Building A Duplex In Wa

[Paradoxx]

Hey everyone

I'm looking into going halves with Mum n Dad on a duplex block and two stand-alone houses on it. I have looked at the land and building costs and as far as the amount I can borrow in my current situation, this looks like an excellent way for my partner and I to get into the market, which if we tried to do alone is seemingly impossible without a deposit or decent dual incomes.

The plan is as I said to get the duplex block, around 700 sq m, build two similar dwellings on it, sell one of them and put the profit into the one we keep, knocking the mortgage down considerably and making it very manageable.

I'm after any information from people who are in the know with sub-dividing, and any hurdles or unexpected costs or difficulties we need to go through. I have looked up planning departmental fees, which seem quite reasonable at under a grand for the whole application process. Are there any special conditions for the land? The land I am looking at is zoned R30 which is suitable for duplex development.

For anyone looking at this sort of thing at the moment (like shared equity with parents or whatever) how's the progress going?

Cheers

Steve

[nang3]

1 word - CapitalGainsTaxMightBeABitch

otherwise still a good idea and a good way to get a foothold - just make sure the people you sell the other half to are decent and not likely to cause probs, might even pay to rent it instead seeing as what people are charging for rent nowadays!!

[edit] you should also be able to avoid mortgage insurance by using the equity in your oldies house, assuming they are using that equity to finance their half.. because FOOK paying mortgage insurance, second only to stamp duty in closeness to dumping on and then setting fire to your cash!!!!! mother govt 's

Edited 27/02/07 04:41 AM by nang3

[crans]

CGT will eat away alot of your profits. There are 2 ways to get around it.

rent the other house out for a year this will lower the amount of tax u have to pay.

Build 1 house. live in it for atleast 1 year. Sell it.

With the profits build the other house.

Also if you are buying land in a development make sure u get a corner block and that you are actually allowed to sub divide it.

Where are you looking at buying the land?

About the only affordable place now days if Byford and even that has become really expensive. I got my block there before prices went up

[XR06T]

if you own an investment for 18+ months there is a 50% CGT exemption, so that's the way to go if you are building them both at once..

keep one for 18 months before selling

[markxr6t]

50% CGT discount applies after 12 months. There is no CGT on your Principal Place of residence full stop (you don't have to live in it for a year).

At the end of the day CGT is actually the lowest form of "income tax" you can pay ie 50% of profits are added onto you income for that year. If its in 2 names its split in half again so its most likely you'll stay within the 30% bracket.

R30 zoning on 750 sq metres means you could comfortably go for 2 green title blocks (ie avoid strata titles, strata survey or "duplex").

Unless you're a builder here's what I'd do:

1. Buy the block

2. Subdivide into 2 green titles ($15-$40k, depending on location of sewer connection).

3. Sell 1 green title block - ideally 1 year after it was on its own title. Perth's market is driven by an artificial land shortage. Everyone wants to build a new house on their own block - hence vacant land sells at a premium.

4. Build on the other one to live in (which will remain CGT exempt) or sell it as well, quit your debt and have a healthy deposit to buy elsewhere.

A rough rule of thumb (and you'll find that most "duplex" blocks are priced accordingly) is that you'll make $50k out of subdivision and little or no more if you build a house on it (unless you're a builder).

I've done it a few times, if you want me to show you the process I'm happy to.

Mark

[ZMAN]

  XR06T said:

if you own an investment for 18+ months there is a 50% CGT exemption, so that's the way to go if you are building them both at once..

keep one for 18 months before selling

←

Mark you just saved me from typing up what you just did. I just recently did one and Mark's outline is pretty much spot on.

[crans]

I would have love to have done this but I couldnt find a big enough block that I could afford. Turned out I did the right thing anyway I waited nearly a year for titles and in that time the land has nearly doubled in price

Edited 27/02/07 06:55 AM by crans

[XR06T]

haha yea, im in the same boat crans, paid 129k for a block exaactly a yr ago

[crans]

where abouts did u get the block?

[Paradoxx]

The blocks are already set up for duplex (they are sold as duplex blocks, but its up to the owner whether or not they put a duplex on it).

CGT will not be a problem at our end as we will be living in it. Mum and dad also have a very good accountant and have worked out CGT for their current investment property and it's a damn sight cheaper than they were expecting.

Looking at figures though, lets assume the block is around 300k. A couple of houses on there should be about 120k each plus any changes we want (one might be better fitted than the other one, just for our own comforts).

Max things out at a 550k outlay - split in two. One house will easily sell for 410+ (depending on market about a year from now), mum and dad take their 225 plus CGT for their sale amount, leftover goes onto our own mortgage and we can finish it off, travel, re-invest, renew vehicles etc... set up a lot better than we are now! The news so far from some contacts that mum n dad have is good, and this is the start of a lot of learning and headaches.

Thanks for the input guys