Making Money on House & Land Packages

I don't think they will correct, but I think they may stagnate a little, but then see a good jump. If your holding for 3-4 years plus I think it's still a good time to jump in. I just think for holds your likely to see 100-200k growth buying in suburbs with houses on 600+m blocks. You can buy these for under 450k, plus have options with development down the track.

 

E.g my NW home sales comparables at time of my land purchase were around 780k. So I made sure i'd source land cheap enough to build same thing but 20% under the 780k value so low 600s. That gives me a 20% buffer if the market craps itself. Its not an easy find and those houses I compare to cant be used as comparables as I buy land that titles/registers 12+ months, but it gives me an indication of what the market views for that product.. to give you an indication of what I find when I look, I couldnt find anything in melbourne except werribee but resales were 15% more than what we could purchase when that was done. I accepted a 15% for my parents cause imo Melb has more room to grow and they have more cash.. In Brisbane i bought h&l about 25% cheaper than established in same area and will have 7-8% yield on comparable rentals.
In SW Sydney i just optioned a few lands where I can get H&L 25% under market value.. e.g if its selling for 680k, i'm getting it for 500k.. to me the buffer protects me and helps me get as little money down as possible on settlement.. these deals are almost impossible to find but i keep searching so when the right one pops up I take it

 

Thanks for taking the time to explain mate, that makes a lot of sense. Sounds like you've had quite a bit of experience under your belt doing H&L. May I ask has this been your primary and only strategy that you've stuck to so far?

 

How are H&L packages performing across the states @sash ?

It would be an interesting look by state, being new I presume they are also easier to tenant than an older property in need of TLC

 

Land and House would be an absolute disaster at the moment in Perth market as there is an oversupply of established homes selling for bargain prices. The strategy of building land and house is best when the market is rising, which is the case in Melb and why everyone is making money.

However, when the tide turns you don't want to be left holding the baby as this market where there is an abundance of land will be vulnerable.

 

In Melbourne and Geelong....it is going strength to strength as there are 100k people coming in. The stuff I have are being tenanted quickly on completion.

 

Personal tax advice could prevent a lot of costly mistakes. I have seen people buy a old house + land and think about a dev that never gets off the ground. Years later they sell the rental on that land and claim it was a CGT event. ATO disagrees. Building can be even worse to argue especially if sold within 6 years.

First sale of new residential property is a GST event. Until someone confirms GST does not apply it would be sensible to assume it does and get advice. The example of the advertising you used could actually trigger a GST problem too. A recent case had that as a feature.

Entity means nothing. Nobody says you need a company or trust. Its irrelevant to what is considered an enterprise. A enterprise is something "done" and not a entity related issue.

The issue that can harm people can include a old loan application, council development application to council or other type of disclosure when people disclose more info than they should.

 

That I agree of course and it is good to get tax advice for e.g. I have used chan and Naylor etc and also obtained from various others.

I am not saying use personal tax advice off the forum - get it verified but to "definitely" say that a sale of an IP which has a house and was rented out purely for rental income no matter what they had in though in the "back of their mind" is subject to GST is not correct. Empty land hands down yes GST as they never was a rental IP in the first place. Yes the example of advertising definitely triggers a GST problem as the intention was to sell and not generate rental income.

 

Huh ? Australian / Westminster system of law applies in Australia. The Government has given the ATO very strong powers. They can form ANY opinion that want. You then must object and appeal if you dont agree. The onus in the taxpayer to disprove the ATO claims and its expensive.

NEW (ie FIRST sold by the first owner) residential property (the topic of this thread!) is almost certainly exposed to GST risks if sold within 5-6 years. Detection risk is doubled - GST and tax both become a detection problem.

The thread here is "making money from house and land". Intentions ?

 

Well the way it is potrayed is very Taliban like - I was being sarcastic in some posts here.

Yes you are correct in that the intention is to make profit of this thread that itself shows that the rental income was not the primary goal.

Ok these examples

1. Couple bought land build home lived in it for 2+ years divorced sold - there was a gain (GST or PPOR exemption
2. Single guy bought land and build a house to live in but then rented it out 3+ years (earning rental income declared on his returns (no gst) as he got posted to work in sydney (maybe his intention was to sell in the very first place but who knows). Couple of years sold out as needed some funds to buy property in Sydney as he will be there for a while(GST or CGT ?)

 

"Making money on house and land packages". As a buy and hold strategy. Not as a turnover for profit event.

Take an average schmo like me. Built several buy and hold house and land over the last decade. All rented for over 12 months and declared on taxable income. Interest rates go up 2%, hypothetically sell one to cover rising costs. Make 100k profit. Taxable outcome?

In my mind I've held it for more than 12 months. This entitles me to a 50% CGT discount. The other 50% or 50k, is taxable. Fair play. Now could you please confirm this as I'm not alone in this situation I'm sure. Just a regular dad investor who's put together a few H&L packages to rent out. I believe this is also the same info @melbournian is trying to clarify. What triggers a CGT event? Aside from doing H&L as an unregistered "business" for the express purpose of selling upon completion at a profit.

 

Interesting discussions, I don't know if there's a clear cut answer but I guess if the tax man comes knocking, you'd better have an acceptable way of proving your intention.

I pretty much use 2 seperate entities. One entity buys and holds. The other develops, so this one goes through the income/gst process.

Trying to be as transparent as I can so if/when I do sell through the 'holding' entity, I'd be expecting to claim the 50% cgt discount.

 

@sash picked up a few in Perth a couple of years back

I think he's riding the property cycle around Australia

 

I know the answer - CGT all the way unless

1. U advertised for sale just after u finished building without even renting.
2. ATO asked moderator for the IP address of ur post which then tracks down a comment to which claimed that u intended to sell
3. Tape recording or email trails linking u making comments in making profit from H&L which they use voice recognition to identify u
4. U advertise ur calculations on Facebook

Some ppl think it's like an episode of homeland security the ATO is.

If everything was GST why even have cgt in the first place and yes divorce couples are paying gst too

 

Phew, I'm safe then. Selling isn't really on the table anyway, so many years ahead of not worrying about it.

 

Yeah the market is down...but I am still up from the price points I bought at though they are down from peak.

 

This is my attitude. I develop in a company and or trust. I hold in personnel names and trust. If I was to sell buy and hold unto the future I would expect cgt even if within 5 years. In my company the turnover is generally within 12 months and clear business intentions.

 

I think sash strategy is to take equity straight up and yield minimum of 6% to cover interest rates.
Yes, Perth market is down.

My strategy is to take some profits off the table while continuing to growth cash flow.

Different strokes for different folks as they say

 

there are ways and means, but I wont be discussing this on a forum... find yourself a gun accountant.

 

@sash ,@Sonamic @Cactus - where are areas to find reasonable prices in the current market?No HL in Sydney below 700k. Land itself is 400-500K. What is a better strategy in the current market?

When I see something like Connect with your dreams – Caddens Hill itself selling 700-800k minimum, and the location is more than an hour train ride to Sydney CBD, looks like there is no money to be made here but more of a risk if the market doesn't move north. Your thoughts?