Browse Forums General Discussion 1 Mar 25, 2010 12:12 pm Hi All, Is this worth it? Buying an investment property in an area you do not intend to live in. However the main purpose of the investment property is to use it as equity when you do decide to build your own house? For example an area like the ponds? Land won't be their for ever.. theres only 3000 and with every release they disappear quicker then getting a priority number. Wouldn't it be better ? To invest in the land pay as much as you can and i mean as much as you can.. in say 2 years.. and then build your house? That way you have equity from your land.. and you secure the perfect lot in the perfect area? instead of buying an investment property somewhere else.. selling that in 2 - 3 yrs for example.. and then paying of the loan with the sale perhaps leaving a profit 100k.. ( or less or moer?) then look around for land and .. perhaps the ideal block won't be available in the area you want.. and then obviously interest rates and cost of land will increase respectively.. to me it signs like a circle of confusion and the actual profit you get when you consider the deposit and all the expenses involved doesn't sound like its worth it.. any thoughts. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Is this worth it? Buy an investment property first? 2Mar 25, 2010 1:17 pm I would rather buy land in an area where I wanted to build in future than the investment property. Like you said, what happens if that land is gone by the time you want to buy and build; which it most likely will be! Secure the block once you know you want to live there; sit on it for a bit and then build. Or, if your not fussed about building, then just buy an investment property; see how much it increases in price and sell at a later date. With the housing/land prices the way they are at present, I'd secure something quickly, preferably land! Re: Is this worth it? Buy an investment property first? 3Mar 25, 2010 1:26 pm Keep in mind you'll be paying about 1k a month in interest on land. Over 24 months you'll have paid ~24k in interest alone without even touching your principle. With an investment property in 2 - 3 years if you get someone living in there, they pay off the interest and after 24 - 36 months, you're up 100k (or what ever the value is). Although investing, you do risk loosing your "ideal" location but in 3 years you may decide your ideal location is somewhere else. ---------------------------------------- Building the PD Lisbon 24 http://www.porterdavis.com.au/#homeviewer/lisbon/24 Blog of our progress. http://lisbon24.blogspot.com/ Homeone build thread https://forum.homeone.com.au/viewtopic.php?f=31&t=28665 Re: Is this worth it? Buy an investment property first? 4Mar 25, 2010 3:04 pm You would need to check estate covenants too. Some estates require land to be built on within a certain time frame. This may be less than your 2-3 years. Re: Is this worth it? Buy an investment property first? 5Mar 25, 2010 3:09 pm At least with an investment property you are getting rent money coming in, where as with land you are having to pay for that as well as a place to live. (ie your tenant pays x amount of the mortgage, you pay xx off the mortgage = together you are paying xxx off the mortgage as well as the value it is increasing at.) Building in the Hunter Valley - 5 glorious acres. The Lakeview Lodge with Triple garage - Beechwood Homes 05/03/10 - Exchanged contracts on land 29/03/10 - Paid deposit to Beechwood homes 19/04/10 - Land settled Re: Is this worth it? Buy an investment property first? 6Mar 25, 2010 4:28 pm I'd say you need to nut out the costs of both.
With an investment property you will pay stamp duty on purchase then you will pay agents fees to sell it as well. You will also pay GST if you don't live in it. The advantage is you can claim the interest as a tax deduction and you earn rent. With land it is a smaller investment but there is no rent to help and you can't claim interest. I think any advantage of buying a rental property and earning rent and saving interest will be taken away from having to pay stamp duty, agents fees and GST. As a short term investment it would want to go up in value a heck of alot to make a decent profit. Also if house prices go up you can bet land will too and its possible to an even greater degree, especially as developers will allways increase block prices as availability decreases. A quick example would be to say buy a house for 400k, rent it and sell it for 500k: On a 400k house you pay 16k stamp duty + 15k to sell it at 500k + 6.9k CGT = 100k-38k = 62k on a 200k block of land if the price went up by the same percentage then you pay 250k. You also pay stamp duty based to 250k not 200k so you can take away another 2k from you retal property profit. So the difference is only 10k. Sure you earn rent and save tax on interest but you are also paying much higher repayments and also stuff like rates, water surcharges and maintenance. Overall I think the hassle isn't worth it and the possibilty that you may not get the land you want at then end is a risk - you just have to check what someone else said about whether you are forced to build in a certain amount of time. Re: Is this worth it? Buy an investment property first? 7Mar 25, 2010 5:15 pm When doing your sums, don't forget the capital gains tax you will pay when you sell an investment property (be it land only or house+land). We bought the worst house on the best street, then bought an investment house which has been rented out. Now working towards demolishing the worst house to build a new one - and will sell the investment to pay for it (after living in it during the build). This has taken a considerable number of years, because until now the figures didn't really make it a good financial decision. I guess in response to your question, do your sums, absolutely. Re: Is this worth it? Buy an investment property first? 