I want to buy a block of vacant land - but theres a catch

Hi all, i've worked my way through this so many times that a fresh set of eyes could be the answer to helping us find a solution.

Situation

PPOR - Valuation $545,000 - Loan 10 year fixed 7.29% (8 years to run) Mortgage - $285,000

IP - Valuation $330,000 - Variable loan - Mortgage - $310,000


Now this is all good and well, we are happy in our current PPOR but intend on moving within 5-10 years. There is land available that we have had our eye on for 12 months, exactly where we want it, with the second and final stage of the development just going on the market , blocks range from $190,000 - $215,000.

I'm after any suggestions on the best way for us to secure/borrow/work the situation.

Should i just get a loan, let the block sit vacant for 5 years?
 
Land appreciates, buildings depreciate.

However you can't deduct the interest if there is no investment income. This block will cost you the best part of $15k pa in non deductable debt.

Why not buy an IP in the same area .. tha land compnent should appreciate at approximnately the same rate as your vacant site.

You will get income and will be able to deduct the interest.

Holding costs for 5 years of the vacant bit of dirt will be around $75k .. say you buy an IP in the area that is cf negative to the tune of $5k pa .. this is tax deductaable, so the cost to you is $3k pa or $15k over the 5 years.

Sell it pay commission, an additional stamp duty .. but you should be better off..

However you may not be able to find a block of land as good as this one .

Therefore I would buy the block of land and build then either sell the PPOR or turn it into an IP and move 4 years earlier .. it will be heaps cheaper.

good luck

RightValue
 
Cheers for that, it really is based around work committments and loan structure and terms at the moment. I may just have to commit to secure it sooner than later as there will not be another opportunity in this area.
 
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