I've got some cash to spare. I can also cope with monthly rental less investment property monthly repayment in negative-geared property. Do you think it's a good time to buy, lease, then sub-divide, build and sell? I've heard that since regulations (VIC) have changed, and also due to COVID, it is very hard being a landlord these days. What are your thoughts?
Good Time to Buy Property, Then Lease It, Then Sub-Divide, Build, and Sell?
PeteCo on 01/07/2021 - 22:53
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Who cares about doing the math? Just ask OZBargain where our foremost armchair finance experts can help you make the best investment decisions!
Real estate is hot and getting hotter by the day. Get in the market asap or pay more later.
today is fine, better if it was yesterday, and tomorrow is too late
Do you think it's a good time to buy, lease, then sub-divide, build and sell?
It's not that black and white. Keep in mind if you subdivide, build and sell that it will be all income (no CGT discount) and you'll have GST implications. All which if not considered could go from thinking you made a profitable decision to a very poor one.
Best bet is to chat to an accountant who has experience in property and you'll have a discussion that would answer this question.
Nah, wait until next week.
You can buy interstate too btw to avoid VIC's onerous landlord regulations.
Just wait until all the lockdowns have ceased.
Yes/No/Maybe. If you have spare cash you should definitely invest it, what in no idea. Worst decision would be to hold it in cash.
Put it all on BTC.
Why would anyone rent the front house while another house is being built in the backyard?
Many houses I looked at in last 3 mths were ex rentals that were falling apart… Agents were saying landlords were offloading investments in droves at moment.
YMMV
40 years ago, before the boomers ruined the market…
"Young kids now have it too easy in the housing market. I remember a time when we were paying 15% interest on our home loans…"
"Yeah, wow, 15% on a $25,000 house back then must have been killing you…"I was paying 3.64% when i bought my $240,000 house 3 years ago. Not much difference.
Well 15% of $25000 is $3750, but 3.64% of $240000 is $8736.
Your cost went up tenfold, if your interest rate was 1.5% then I would agree it's "Not much difference".
As you rightly pointed out. Everyone is just making massive repayments of principle. Interest rates don't even feature.
Problem is when a 1% interest rate rise becomes an outsized increase in repayments.
30 years ago, variable rate 17.9% on a $96k mortgage, purchase price $120k, back in the recession we had to have…. it wasn't easy. Couldn't even tell you what the rate was on my first home loan in the 70s which was $26500 but the repayment was $340pm which was a fair chunk of our income at the time.
I was working then for a bank which administered loans on behalf of the NSW Housing Commission. Interest rates for these loans were around 3% which made me quite envious! We had customers who were three - four months in arrears (around $160 LOL) and we had to visit them to chase the arrears. I remember that so many of these people had boats and caravans, colour TVs, things I could only dream of back then, and I wondered why they couldn't afford their $40pm loan repayments but could afford all of these consumer items….
I certainly don't think young kids have it easy now, I'd hate to be starting out now and buying, I think the market has moved way too far out of reach for a single person and even couples can struggle.
Buy Property, Then Lease It, Then Sub-Divide, Build, and Sell
Nobody is going to be leasing when you got heavy equipment plus building on the back.
I'd suggest you work out the numbers and see if it is going to work.
Price + Stamp Duty + Interest + cost to get council approval + cost of subdivision.
What I do know:
Council approval can take 6 months to 1 year
Cost of subdivision is probably $30k
Architectural plans are probably $15k+I've done some research on some of the above. You also need to talk to an accountant about tax implications.
Problem with property is everyone is onto it. People are paying over ask (like 10% is what I've seen) which is your profit!
Old Chinese proverb: the best time to buy, lease, then sub-divide, build and sell was 20 years ago. The second best time is now.
The issue is can you get the build done in time to recoup the cost, at the moment there's widespread shortage of timber, even chep and loscam struggles to spin out enough pallets from the lower grade pinewood.
Build costs are up 20% since covid. Even without that, it’s a tough game to make a profit once you add in builders margin (20%+) plus cost of land if you are in melb or sydney. You really need to be the builder yourself if you want to make real money. I know a lot of experienced developers who have got into strife over last 12 months due to constantly changing market conditions and cost blow outs. You ideally want a big capital buffer to protect yourself so in worst case scenarios you can afford to ride out the storm because timing is everything. Also you never know what crazy shit you will face with council approvals and neighbours. Rarely goes smoothly. If you are prepared for all this, go for it, but just don’t think making money on a project like this is going to be easy. It will cost you a f-load of time and stress.
Just do it, if you can afford it.
No investment is certain, sometimes you win sometimes you lose.