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  1. #1
    Join Date
    Jan 2007
    Location
    Hamilton
    Posts
    19

    Unhappy How to start rennovatin full time

    Hi there,
    we are about to sell our first 'do-er upper' and we are hoping to clear around 100k profit (partly due to 1.5yrs additional capital gain). The aim is to then go straight into another do-up, but my partner then wants to quit his job (yes it really does mean Just Over Broke), and rennovate full time. We will definitely live in the next house we do up, but we will now be looking at much shorter time frames.

    What I would love to hear, is how do we go about getting all the legals sorted? My Dad is a mortgage broker and my mother in law is an accountant, and they are both telling us that we need to live in it for a year, otherwise banks wont lend to us, and IRD will ruin us. But there are property investors all around us who are going it full time and still making money. So who has been advising them?

    Surely I'm not mistaken in thinking that there is a way to legally and profitably do full time rennovating?

    I look forward to your replies. By the way, we are based in Hamilton.

    Thanks very much, Sarah.

  2. #2
    Join Date
    Jul 2005
    Posts
    1,156

    Default

    we need to live in it for a year, otherwise banks wont lend to us, and IRD will ruin us.
    sorry Sarah, this is a very BAD advice. Talk to people who work with traders (even if they are not relatives) and pay for their advice.
    Garth Melville from www.company-solutions.co.nz 0800 47 43 53 is a MUST, tell him The Grocer has recommended you to talk to him.
    If you will not talk to him, banks wont lend to you, and IRD will ruin you.

  3. #3
    Join Date
    Apr 2006
    Posts
    4,018

    Default

    My God, I agree with Ivanhoe (Or should that be "The Grocer"???)

    sdt2 - You will need to pay tax on the profit you clear on a property you renovate and sell, even if you live in for a year (or ten years for that matter), IF your intention on purchase is to sell the property for a profit. See Section CB5 of the Income Tax Act 2004 for this point.

    You mother-in-law might be think that the exclusion in Section CB14 of the ITA2004 applies in your case, seeing as you will be living in that dwelling while renovating it. However, CB14 does not apply where the occupant "has engaged in a regular pattern of acquiring and disposing, or erecting and disposing, of dwellinghouses." As you have already done this once, your second may well be seen to constitute part of a "regular pattern".

    But I'm no accountant - and even if I were, I might not know what I'm talking about (as seems to be the case with your mother-in-law).

    So seek advice from a specialist property accountant, such as Peter Meads, who works with Gather Melville to whom Ivanhoe has referred you.

    Finally - are you a member of the Waikato PIA? If not, and given your ambitions, you probably should be. You'll learn heaps there.

    Paul.

  4. #4
    Join Date
    Nov 2003
    Location
    Auckland
    Posts
    524

    Default

    Quote Originally Posted by SuperDad
    I agree with Ivanhoe (Or should that be "The Grocer"???)
    No, it shouldn't be. Search the forums to find out about "TheGrocer" (highly recommended).

  5. #5
    Join Date
    Jul 2005
    Posts
    1,156

    Default

    Come on, Grant! I was setting up Garth for a suprise (imagine his expression!) and now you spoiled it all!
    BTW, have you listened to THE recording? and where's my (rhymes with napkin) - I finished fizzballs yesterday!
    Last edited by Ivanhoe; 30-01-2007 at 08:57 PM.

  6. #6
    Join Date
    Nov 2003
    Location
    Auckland
    Posts
    524

    Default

    Sorry mate. Thought people could benefit from knowing about the real TheGrocer.

    Quote Originally Posted by Ivanhoe
    BTW, have you listened to THE recording?
    No, not yet. Just finished Keith Cunningham. Wayne Dyer at the moment "How to be an NLP."
    Quote Originally Posted by Ivanhoe
    and where's my (rhymes with napkin)

  7. #7
    Join Date
    Jul 2005
    Posts
    1,156

    Default

    sorry, rhymes with napkinS, how to fist and fell beeral is date

  8. #8
    Join Date
    Jul 2005
    Posts
    1,156

    Default

    Sorry Sarah for highjacking your thread, as a compensation - PM me and we can talk on the phone about do ups taxes and lending.

    Grant, I has just finished listening to Stuart Wilde's Esoteric secret of money, track 2 (you should have it) - I've been blown away, it absolutely rocks - I know you don't get him but give it a go please!

  9. #9
    Join Date
    Oct 2003
    Posts
    3,578

    Default

    Quote Originally Posted by Ivanhoe View Post
    sorry Sarah, this is a very BAD advice. Talk to people who work with traders (even if they are not relatives) and pay for their advice.
    Garth Melville from www.company-solutions.co.nz 0800 47 43 53 is a MUST, tell him The Grocer has recommended you to talk to him.
    If you will not talk to him, banks wont lend to you, and IRD will ruin you.
    The IRD will ruin you if you treat the gain as non taxable. There are exemptions for homes you live in but seems your mother-in-law knows that if you establish a short term pattern, this exemption will not apply.

    If you pay tax on gains, the IRD will be happy. As with the banks, structure it properly, pay your interest and they wont give a shi_

  10. #10
    Join Date
    Jul 2005
    Location
    Christchurch
    Posts
    735

    Default

    Surely I'm not mistaken in thinking that there is a way to legally and profitably do full time rennovating
    Sure by way under valuation, do the reno at super speed and pay tax on the profit after selling. Now find a lender that will lend to you but tell them what you want to do. Tell your father to talk to Kris Pederson at General Finance or some other lender that has their own funds to lend. This money costs more to borrow given the nature and risk factor involved. Your father is right about banks so don't use them. If you want to do this then look at it as a business and that way you only look at the ROI (Return on Investment)
    Sale Price - Overall Costs (Reno costs, Interest, Fees for borrowing money) = Gross Profit - Tax = Net Profit.
    It's quite simple really.
    Oh and yes and go and see other people regarding your structures, finances. Speak to Garth Melville (He seems to be the man the whole site recommends, although myself think their are many out there who can help). You can still use your parents to help you with your mortgage and accounting. Do your Parents invest?? Do you want to do what your parents have done???

    Another idea that you could consider is after renovation, you keep the property and get tenants in. Once you have done any major renovations you should be able to go back to the bank and ask for a top-up. Now initially this might be negatively geared, but hey the money you were going to give to the tax man could be used to cover any shortfall and this is paid from the top up. That way you get to keep the capital gains. That $100K profit could go to supporting you in your first year doing this and you keep the banks happy and after a year you have a track record of doing this and making money and keeping the loans so that you keep the banks happy.

    Just some ideas to throw around.


 

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