Permit to build behind existing

Hi all,

I am very new here and in the market, and appreciate some advice.

I have a property in Melbourne Knox Council area. I am lodging a planning permit application to build two single level units behind exiting dwelling (also single level) in the next few weeks.

I am planning to start the subdivision process ASAP as well, probably after getting some positive feedback from the council or when the permit issued.

I was thinking if possible to renovate and sell the exiting house to either A) finance the project (build two units) or B) to sell the land with permits to developers separate (I think this way I will maximise the profit). so either way, it may be to my advantage to sell the exiting house separately first. But as we all know the subdivision won’t be finalised until services are in place (or a deposit paid??) and I guess I have to pay the 8.5% open space contribution (more than two units on a land) as well? Am I right?? Is there a way I can avoid this (2 lot subdivition and sell exiting house and the land with two units on it ???)

Is there anybody here to advice how this is done? Can I sell the existing house before completing the construction of the other two and how??

Another thing is that because we are subdividing (so adding value), I think it may be better for us to move and live in this house for the next few years so we avoid capital tax etc. the property is 100% under my name at the moment (because we wanted to take advantage of negative gearing and tax deductions – me being the higher salary earner) and I guess I can (should) add my wife’s name after we moved there so minimise taxes?

What are your thoughts on this please.

 

Consult an accountant.
Just moving in now won’t automatically avoid all CGT liability - a lot will depend on previous rental and/or occupancy details.
Marg

 

I think you're way ahead of yourself with certain things and very behind with other things that many people would have decided on before even doing designs.

Entity: you should talk to an accountant about how adding your wife or moving in with affect you tax wise. You may well be no better off doing either of those things

Finance: if you can't sell the existing house, how will you finance the rear two houses

Feasibility: I'm assuming you know how feasible the project is and all the scenarios. Developers might not care to buy with permits for 2 behind - they might wish to buy with permits for 3 or 4 and not have the existing house

@lixas4 @Tufan Chakir probably have some good insight about how you might be able to stage it but as far as I know you need to complete the subdivision to sell and have titles for settlement (most states you can exchange contracts before titles and settle once titles are issued)

 

Heya @Morteza,
I don’t pretend to be an expert but I have done what you are proposing albeit only 1 lot created at the rear.

Here are some key considerations.
- In Victoria you either need to have the houses constructed OR a section173 on title before the subdivision will be completed. The section 173 is a legal caveat on the entire Lot to protect the council basically saying the land will only be used for the DA.
- Technically you could sell the house first but ofcourse it would be subject to subdivision. I would imagine this would be near impossible to sell given the uncertainty of what would happen with the back (let’s be honest it’s not a standard OTP kind of set-up).
- When you go for finance if the subdivision is not done then expect the val to come in very short. Let’s assume each house separately titled is worth 500k each (1.5mil). The val might come in more like 1.1-1.2 because the bank is valuing a single block with 3 houses.
- Builders do not love building at the back of an existing. In my case I actually built my PPOR at rear and whilst it’s beautiful the builder said to me and I quote “I will never again build behind an existing house”.

So here would be my strong recommendations. Before submitting DA and burning cash see a broker first. Servicing, Equity and Val’s are key before ANY true decision can be made.

If it turns out it’s not feasible for you to do the subdivision and builds then I would completely change my strategy. I would instead do DA for 3 townhouses which includes demolition of the existing. I would be fairly certain selling a property with DA for 3 would be:
A) Just as profitable once you factor in all the subdivision costs, interest.
B) Far Far Far Farrrrrrrrr less headaches

If however you did have the means to do it yourself the preferred method is build before subdivision (requires a lot of equity/cash) OR
Subdivision first which just takes longer and is a bit more work.

Feel free to flick me any questions.

 

Oh and see an accountant. I can strongly recommend @Paul@PFI.
Moving into a property doesn’t make it CGT free also if it is your PPOR and you do have CGT exemption than creating new blocks will lose that (except for the original portion).

So again steps would be:
1 - Broker (What is even possible)
2 - Accountant (If possible then what are the tax considerations). Ideally an accountant who can also discuss structures.