Sell the land or sell the house ??

We really need some help in deciding whether to sell the land or the house.

May 2008 - Bought a home to live in (PPOR) for $180 K

Sept 2008 - Bought a land $130 K

With both the purchases, we opted for a loan which has unlimited redraw and repayments but no offset.

Also, both loans are under me and my wife's name.

We did not know the tax deduction implications at that time and hence to save on interest our salaries, bonus,
etc went directly in both loans.

At one stage, the outstanding amounts on home was about 65K and on land it was about 60K.

Now we have bought an established home and settling in late June. This will be our new PPOR.

We need to choose between the following two options:

- Convert the existing PPOR in investment property and sell the land

- Sell the existing PPOR and within 2-3 years build a house on the land and convert it to the investment property.

Which strategy is better from the investment and tax perspective?

Any thoughts and advice will be much appreciated.
 
We need to choose between the following two options:

- Convert the existing PPOR in investment property and sell the land

- Sell the existing PPOR and within 2-3 years build a house on the land and convert it to the investment property.

This is one of those "it depends.." kind of thing. Without knowing more of your situation, I'd pick option 1 for the following reasons:
- IP earns money (ie. CG/ rent/ depreciation/ deductions) while land just costs money (until sold/ built on).
- Don't you have deadline to start building on the land? IP doesn't have this restriction
- Fast forward to 2013 you'd have equity/ LOC from IP which wouldn't happen if you keep the land instead

Hope this helps,
chran
 
you can't do much with vacant land unless you run some sheep:confused:, untill then it will always cost you $$$,
placing a house on it will help. although you might have to find another, $200k but then you will have income and depreciation.
 
If your intention is to eventually build a house on the land then all expenses related to the land are deductible even though no income is being generated for a while , ie 2 or 3 years.

Now you just have to work out which option will give you the best long term return.

Holding land ,then spending 6 months to build a house, maybe longer, however does create an opportunity cost. At least an IP with a house will have income generation.
if you are unaware of these things then you need an accountant more than you think as there are probably a few other things you may be missing
 
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