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Asset rich, income poor - what to do?

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  • Asset rich, income poor - what to do?

    I have a large, mostly flat section in urban Auckland which is to be subdivided into 10 sections. Under the PAUP they will all be 'Single House' zone. Currently the zone is 450m2 per section.

    Originally the plan was to sell it to a developer late last year, however the market went quiet. I decided to go for resource consent for a staged subdivision at that point, which has since been granted. As I have no mortgage, I'm able to borrow enough from my bank to cover the first stage.

    The plan was to use the money from the sale of the property to buy investment properties. With all the new rules and rising prices, it's obvious that I won't be able to buy anything with my low, self-employed income. Now that I'm doing the subdivision myself, what's the point in selling empty sections and incurring a bunch of taxes, when I can just build on the sections and keep them.

    My plan is basically:

    1) undertake the first stage of subdivision
    2) put two transportable homes (a 2-bed 'minor dwelling' and 3-bed) on each section using the section as equity
    3) rent out these new properties (current average rents in my area are $400 for a 2-bed house, $500 for a 3-bed house)
    4) based on the value and new income, borrow against the first stage properties to complete the second stage
    5) repeat of steps 1 to 3
    6) sell my owner-occupied dwelling (tax free) on it's section and buy a another personal dwelling elsewhere

    The end result should be 9 sections with 18 investment properties (9 of which are minor dwellings) with mortgages under 50% of the property value, and me in a new house elsewhere with no mortgage.

    Any holes in my plan? Or any other plan I should consider?

    Thanks in advance

  • #2
    If you can do without selling you have a massive win (no tax, no agents fee, no GST), so that should be the first priority if you can.
    This is assuming you can finance everything along the way.
    If not I would be interested in having a look at it.

    Good luck.
    To Sell or Buy Investment Property contact us. 0800 NZ PROPERTY or 021 402990
    www.propertyventures.co.nz
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    • #3
      You should be able to get finance to do this, probably quicker than you think with a good broker. You will want a broker who understands the whole deal and can help you work with 2nd or even 3rd tier lenders to get the homes on there and then refinanced back into a regular bank. My broker was telling me a story about how he did something similar with a leaky home deal, I'll PM you his details.

      Also get independent tax advice regardless.
      Last edited by Nick G; 27-08-2016, 11:57 PM.
      Free online Property Investment Course from iFindProperty, a residential investment property agency.

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      • #4
        Thanks Puff & Nick. I can see a broker is my next step.

        I'll pop back on here as things move along, with a few questions no doubt.

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        • #5
          Only downside I see is concentration risk (lack of any diversification) but having multiple investments in the same place has upsides, too.
          AAT Accounting Services - Property Specialist - [email protected]
          Fixed price fees and quick knowledgeable service for property investors & traders!

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