Flipping too costly?

Discussion in 'Accounting & Tax' started by SirDingo, 15th Mar, 2016.

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  1. Terry_w

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

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    Not necessarily. He just waits till they have risen a decent amount. These would be on revenue account so no discount anyway.
     
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  2. D.T.

    D.T. Specialist Property Manager Business Member

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    Certainly is cgt in USA, at 15%.

    You can use a Section 1031 exchange form to roll your sale revenue into buying a like for like asset which defers the tax, but a property will be your last one some day.

    Good article on it here if you're interested in learning more about it - Ten Things to Know About 1031 Exchanges
     
  3. Nemo30

    Nemo30 Well-Known Member

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    Stamp duty is tax deductible in the ACT, but you dont get 100% back.... it is a deduction so you end up with your marginal tax rate back. Also, you cant double dip and add it to your cost base when selling as you can in other states.

    Im about to flip one of my properties in Adelaide. After all costs should make about $80-90k.
     
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  4. ellejay

    ellejay Well-Known Member

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    That's a great result!
     
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  5. D.T.

    D.T. Specialist Property Manager Business Member

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    I'm flipping a couple , will post pics and numbers if its of any interest.
     
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  6. zed_kid

    zed_kid Well-Known Member

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    I’ve done a couple flips, basically it comes down to purchase price, you make your money when you buy. I’m working the numbers on one now, and 10% variance in purchase price has a 25% swing on ROI.


    The good thing about current situation is holding costs are low, so you can let a project run over time by a couple months and it won’t break you.
     
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  7. SOULFLY3

    SOULFLY3 Well-Known Member

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    Another question here
    What if one purchases a house & Subdivides and builds at rear.

    Ie - Live in front and renovate while obtaining DA and upon approval build the second dwelling
    lets say 12-15month process.

    Build at rear finishes then sell the Front house & move into the new rear dwelling.
    Then look for next site to go again lets say 4-6 months
    (Most likely selling that new build to fund next purchase)

    what type of implications tax wise could this strategy encounter?
    Would these properties sold besubject to CGT ?
     
  8. Mike A

    Mike A Well-Known Member

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    Both will probably be subject to tax with no discount. CGT wont apply
     
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  9. Hamish Blair

    Hamish Blair Well-Known Member

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    We love the US TV shows; seems they use their own labour for the reno and sale, so the profit includes an hourly rate for their time and expertise.

    The key think is whether you can add enough value based on the location to get an uplift in value. Buying the worst house in the best street kind of thing, plus knowing how much the reno will cost.

    I think many people walk away from problems on the basis they don’t know how long or much it will take to fix. If you know how to solve these problems then with a clearer understanding of the risk.

    Remember bad money drives out good money, usually due to misperceptions around risk. No point competing against someone who drives the price up because they have underestimated the cost or overestimated the potential end value because they don’t fully understand the risks.

    Jane Slack-Smith has an interesting approach and some useful content and tools in this regard. She takes a risk-management approach to property investing.
     
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  10. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    All people who produce business income should cost their time into any project. It is worthless and futile to consider a project that produces a profit of $30,000 if the time taken is 4000hrs of labour as the hourly rate would be $7.50 per hour.

    I often see people who cost themselves at $50 and this can be foolish as their productive income producing time may be 50% of the week after non-income producing quotes, invoicing, travel etc are completed. So they end up working for $25 a hour and wonder why they arent getting ahead. I generally suggest starting with a hourly rate then triple it (or more !!) to determine what a hour is worth. So a sparkie may estimate a job to be 3hrs x $180 = $540 + and quote it at $595 incl of GST.
     
  11. KinG3o0o

    KinG3o0o Well-Known Member

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    Yes please,
    i would like to learn and know how its done, especially like a pro (its your job so i take it that you are a pro as a buyer agent)

    thank you
     
  12. Sackie

    Sackie Well-Known Member

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    It's what everyone should be doing imo. Investing is all about managing risk for reward. That's pretty much it.
     
  13. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Many people also over exaggerate flips by ignoring every cost and time.
     
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