Boulder WA - sell or keep ???????

K

keenas

Hi

I have been procrastinating over this one for awhile.

I have a property in Boulder that i have owned for 3 years. I paid $92,000 for it and have recently had it revalued at $269,000.

I am currently receiving $230 a week in rent and have been told that with a paint job and new carpet I could easily achieve $310. In fact the current tennant is happy to stay on at the increased rent.

The reason I am thinking about selling is

1. I have a half renovated house (my PPR) that needs $30,000 spent on it to complete. PPR should be worth $330,000 when finished - we owe $244,000. This has been an unfinished project for the past 4 years and my husband is sick of the sight of it.

2. My Husband and i have several thousand tax losses in a previous Company. Any future property that we purchase under the Company name will be Capital Gains exempt for us (it will come out of the losses).

3. Boulder relies on the mining industry - which can be risky.

So, we are thinking that maybe we should sell our Boulder property, finish our house and put around a $40,000 deposit on another property in a high growth area, under our Company name. Boulder is not under the Company name.

The longer we hold Boulder, the more Capital Gains Tax that we end up paying. But, it is a nice little cashflow property.

Decisions decision - can anyone give me any advice on this one PLEASE.

Thanx in advance

Keenas
 
Hi Keenas

funny post......we are in the same position !

We bought a place 3 years ago in Boulder for $140k (4x2). It is now worth $320k. But, we umm and ahh about what to do with it ! We get $330 week rent (agent says she could get $350 or $370 easily when lease expires. So the cash flow is nice.)

If we sell, we would probably clear $100k - $120k after costs and CGT etc. CGT would be somewhere between $30k and $40k I estimate, depending on what we sell it for. We could use these funds to pay down PPOR loan to approx $100k, then use the increased equity in PPOR to buy another IP somewhere else.

The good thing is, if you sell in July 08, you won't have to pay the CGT until approx June 2010 (nearly 2 years later). This is because it's in the 08/09 fin year, which doesn't finish until June 30, 2009. A tax agent can get an extension to lodge a TR until sometime in May 2010, once the ATO processes the return thay give either 4 or 6 weeks to pay, nearly 2 years later ! In the meantime, that money can sit in my mortgage ! The only thing to be careful of is that the property would be considered to be sold when the contract goes 'unconditional', so plan exactly when you put it on the market and sign contracts etc.

But back to your question about what to do, I don't know !

The only thing that holds me back selling is the thought that the prices in Kal/Boulder go up to Karratha prices, that would be nice !

On the downside, we probably need to sell to pay down PPOR mortgage, as it's been going the wrong way for a while.

This hasn't helped much, but at least you know you are not alone !

Cheers
 
I too have a place in Kal.
Bought it 2 years ago and it has gone up 50% in value and rent, so its a good investment so far.
Thought about selling but I decided there is a long way to go wth the resources boom the way China is emerging so I am going to keep it. Like yours, it pays its way.
Who said positve gearing property does not exist.
 
Okay, I'll buck the trend.

I WISH I'd bought there 3 years ago and if I did, I'd keep it!! Mining isn't stopping any time soon. Congratulations on doing so well so far. Sounds like you could draw down on some equity to improve the value of your ppor anyway. Don't sell your golden goose. :)
 
Timing in K-B

Knowing zero, brought in 1996 and 97 the Boulder new area, cashflow positive secure 5 yr + rents, shire then released some 1000 blocks (after solving a native title claim issue as I recall) capital growth over @ 5 yrs almost zippo, so sold the 1996 prop at netural CG, when stamp duty and agent fees subtracted and 1997 prop @3-5 % gain and invested elseware in the city. Result not comfortable far from city CBD + 10 -15 km now. But with the marvels of hindsight ...............:eek: as they say never, never sell !!

Mav
 
Keenas, Sounds like you dont have any master plan and didnt purchase it with an end in mind? What did you buy it for? Where does/did it fit into your investment strategy for you to purchase it in the first instance?

The answers to those questions will dictate as to what you need to do with it. ie hold or sell. Property is merely a vehicle to get you from A to B , what ever that A & B may be for you.

Hope this helps.
 
Last edited:
kegger said:
The only thing to be careful of is that the property would be considered to be sold when the contract goes 'unconditional', so plan exactly when you put it on the market and sign contracts etc.
Click to expand...

For capital gains purposes the date that determines what financial year the property must have the capital gain declared is the date the contract is signed, not the date the contract goes unconditional!!.
 
allblack, I disagree with you. Can you substantiate your thoughts from discussions with a tax accountant ?

I have it on sound accounting advice it is the date the contract goes unconditional. So, if it's a contract with no conditions, then it would be the date the contract is signed. If it's 'subject to finance', then the date considered for CGT purposes is the date the finance is approved.

Perhaps their is a knowledgeable accountant who can clarify ?

Cheers
 
It is definitely the date the contract is signed.

In the event of an ATO audit, this date can be proven by presenting the original contract.

We sold an IP this financial year, contract dated 2nd July 2007. Our accountant told us that it was the contract date so to make sure we held things past 30th June.

Yes, we won't have to pay the CGT until July/August next year, our accountant will lodge our tax returns on the last allowable day, probably May 2009. So we have the use of the CGT sitting in our offset account for the best part of two years, a bit more hopefully.
Marg
 
silversands said:
Hi Marg, our accountant gave us the same info as Kegger's. I would love to hear from some more ss accountants re this issue, please :confused: :confused:
Click to expand...

I am an Accountant!!!!....It doesn't matter whether the contract is conditional or not the date is when the contract is signed.This is one of the most misunderstood areas of tax law. I quote below from the Capital gains Guide on the ATO website:


"Time of the CGT event

The timing of a CGT event is important because it determines in which income year you report your capital gain or capital loss.

If you dispose of a CGT asset to someone else, the CGT event happens when you enter into the contract for disposal. If there is no contract, the CGT event generally happens when you stop being the asset’s owner.

Example: Contract

In June 2007, Sue enters into a contract to sell land. The contract is settled in October 2007.

Sue makes the capital gain in the 2006–07 year (the income year she enters into the contract), not the 2007–08 year (the income year settlement takes place)."
 
Yeah, I see your point. It also said the timing of a cgt event is "usually" when you enter into a contract to dispose of an asset. It certainly seems to indicate possible exceptions to the rule...
Does anyone else have any input on this? I am more than a little curious now!!
Thanks and regards, Jodie
 
Hello everyone, just wanted to add that we live in South Kalgoorlie and have witnessed the growth over the last year.
This rise in prices seems to have plateaued lately though, a lot of agents have said to me that they cant see much more in growth in the near future, but rents are definately playing catch up - if you can get a rental in Kalgoorlie/ Boulder for under $300 per week now, you are doing a good job.
So if you hold on to your property at least you can receive considerably more rent now.
 
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