Hi Everyone, I have a land which is due to settle in a month time. The land is in Tarneit new estates. The land costed me $277, size is 555 Sqm. The land is an irregular shape, not sure how effective would it be to have a decent house built. Attached. My plan is to build a house 4x2x2 and sell it afterwards. I am hoping to build around 22 - 25 Sqm house for $200k - $230k, so $500 K in total. Am I too conservative? I need to do the calculation on selling costs. Capital gain tax. Would appreciate if I could get some of your thoughts. Irregular shape of land - Restricted with what can be build. A lot of small size lots - On right side and across the street. Available house selling price in market - The cost of similar size land and house are available for $550k range in established Tarneit areas. Houses are 5 - 10 year old. My plan is to build and sell - How much difference in profit would it make if I keep it and rent. Though not sure the chances of renting in these new estates? Another option could be I live in the house as PPOR and save capital gain tax, if I sell after a year. This is my first time experience and I understand I may not make any profit but I am hoping I won’t be out of my pocket too and most importantly I will learn few things. Couple of things which I won’t be doing next time, firstly no irregular shape land and second no off the plan. Thanks in advance.
Thanks for the reply. This is based upon a quote on a similar configuration home a friend of mine has received for $220.
Go and talk to the builders and ask them how much it would cost the build what you want. Don't rely on what friends paid. I don't know what build prices are like where you are located. I do know that there is no way you would get that built for that price here in Canberra. Run you numbers and see how you go. There is zero point doing any of it if the numbers don't stack up. Plenty of other oppertunities to get real experience, where the numbers do align. The other thing to consider is whether there is any demand in your area for the type of place you are proposing to build.
Agree, I am in talks with few builders, will get quotation soon. Due to current market situation and lending restriction market is bit slow here. Friend I mentioned earlier had the quote done last week only. 23sq for $220. Agree too, seeing the current market situation I wouldn’t buy any thing now. This land I purchased almost 1.5 years ago. I doubt I will be able to sell it now, there are few in market. I am working on expenses for selling cost. There are similar price range houses available in near by surrounding however most of them are 5-10yrs old. A brand new house for similar price I hope would get a buyer. Another thing which I think could be in advantage perhaps the size of the land. Thanks @Rugrat
I definitely want to make profit out of it. I don’t have a choice of pulling out of the land now, if I do I will lose the deposit. I have decided to go ahead and build and sell it or depending on the situation, rent it and sell it. I am newbie, learning everyday. This is my first project if not loss I want to break even. Hoping to get some expert opinion from those who have pulled profit out in similar situation. Thanks for the reply!!
Yes I understand you want to make a profit - but will you? Have you done extensive DD on what sort of profit or returns you will actually make from this? Your comments so far seem to suggest that you're taking quite a rough stab at what the end product will sell for. Because losing the deposit might even be the better way to go compared to the opportunity cost of tying up capital only to lose money at the end anyway.
Current Price for the similar configuration home (Size of the land, Rooms) in market is $560 - $580, depending on the variables. I am budgeting around $540-$550 for sale later on. My Cost - Land Cost $277 and Build $220- $240. Total $510 - $520. I am waiting on some quotes coming week and that will give me a better picture. I understand I need more details on expenses in terms of selling and CGT. Learning in process, I look forward tips from others.
Get the tax right. This is likely to be taxed as income tax, with no CGT discount plus GST on the sale.
Thanks @Terry_w, Could I please request if you could refer any thread or information related to this? I am including this in Things to discuss when I see my tax guy.
There are plenty of discussions on this in the tax forum. When you buy something with the intention to sell it at a profit it is held on 'revenue account' and the main residence exemption cannot apply to revenue assets, only could apply to 'capital assets'. It is likely to also be an 'enterprise' for GST and since it is a 'new' property you would then need to charge GST to the purchaser of the property while it is 'new' if you are registered or required to be registered for GST. Because the turn over is more than $75k you would be required to be registered if conducting an enterprise.\ See the tax forum here
The other thing to consider is that if you re planning to do this more than once (ongoing), the whole venture is likely to be treated as business. This details renovations however I would assume that building to sell is essentially the same thing for this purpose. @Terry_w might be able to clarify (or is that what you meant by enterprise?). Are you in the business of renovating properties? - Andrew
