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  • Building New To Sell

    I would like to know opinions on building in new subdivisions to sell in 1-2 years.

    I figure I can buy land in a NEW subdivision before its been built up for around $200,000 - here in Hastings / Havelock North - and build a house for around $250,000. This way it seems to me I get it for THE ABSOLUTELY CHEAPEST PRICE. Live in it for a year and do the landscaping perhaps myself, then sell it off very shortly once the area has been built up making a nice capital gain, and do it again in another area.

    Ive been trying to do some research and find out what similar houses were bought for and are being sold for - to work out the profit - but its not that easy for me. Ive been looking at the prices of houses for sale in built up subdivisions, but its hard to know when they were built - hmm, perhaps I need to ring the agent!

    Anyway, is this a sound idea? Is there a reasonable capital gain on brand new properties in their 1st or 2nd year? Only problem I can think of is where to live while its being built.

    Thanks for any help.

  • #2
    I've never been a big fan of building spec houses because of the time they take. you might have money tied up for a couple of years, and it takes that long before you see a profit from it. The market can change a lot in a couple of years.

    I can generate a similar profit from a do-up but in a much shorter time.

    Of course this is just my preference, and there are heaps of people who do spec houses and do very well from it. Each to their own.

    Gerrard

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    • #3
      Mulpsy,

      Have you figured tax into your calculations?

      Paul.

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      • #4
        I haven't even thought about tax - but it isn't a problem unless I became a trader, is it? I'd like to know more tho Paul, perhaps if you could elaborate?

        I intend to live in them for 12-18 months. My way of thinking is that it is the easiest way to make a capital gain in the shortest time! Buying when their is nothing, then selling when it's all built up. Perhaps my theory is wrong.

        The other reason I want to go down this road is that my money isn't trusted to tenants to trash the place. Im in a position now financially, and I want to do something with property that a new home seemed a nice idea.

        Comment


        • #5
          Originally posted by mulpsy
          I would like to know opinions on building in new subdivisions to sell in 1-2 years.
          Originally posted by mulpsy
          I haven't even thought about tax - but it isn't a problem unless I became a trader, is it?
          You are a trader now - intention is to build and sell.
          Might pay to factor the IRD into your calculations.

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          • #6
            hi Mulpsy

            whether you are doing one trade or 100, the minute your intention is to buy and sell and make profit, you will be liable to tax.

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            • #7
              You are the exact person IRD is forming (or have formed) a new audit team to target. Beware.

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              • #8
                Maybe you should consider the market -- the whole market. Sales for all houses, old and new, are already slowing. Two years from now, prices will have either fallen or stagnated. If they stagnate -- then New Zealand will be the last place you will want to build a house. If prices fall -- then there will be some real bargains out there. I say wait and be patient. By summers end we will have an idea on which way the market is heading.
                Erewhon is still erehwon, I don’t see it changing anytime soon.

                http://exnzpat.blogspot.com/

                Comment


                • #9
                  I would be interested to know at what stage of the property game you are at. Are you a seasoned investor with lots of experience or a beginner? Without a doubt most of the horror stories in property has been from people who STARTED with a new construction, involving councils, permits, delays, holding costs and all those unexpected expenses.

                  If you are new to the game building would not be my first preference. It may not be a good initial experience and you may be put off property.

                  You may be best to buy an existing two flat property, live in one and rent out the other. I know you are wary of tenants, but I think tenants may be easier to handle initially than councils.

                  With the IRD it is your INTENTION that will be assessed for tax. You have already clearly stated your intention publicly in this forum.

                  I would perhaps speak to property people who have already “Been there, done that” before you settle on any one strategy.

                  To success
                  Dorien

                  Comment


                  • #10
                    Cheers Dorian and others for the replys.

                    Im new to the property thing, have a lot of equity in my home and a fairly substantial amount of savings - just wanted to do something with it to get ahead. I know someone is gonna ask why I have savings and dont completely OWN my home so I'll beat them to it - personal reasons.

                    My wife is totally against tenants and rentals, would rather leave the money in the bank than trust someone we dont know with it to smash holes in the walls etc.

                    The trader thing - I have owned ( or co-owned with the bank ) 6 houses over the last 15 years. I lived in them, carried out maintenance and some improvements on them and made money when I sold. Im sure when every person buys property, making money when they sell is in the back of their mind. Even if its not the intention, it still can happen! But does this make them a trader? Suppose it comes down to definition - and I know the IRD can do what they want!

