioned. One thing to build units but you need to be able to sell them.

 

Swan split coding - min 1300sqm

 

Welcome to the forum - sorry I didn't see this as I try and stick my nose into everyone in Perth's business

Kudos to you for delving deeper than many people do when looking at potential development sites. Often they just see that someone else has done something and blindly buy. As you have no doubt worked out - this forum will try and stop you doing that - and happy to lend an ear and bounce ideas around to hone your skills.

The good news is that there is time on your side. There is no rush and the deal of a lifetime comes along once a month.

Using your FHOR and FHOG can be a good move if you can time it right to meet the requirements and get some holding costs. Not paying stamp duty can mean more money in your cash buffer for your subdivision costs which can be quite substantial.

Is your plan to keep the house and create a block behind and sell the block?

 

@PerthieNewbie with that 300k loan what deposit did you have at the time? when seeing the banks

It could be an idea to save a bigger loan which should force up the lend able amount. It depends what you see the property market doing in the next 12 months or so in the areas you are looking to buy?

 

You may also want to research the tax implications of a development. The 50% CGT discount you referred to may not be applicable and you may need to factor GST into your selling costs.

 

Thanks Westminster Yeah, i'm enjoying doing this research to hopefully make a knowledgeable decision when the time comes!

When I wrote my first post I was thinking of just doing something on my own, which meant keeping the house and selling the back block.

But i've since talked to my dad and bounced a few ideas around...he's thinking of joining me in a project and buying a dated sub-dividable block and then I can build at the back - thus utilising my full FHOG (which I will lose out on if I buy an established house myself)....so that may be another option for me too...

 

I think this might be problematic. He would need to buy it in his name then sell you the rear block for it to work? What that what you were thinking?

 

Oh TRUE! Didn't think of that...

 

.

Do you know what sort of tax implications?

 

I'm also now looking at wanneroo, looks like a nice area with some houses and they have good zoning...but it's so far away?

 

Developing tax 101 and not by an accountant
1. CGT doesn't always apply. It can be classed as income tax not CGT. Depends whether you meet the requirements for Developer or Investor. It depends on intent and timing. Read up on Developing vs Investing
2. GST is applicable on selling new houses that are under 5 years old. But you can claim the GST on the build. How you manage it will depend on #1. Read up on the Margin Scheme

 

@Shogun Actually not sure about Wanneroo now that i'm reading some reviews online, not too familiar with the suburbs...which are some suburbs would you suggest?

 

hmm, will need to do more research. Thanks @Westminster !

 

Hi @PerthieNewbie,

I suggest you read @Paul@PFI's article "Tax and GST - Property" in his developer toolkit (Capital gains tax when subdividing 2 blocks and holding one) to get a good understanding on whether your activities will be an enterprise so gst could be payable (and ABN will be required).

You may purchase with your father through tenants in common ownership, and do a partition deed at the time of subdivision or a deed of exchange after your new house is built. Either deed will make each of you solely own the subdivided title at the end. There might be a bit of duty to be paid if the values of the two final products do not match your shares from tenants in common. ie.: A subdivision with the house retained ends up with a house at 300k and land at 200k, while if each of you own 50%, the duty will be payable (I guess is for the difference of the values).

Better to get legal advice. You may speak to a property lawyer about the partition deed. I believe you will not be charged for the consultation but only need to pay if you require the service. If you need more details, you can PM me, as I am in a similar process.

 

I'm pretty sure if you purchase TIC then FHOG will not be available.