8Mar 25, 2010 6:55 pm Hi all thanks for the comments we totally appreciate it! we are opting to secure a lot at the ponds.. cos it won't be their for long... and luckily their is no time constraints to build unless u want a 5k rebate which is construction within 2 years.. to recieve the rebate. I think definetly for a first home buyer:- as hard as it is to save a deposit.. i don't want to take the risk and put it towards an investment property.. that perhaps at the of the day in consideration of increase in land and house prices plus the original deposit lost.. isn't going to be much of a gain.. if i get the land atleast their is 2 things to look at it. 1. I love the area. 2. The value of the land will appreciate and thus add to our equity when forking out for the construction... and yes our plan is to reduce the land loan by heapsss.. and we have discussed strategies to get that done..n i guess it does sound like a more "secure option" especially for a first home buyer... if i had my own home first then i guess i could use that equity and then get an investrment property .... but yeh i guess u gota be cautious.. in every terms cos saving the initial deposit is tough! ... especially when u don't have ne1 else to support u besides ur partner.. u don't wana be a burden on parents.. etc .. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Is this worth it? Buy an investment property first? 9Mar 26, 2010 9:23 am dreamz Hi all thanks for the comments we totally appreciate it! we are opting to secure a lot at the ponds.. cos it won't be their for long... and luckily their is no time constraints to build unless u want a 5k rebate which is construction within 2 years.. to recieve the rebate. I think definetly for a first home buyer:- as hard as it is to save a deposit.. i don't want to take the risk and put it towards an investment property.. that perhaps at the of the day in consideration of increase in land and house prices plus the original deposit lost.. isn't going to be much of a gain.. if i get the land atleast their is 2 things to look at it. 1. I love the area. 2. The value of the land will appreciate and thus add to our equity when forking out for the construction... and yes our plan is to reduce the land loan by heapsss.. and we have discussed strategies to get that done..n i guess it does sound like a more "secure option" especially for a first home buyer... if i had my own home first then i guess i could use that equity and then get an investrment property .... but yeh i guess u gota be cautious.. in every terms cos saving the initial deposit is tough! ... especially when u don't have ne1 else to support u besides ur partner.. u don't wana be a burden on parents.. etc .. for single storey @ the ponds, i think we going to be roughly looking for the range of 550K-650K. it will be hard to do any savings with that much of loan. Re: Is this worth it? Buy an investment property first? 10Mar 26, 2010 9:31 am there is no gst payable/refundable on residential property Mozzie I'd say you need to nut out the costs of both. With an investment property you will pay stamp duty on purchase then you will pay agents fees to sell it as well. You will also pay GST if you don't live in it. The advantage is you can claim the interest as a tax deduction and you earn rent. With land it is a smaller investment but there is no rent to help and you can't claim interest. I think any advantage of buying a rental property and earning rent and saving interest will be taken away from having to pay stamp duty, agents fees and GST. As a short term investment it would want to go up in value a heck of alot to make a decent profit. Also if house prices go up you can bet land will too and its possible to an even greater degree, especially as developers will allways increase block prices as availability decreases. A quick example would be to say buy a house for 400k, rent it and sell it for 500k: On a 400k house you pay 16k stamp duty + 15k to sell it at 500k + 6.9k GST = 100k-38k = 62k on a 200k block of land if the price went up by the same percentage then you pay 250k. You also pay stamp duty based to 250k not 200k so you can take away another 2k from you retal property profit. So the difference is only 10k. Sure you earn rent and save tax on interest but you are also paying much higher repayments and also stuff like rates, water surcharges and maintenance. Overall I think the hassle isn't worth it and the possibilty that you may not get the land you want at then end is a risk - you just have to check what someone else said about whether you are forced to build in a certain amount of time. Re: Is this worth it? Buy an investment property first? 11Mar 26, 2010 10:26 am heater07 there is no gst payable/refundable on residential property There is GST payable on vacant land or NEW residential property. Although not if the vendor isn't registered for GST, or in some circumstance if it's farm land being subdivided, OR if the margin scheme was used to calculate the GST. The GST exceptions and special rules for property are enough to make your head spin. For your average investor, it's a non-issue, especially if you're not registered for GST. The price is what it is, whether it includes GST or not, and you're either prepared to pay it or not. Re: Is this worth it? Buy an investment property first? 