re numbers is it usually worth holding for 12 months to sell for CapGains benefit???

[mixedup]

Just in general, for someone who is targeting cosmetic renovation projects on homes, is it from financial perspective typically better to hold for 12 months and rent out the renovated home prior to selling to seek the Capital Gains tax benefit that would come into play?

For the sake of the question perhaps assume that you would not have any purchasing power left after buying this first home for reno. So this forces moreso the decision after the reno is completed the situation where you would need to sell to get enough $ to go onto the 2nd reno.

I'm thinking pro/cons might be:
- needing to sell to get the $ towards buying & starting another reno
- but then you could extract the equity increase if you hold for 12 months (assume this still wouldn't be a good as selling re purchasing power on next purchase)
- there would also be risk of deterioration of value via tenants too to consider too no?

 

[matto_]

It would have to depend. Also I am not sure whether cgt would be prime driver in terms of selling timeframe.

 

[Cherry Pro]

Hi MixedUp

Have you considered refinancing instead of selling ? That might be the way to go.

Say you buy at $220, put in $10k for cosmetic renovations and you can get the bank to reval at say $270k. You can then withdraw $45,000 (difference between 90% of 220,000 and 90% of 270,000 - assuming LMI has been paid) which will allow you to get into your next deal.

Best wishes,
Amelia

 

[mixedup]

understand the concept Amelia - so I guess there were really two questions I should have asked...

(1) Waiting to sell for 1 year (doing nothing in the meantime) VS selling straight away, and
(2) Waiting to sell for 1 year VS not selling at all (but extracting equity from 1st property)

 

[Cherry Pro]

Hi

The key question is what are you trying to achieve here ... if it's to extract equity to get into your next deal, you can virtually eat your cake and have it too..with a reval.

Between selling now and selling in a year's time, I would consider the implications of capital gains tax, and if I can ignore the 50% discount that holding for a year will allow. Also, where do you think the market is heading and whether you're up for the holding costs on the property.

 

[BayView]

The other danger with renos is being able to get back more than you put in in terms of dollars.

In the current market/s this may be hard - I don't think many people are predicting much growth over the next 1 or 2 years.

There will be pockets of growth of course, but where? is the trick.

You would also need to buy something a decent amount under-value as well.