This is my first thread so I hope I'm doing this right!
I bought a 1012sqm block in Boondall, Brisbane a year ago with an old 2 bedroom cottage at the front. My initial plan was to subdivide and sell the land at the back and use the profits to convert the front house into a positive cash flow property. Subdivision is now complete.
However I am now thinking about whether it is better to build it out to rent as I can now use existing equity to build with none of my own additional money. I plan to keep it as an investment so I avoid GST and income tax.
My question is - what considerations should I be looking at to make this decision?
Purchase price: $370,000
Total subdivision costs (headworks, survey, town planning): $72k
Holding costs: $21k
Total costs: $463k
Current value of land plus house: $555,000
Increase in equity if I sell the land now: $92k or 19.8% (not including CGT or real estate agent sale costs) Not quite the 20% most people strive for but close.
If I build, build costs will be around $209k. However, the area does not have a lot of new builds so I am struggling to come up with a final figure, I'm guessing close to $500k which is not too far away from value of land plus build.
The new house can probably rent out for around $500/wk and the old house for $320/wk which will make it slightly negative which I will find it difficult to claim as it is in a trust. There are also land tax considerations if I keep both.
I am conscious that some people advocate building and keeping so that I have an investment at a discount since I have already paid for the purchasing costs, and that some advice to sell so that I can use the cash flow for my next investment. Return if I build is lower than selling but should I take into account potential future growth as well?
I bought a 1012sqm block in Boondall, Brisbane a year ago with an old 2 bedroom cottage at the front. My initial plan was to subdivide and sell the land at the back and use the profits to convert the front house into a positive cash flow property. Subdivision is now complete.
However I am now thinking about whether it is better to build it out to rent as I can now use existing equity to build with none of my own additional money. I plan to keep it as an investment so I avoid GST and income tax.
My question is - what considerations should I be looking at to make this decision?
Purchase price: $370,000
Total subdivision costs (headworks, survey, town planning): $72k
Holding costs: $21k
Total costs: $463k
Current value of land plus house: $555,000
Increase in equity if I sell the land now: $92k or 19.8% (not including CGT or real estate agent sale costs) Not quite the 20% most people strive for but close.
If I build, build costs will be around $209k. However, the area does not have a lot of new builds so I am struggling to come up with a final figure, I'm guessing close to $500k which is not too far away from value of land plus build.
The new house can probably rent out for around $500/wk and the old house for $320/wk which will make it slightly negative which I will find it difficult to claim as it is in a trust. There are also land tax considerations if I keep both.
I am conscious that some people advocate building and keeping so that I have an investment at a discount since I have already paid for the purchasing costs, and that some advice to sell so that I can use the cash flow for my next investment. Return if I build is lower than selling but should I take into account potential future growth as well?