                    Anyway, I wanted to know if their was much money in buying a land and house package in a subdivision, doing the little things such as landscaping myself while I live in it, then selling it perhaps 1.5 to 2 years later when the rest of the subdivision is established.

                    Hope that dosn't sound nasty, I have learnt a heap here and really appreciate the opinions of the experienced folks.

                    Comment


                    • #11
                      Firstly, profit is made on purchase, this means you must buy so that you obtain a profit albeit paper at the start.
                      Secondly what you think about comes about i.e. Tenants kicking holes in walls.
                      Thirdly, What is your actual intention?
                      Lets say you realize $50k profit - what then?
                      Money's only good at making more money.
                      IMHO ongoing income is the key not capital profits. You'll spend it and be destined to repeat the strategy for the rest of your life.
                      Consider your intended outcome.

                      Comment


                      • #12
                        Originally posted by Dorien View Post
                        I would be interested to know at what stage of the property game you are at. Are you a seasoned investor with lots of experience or a beginner? Without a doubt most of the horror stories in property has been from people who STARTED with a new construction, involving councils, permits, delays, holding costs and all those unexpected expenses.

                        If you are new to the game building would not be my first preference. It may not be a good initial experience and you may be put off property.

                        You may be best to buy an existing two flat property, live in one and rent out the other. I know you are wary of tenants, but I think tenants may be easier to handle initially than councils.

                        With the IRD it is your INTENTION that will be assessed for tax. You have already clearly stated your intention publicly in this forum.

                        I would perhaps speak to property people who have already “Been there, done that” before you settle on any one strategy.

                        To success
                        Dorien
                        Dorien,

                        Could you please either PM, or phone me 027 4348638.
                        Its not possible for me to PM you, and also I have had no reply when trying to contact anyone through your website.

                        Thanks, Glen.

                        Comment


                        • #13
                          Originally posted by Mulpsy View Post

                          The trader thing - I have owned ( or co-owned with the bank ) 6 houses over the last 15 years. I lived in them, carried out maintenance and some improvements on them and made money when I sold. Im sure when every person buys property, making money when they sell is in the back of their mind. Even if its not the intention, it still can happen! But does this make them a trader? Suppose it comes down to definition - and I know the IRD can do what they want!
                          Sounds like you are a trader to me, in that you've been buying houses and doing them up and selling them for a profit.

                          Even if you've been truely ignorant of the law it is no excuse as far as the IRD are concerned......you should have been paying income tax on the profits you have made.

                          As has been alluded the IRD are spending extra cash (14.6 Mill from memory) to catch people such as yourself. I would suggest that as you are now aware of the error of your ways, you should 'fess up to the IRD and throw yourself at their mercy. Best case, would be that it gets decided you're a great guy for coming forward and nothing further happens...next option I'm pretty sure there is some kind of amnesty running and you'll only be liable to pay the tax you should have paid in the first place without any penalties ......worst case of course is they nail your ass and stick you for the tax you owe + fines + interest.....ouch.

                          I find it hard to belive that you didn't have any idea that you were ripping of the IRD.....but I'll give you the benfit of the doubt.......Now you know DO THE RIGHT THING!!!!!

                          Cheers
                          Spaceman
                          Last edited by spaceman; 15-12-2007, 07:05 PM.

                          Comment


                          • #14
                            I agree with Spaceman. What you are doing would inply you are a trader, and subject to income tax on your profits. I also assume you haven't paid tax so far. If you don't fess up, you better hope the IRD doesn't catch you... Onanother note, building a house isn't all as easy as anyone would initially think. Cheers

                            Comment


                            • #15
                              Originally posted by Mulpsy View Post
                              I would like to know opinions on building in new subdivisions to sell in 1-2 years.

                              I figure I can buy land in a NEW subdivision before its been built up for around $200,000 - here in Hastings / Havelock North - and build a house for around $250,000. This way it seems to me I get it for THE ABSOLUTELY CHEAPEST PRICE. Live in it for a year and do the landscaping perhaps myself, then sell it off very shortly once the area has been built up making a nice capital gain, and do it again in another area.
                              Mulpsy,

                              I am suprised no one has mentioned How2.

                              They advertise on PT or check them out at

                              http://www.how2pm.com


                              Do one of their weekend seminars, you will lean a lot about the process.
                              You will also learn how much you dont know.

                              But if you are interested in developing, I am sure you will come away with a better idea than build, live in and sell every two years

                              Cheers
                              HermanZ

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