Build second house in the backyard and keep it or sell it?

[Aulyna]

Dear all,

Just moved to a new house, need your advice for the old pp which was bought 10 year ago and was paid off:

It's a standard 3 bd house with block of 860+ block, located in a good located suburb. It could sell for 450+k at current market.

I am suggested to get it refinanced and build another 3 bed house at the backyard about 130-150m2, and keep it as an IP.

But the problem is the two houses are not seperate title. They have to sell together. If the second house cost 250k, the total value would be 750k.

Is it worth to do so? Is it better to build second house in the backyare or

Your advice would be highly appreciated.

Aulyna

 

[tobe]

It depends..... I guess your bummed out having paid out the loan, and now having to pay your loan on the new place your living in, and paying tax on the new rental income?
You have a couple of options. The first is to sell your old property and use the funds to pay down your current O/O mortgage. then use the equity to purchase a new investment property. You will lose a bit in stamp duty and selling costs, but might be happier with your tax position afterwards.
Another option is to use the equity in this house to buy a second investment property, if this one is negatively geared, your tax position would be blended, and you will not pay as much tax, although this doesnt help with your new O/O mortgage payments.
The third option is to build in your backyard. I suggest carefully considering this option, as the costs may well be more than you imagine, and may take longer than you think. You may not be able to rent out the front property while you build, and after completion, the value and rental amounts may be less than a 2 seperate properties...

 

[marg4000]

Keep in mind that if you build and have to sell both properties together as they are on one title then you will restrict your pool of possible buyers enormously.

Is the property in joint names? If not, can you sell to your spouse/partner?

Is a subdivision to creat two titles possible?
Marg

 

[Aulyna]

Thanks tobe and marg4000.

What you said is correct.

The property in joint names. Can I sell it to my son, who is 16?

It's not possible to create two titles.


Regards,

Aulyna

 

[tobe]

You have to be 18 to own property, and the sale would be subject to stamp duty. I think your better off with one of the other options.