Western Sydney - sell or refinance?

I bought a house in Western Sydney in 2009 for $280k. With recent planned changes to zoning, the house will be sitting on med/high density land very soon. I've been approached by an agent who has an adjacent block (at the rear) about to hit the market and would like to list both together to achieve a higher price. He thinks the property, sold together, would be worth about $800k each. Maybe optimistic, but he did have comparables to back it up. Now to sell, I'd be hit with over $100k of CGT. On the other hand, if I were to refinance, I can't see how a valuer would come anywhere close to $800k. Realistically, more like $400-450k (a 'normal' house price for the area) which would limit my next move.

I am still bullish on prices in this area, but I can't see there being much chance of another big jump like this. More likely just a steady rate of growth. If I were to sell or refinance, I would use the funds to buy similar properties in other areas that are yet to be rezoned.

In a bit of a bind. $100k is a load of cash to be paying in CGT. Thoughts?
 
I would really question the suggestion that it woud go from 450 to 800k. What size block and what suburb?

And ensure you arent being played, aka agent finds two good blocks and then plays the "oh the block behind you is about to list" card with each of you to get a listing, when neither were on the market
 
If you sold you could use the proceeds to pay down non deductible debt and save non deductible interest. You could also pay the tax, pay the stamp duty on a new one and still be ahead. And you could structure things more effectively too.
 
True that bank valuer does not assess so much into development potential, however if there are R3 (medium density) sold in the area, they would happy to take this as comparable. If your agent have provided you information that 800k can be achieved, there must be comparable sales that you can provide to valuer.
 
I would really question the suggestion that it woud go from 450 to 800k. What size block and what suburb?

And ensure you arent being played, aka agent finds two good blocks and then plays the "oh the block behind you is about to list" card with each of you to get a listing, when neither were on the market

It's being rezoned for 6 storey mixed commercial/residential - 21 units by my calculation. 600sqm in Penrith LGA.

Yeah, I'm wary of the agents' bag of tricks.
 
True that bank valuer does not assess so much into development potential, however if there are R3 (medium density) sold in the area, they would happy to take this as comparable. If your agent have provided you information that 800k can be achieved, there must be comparable sales that you can provide to valuer.

This above statement should answer your questions. If the bank values lower than you should be proactive by contacting the bank panel valuer and provide the comparable information of $800K that can be achieved, so problem solved! Whether sold or devalued you should be close enough to the same price!
I would take the money and pay CGT and reinvest, why wait for another opportunity unknown number of years, especially if you are keen to reinvest or you can use that money so it is not sitting idle?
I think you shouldn't concentrate on CGT, rather on the profit you made and how to reinvest it again..... :)
 
This above statement should answer your questions. If the bank values lower than you should be proactive by contacting the bank panel valuer and provide the comparable information of $800K that can be achieved, so problem solved! Whether sold or devalued you should be close enough to the same price!

Great problem to have OP! Personally i'd take the money and run. Paying 100k in tax is brilliant - just means you've made a load.

From my experience of valuations, this (above) is highly unlikely unfortunately. At best, it'd be reported in the valuation report and then I don't think banks would lend out at 800k valuation based on a proposed deal at a certain point in time.

Cheers,
Redom
 
From my experience of valuations, this (above) is highly unlikely unfortunately. At best, it'd be reported in the valuation report and then I don't think banks would lend out at 800k valuation based on a proposed deal at a certain point in time.

Even if there are comparables within 200m?
 
You're in a great position anyway you look at it, it was just $280k 5 years ago and $800k now!

Thanks! Beginners luck maybe. This was my first IP. Had a couple of good ones and a couple of misses. My two in Brissy are only back up to what I bought them for 4 years ago.
 
Even if there are comparables within 200m?

Comparables? The comparable here would be two separate title owners joining together to achieve a valuation 75% than individual titles?

For that 75% premium valuation to come through and be used, you'll need to sell together. Unless there's a legal binding requirement (iron clad) to do this, i doubt banks will accept that. THey'll need the security of the other property and they'll need to know that THEY can sell them together if you failed to meet your repayments - otherwise its not worth 800k to them.

Haven't dealt with this exact scenario before, but on the principles of lending, this is quite unlikely unfortunately.

Cheers,
Redom
 
Comparables? The comparable here would be two separate title owners joining together to achieve a valuation 75% than individual titles?

For that 75% premium valuation to come through and be used, you'll need to sell together. Unless there's a legal binding requirement (iron clad) to do this, i doubt banks will accept that. THey'll need the security of the other property and they'll need to know that THEY can sell them together if you failed to meet your repayments - otherwise its not worth 800k to them.

Haven't dealt with this exact scenario before, but on the principles of lending, this is quite unlikely unfortunately.

Cheers,
Redom

Fair point. I can see where the lenders are coming from. So a more reasonable comparable would then be same zoning / same size land but not sold with a neighbouring property.
 
Great work Happy Camper. Either way you are a winner in my opinion. Why not put it up for sale at a price say $650k. If it sells great if it doesn't who cares. You'll then see if real estate agent is fair dinkum or not.

Can you run me through the capital gain figure of 100k? Not understanding if that is on the 800k sale price. If on 800k wouldn't the capital gain be 520k and therefore the tax be more like 260k minus a few costs so therefore say 200k?
 
Can you run me through the capital gain figure of 100k? Not understanding if that is on the 800k sale price. If on 800k wouldn't the capital gain be 520k and therefore the tax be more like 260k minus a few costs so therefore say 200k?

My knowledge of CGT is extremely basic, so I think my $100k figure could be quite wrong. I only used a basic calculator I found online.
 
My knowledge of CGT is extremely basic, so I think my $100k figure could be quite wrong. I only used a basic calculator I found online.
Someone on here would explain it better than me but my understanding is
Sale Price - $800k
Bought Price - 280k
Capital Gain $520k
Minus Costs eg Renovations, agent fees, solicitor fees, Stamp duty?? say $50k
Capital Gain after Costs $470k
Plus Depreciation claimed say 20k
Capital Gain 490k
Held for more than 12 months so halve it equals 245k.
Now this gets added to your income, say 100k
You will be taxed for that year on 345k
345k times say 40 cents equals 138k Tax.
After all that yes that works out circa 100k as the other 38 was on your income anyway.

Don't mind me. Someone else may be able to show better workings anyway. I just a dumb farmer.
 
Someone on here would explain it better than me but my understanding is
Sale Price - $800k
Bought Price - 280k
Capital Gain $520k
Minus Costs eg Renovations, agent fees, solicitor fees, Stamp duty?? say $50k
Capital Gain after Costs $470k
Plus Depreciation claimed say 20k
Capital Gain 490k
Held for more than 12 months so halve it equals 245k.
Now this gets added to your income, say 100k
You will be taxed for that year on 345k
345k times say 40 cents equals 138k Tax.
After all that yes that works out circa 100k as the other 38 was on your income anyway.

Don't mind me. Someone else may be able to show better workings anyway. I just a dumb farmer.

thats about right, but the tax rate would be 45% on income over $180k and don't forget the medicare levy.
 
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