12Mar 26, 2010 11:42 am heater07 there is no gst payable/refundable on residential property Mozzie I'd say you need to nut out the costs of both. With an investment property you will pay stamp duty on purchase then you will pay agents fees to sell it as well. You will also pay GST if you don't live in it. The advantage is you can claim the interest as a tax deduction and you earn rent. With land it is a smaller investment but there is no rent to help and you can't claim interest. I think any advantage of buying a rental property and earning rent and saving interest will be taken away from having to pay stamp duty, agents fees and GST. As a short term investment it would want to go up in value a heck of alot to make a decent profit. Also if house prices go up you can bet land will too and its possible to an even greater degree, especially as developers will allways increase block prices as availability decreases. A quick example would be to say buy a house for 400k, rent it and sell it for 500k: On a 400k house you pay 16k stamp duty + 15k to sell it at 500k + 6.9k GST = 100k-38k = 62k on a 200k block of land if the price went up by the same percentage then you pay 250k. You also pay stamp duty based to 250k not 200k so you can take away another 2k from you retal property profit. So the difference is only 10k. Sure you earn rent and save tax on interest but you are also paying much higher repayments and also stuff like rates, water surcharges and maintenance. Overall I think the hassle isn't worth it and the possibilty that you may not get the land you want at then end is a risk - you just have to check what someone else said about whether you are forced to build in a certain amount of time. I meant Capital Gains Tax. I've correct it now. Re: Is this worth it? Buy an investment property first? 13Mar 26, 2010 12:05 pm yep thats correct standard houses these days.. ponds, kellyvile, prestons.. is around 550k if you want to build from scratch.. hence which is why its a safer option to put ur first deposit towards ur own home instead of building and buying land from scratch for investment.. i don't get it.. why u would use it as an investment at first doesn't make sense.. considering as most mentioned above its kind of not really worth it when u take into acount price of land and house going up. and all the costs associated with an investment ( yes it can be claimed back.) however from the sale u will be paying CGT and then pay off the rest of the loan and who knows u might just be left with ur original deposit in profit only... decisions.. decisions.. but for the peeps who have built their house from scratch u all should be proud! its tough work and hard earned dollars! so congrats. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home Re: Is this worth it? Buy an investment property first? 14Mar 26, 2010 12:21 pm dreamz yep thats correct standard houses these days.. ponds, kellyvile, prestons.. is around 550k if you want to build from scratch.. hence which is why its a safer option to put ur first deposit towards ur own home instead of building and buying land from scratch for investment.. i don't get it.. why u would use it as an investment at first doesn't make sense.. considering as most mentioned above its kind of not really worth it when u take into acount price of land and house going up. and all the costs associated with an investment ( yes it can be claimed back.) however from the sale u will be paying CGT and then pay off the rest of the loan and who knows u might just be left with ur original deposit in profit only... decisions.. decisions.. but for the peeps who have built their house from scratch u all should be proud! its tough work and hard earned dollars! so congrats. Do you think that the Ponds will be a good investment? not saying that I would be investing on my first home .. but down the track, sooner or later ... we may sell the house to move to bigger or smaller (depends on the scenario later on) ... what do you foresee or estimate? Re: Is this worth it? Buy an investment property first? 15Mar 26, 2010 12:38 pm If you could afford it the best investment would be to buy 2 blocks. Build on one now, live in it for a while, rent it out for a while then sell it to finance the second build. The Ponds/ Kellyville Ridge is expected to boom in prices over the next few years. All of those property reports in the media lately have been tipping that a $600K valued house now will be worth more than $1 mill in 10 Years (some predictions as high as $1.5 mill). Houses that were built for $645K ($285K land + $365K build) or less, 2 years ago are now selling for $720K + Mind you there are not many buyers in that price bracket at the moment so they are hanging on the market for a while. If I could afford the build another one in The Ponds as an investment I would. Mind you I need to build my current one first. Building at The Ponds Land reg 3/12/09, Land settled 18/12/09 Approved by Design Panel 16/11/09, Submitted to council 24/11/09, Approved by Council 21/1/10 Site Start 21/5/10 http://andyminpondsbuild.blogspot.com/ https://forum.homeone.com.au/viewtopic.php?f=31&t=19800 Re: Is this worth it? Buy an investment property first? 16Mar 26, 2010 1:11 pm Mozzie I meant Capital Gains Tax. I've correct it now. I thought it was odd you didn't mention CGT.... Re: Is this worth it? Buy an investment property first? 17Mar 26, 2010 5:32 pm Andy_Min ur right on that.. http://dreamzattheponds.blogspot.com To be invited to our blog send a PM with your email. Settled on land 25th June Exchanged contracts on Land April 14th 2010 Building our First Home In fairness nobody gave a crap about the ACCC and the gag clauses continued in the pro forma templates of a few other builders after the ACCC took on Wisdom, and more… 19 73086 Hi I am wanting some opinions about the build of a steel shed I am going to get one about 4.5 x 2.5 m steel shed and the height will be about 2.3-2.4m high The one I am… 0 14434 Hi everyone. I am a single mother with little daughter, living in a small tourist town in WA Australia. I am thinking to install security screens to all the doors and… 0 22439 |