Redevelopment investment structure.

[always_learning]

From: Always Learning


Hypothetical:<p>
I buy a property for $500K with dual development potential. Old house is rehabilitated, land is subdivided and new house is build for $250K.
<p> Total spend $750K.
<p>
New house is worth $450K, rehabilitated house $400;
<p>Total value $850K.
<p>Can I, or should I say how can I structure it so that I can sell the new house $450K and roll the profits into the existing house without paying tax on the profits? (Meaning I have a $400K house that cost me $300K).
<p>"Too easy" you say! If that is too easy, then my next question is: How do I make the same $100K virtual "profit", but structure it so I can claim a $50K loss to my taxable income?
<p>
<hr width="50%" color="pink">
<ul>

<li> Unless you change how you are, you'll always have what you've got.
<li> To have more than you've got, become more than you are.

</ul>

 

[Jakk]

Reply: 1
From: Jakk Bass - The SLUM LORD


G'Day A.L.

When you find out, can you please let me know.

regards

Jakk the Slum Lord

 

[NigelW]

Reply: 2
From: Nigel W


Always

I know you're just giving some nominal figures...but remember you may need to factor in GST following the subdivision and look at the applicability of the margin scheme...

Cheers
N.

 

[F.P]

Reply: 3
From: F P


You paid too much for the land.....
Your looking at a return of around 13% before CGT. Most real developers wouldn't touch it unless they were making 30 to 40%.
After CGT your return is around 6-7%. It's a lot of risk to outlay $750,000 for $50,000.

You would be better off purchasing a few rental properties rather than develop.

Other costs to factor when developing:
- planning/design
- timeline/budget blowouts
- agency fees
- holding costs
etc....

Anyway..in answer to your question, the tax dept. will consider that the profit you make is apportioned across both dwellings.

An option could be to build both, sell one, live in one for 12 months, however the Tax office will still apportion costs but your return is greater. Also, just check the Part 4A of the Tax Act. if you are doing all of this to avoid tax then it's a no no.....

Speak to you Accountant...

 

[always_learning]

Reply: 3.1
From: Always Learning


It's just a hypothetical, if/when I really get serious about it, I would be talking with my accountant to review the figures. Actually if I think about it I need 3 people to help.
<ul>
<li>Someone to get the finance/loans organized.
<li> A accountant to recommend the best way to structure the project and validate the value.
<li> Someone who has done it in real life to walk me through the mine field of council regulations, dealing with builders and tradespeople, etc.
</ul>
Honestly I am just considering fundamental questions like : "Knowing what I know know, how do I maximize my control of high quality growth potential IP's whilst minimizing my financial and time costs?" Control as much as possible, for the least amount as possible, with the least risk as possible!
<p>
How do I convert $600K of equity and a well paid job into controlling $8M of property yielding a nett 3% +cashflow in 10 years or less? These are the questions/goals running through my mind!
<p>
<hr width="50%" color="pink">
<ul>

<li> Unless you change how you are, you'll always have what you've got.
<li> To have more than you've got, become more than you are.

</ul>