ok after 4 hardcore months of learning and a few ides that have tweaked into my head over the last few months id like to know what to do, and whether this is the right idea or not. its alot different from what i used to think.
ignore this if u want to just see the facts
i purchased the block of land 2 yrs ago and was going to build... thinking i was doing the right thing so started saving up a bit so i could.
during the next year i worked out all the extra costs of building (shed, tanks, bore, septic system, power etc) were going to cost alot of money
infact more money than it cost to purchase my PPOR one year after the block.
then i though yep done the right thing now.
a year later i found these forums and wow what an eye opener i hadnt done the right thing although i got into property so its better than doing nothing.
so heres what i have and what i think i should do
Currently i have a PPOR 185K
and a block of land 85k
with the equity of both and my borrowing power i can get a loan of about 300k - 320k with some money in the offset as a decent buffer aswell
i was just going to ignore the block but its not making me any money and is limiting my borrowing power
-should i sell it.. knowing it probably wont sell straight away and will lose money on this purchase...
OR
- build on it
rent it out
claim good depreciation etc as its a new house and in ~5 years time move into that
only problem with that is should i build the extra shed etc or hold off until i move into it?
i would then have to build it differently to how i would if i was going to live there. not a big problem
in the mean time im looking for a bigger house so would rent my current house out and rent a house making sure i end up better off after tax
and also any problems with the house will now be tax deductible, eg replacing the hot water system as its been there since 98 so pretty old may be due to stuff up. low water pressure so pipes could probably be done with replacing. and or the pipe from sa water to the meter.
that way the block is then doing something for me rather than nothing
and once the house is built i should get a bit of equity from it
the pros
-this area has pretty low vacancy rates, all the REA keep advertising for more houses wanted to rent and realeastate.com.au only shows a handful of houses for rent
- i know the area
-it turns my block into a tax deductible asset rather than doing nothing
the cons
-the REA dont actively push for decent rent and rent increase so although rental return is probably about 5.2% i could be more around 6% if the agents worked for there landlords
-there would be mild capital growth. not as much as a great picked area but not having the experience to pick the right areas anyway it might be a better choice than what i would choose otherwise.
also should i look at doing a reno on my current PPOR that im looking to rent out or should i wait until its become an ip and do it a few years later just before looking at purchasing another property to gain some more equity? or reno it and then sell it (keeping in mind the 6 year CGT rule as i wont have a ppor) as its an old house and while very good condition for its age it may get costly with maintenance (will have to wait and find out)
if i do it now then i can just plod along and get things done (although i want to move into a bigger house so things can be put to use instead of packed away not getting used because there is no room)
i have what i believe is a low servicing amount so need to try and somehow utilize it the best i can and being young i have a long term approach option
i know alot of you dont read posts that are too big but i hope you could skim read it if u dont choose to read it properly and can offer some valuable information
cheers
ignore this if u want to just see the facts
i purchased the block of land 2 yrs ago and was going to build... thinking i was doing the right thing so started saving up a bit so i could.
during the next year i worked out all the extra costs of building (shed, tanks, bore, septic system, power etc) were going to cost alot of money
infact more money than it cost to purchase my PPOR one year after the block.
then i though yep done the right thing now.
a year later i found these forums and wow what an eye opener i hadnt done the right thing although i got into property so its better than doing nothing.
so heres what i have and what i think i should do
Currently i have a PPOR 185K
and a block of land 85k
with the equity of both and my borrowing power i can get a loan of about 300k - 320k with some money in the offset as a decent buffer aswell
i was just going to ignore the block but its not making me any money and is limiting my borrowing power
-should i sell it.. knowing it probably wont sell straight away and will lose money on this purchase...
OR
- build on it
rent it out
claim good depreciation etc as its a new house and in ~5 years time move into that
only problem with that is should i build the extra shed etc or hold off until i move into it?
i would then have to build it differently to how i would if i was going to live there. not a big problem
in the mean time im looking for a bigger house so would rent my current house out and rent a house making sure i end up better off after tax
and also any problems with the house will now be tax deductible, eg replacing the hot water system as its been there since 98 so pretty old may be due to stuff up. low water pressure so pipes could probably be done with replacing. and or the pipe from sa water to the meter.
that way the block is then doing something for me rather than nothing
and once the house is built i should get a bit of equity from it
the pros
-this area has pretty low vacancy rates, all the REA keep advertising for more houses wanted to rent and realeastate.com.au only shows a handful of houses for rent
- i know the area
-it turns my block into a tax deductible asset rather than doing nothing
the cons
-the REA dont actively push for decent rent and rent increase so although rental return is probably about 5.2% i could be more around 6% if the agents worked for there landlords
-there would be mild capital growth. not as much as a great picked area but not having the experience to pick the right areas anyway it might be a better choice than what i would choose otherwise.
also should i look at doing a reno on my current PPOR that im looking to rent out or should i wait until its become an ip and do it a few years later just before looking at purchasing another property to gain some more equity? or reno it and then sell it (keeping in mind the 6 year CGT rule as i wont have a ppor) as its an old house and while very good condition for its age it may get costly with maintenance (will have to wait and find out)
if i do it now then i can just plod along and get things done (although i want to move into a bigger house so things can be put to use instead of packed away not getting used because there is no room)
i have what i believe is a low servicing amount so need to try and somehow utilize it the best i can and being young i have a long term approach option
i know alot of you dont read posts that are too big but i hope you could skim read it if u dont choose to read it properly and can offer some valuable information
cheers
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