Building a house on block of land bought as Investment

Discussion in 'Development' started by himanshu, 3rd Mar, 2012.

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  1. himanshu

    himanshu Member

    Joined:
    1st Jul, 2015
    Posts:
    8
    Location:
    melbourne
    Hello everyone

    We have got a block a land bought for investment purposes. When we bought it, we thought we will keep it for some more time and then sell it later. Little did we imagine that property market will be like this. Our block is on the market for last 6-9 months and not selling even below the price. We are thinking of building house on it, rent it out for little while and then sell it.

    Are there any tax benefits in doing that. I have heard that we can claim our interest charges also that we have paid so far on loan for buying land. Would appreciate your advice.

    thanks
     
  2. vanessa__

    vanessa__ V J Tait & Associates

    Joined:
    1st Jul, 2015
    Posts:
    23
    Location:
    West Pennant Hills, Sydney, NSW
    Hi

    You really need to speak to an accountant to get this sort of information. A lot depends on if you are negative geared or positive geared. You would need to be negative geared to be able to claim interest and other expenses. However that would mean that you will be paying out of your pocket towards the mortgage and expenses for the property. I would suggest you have a good chat to your accountant to see if it is worth your while or you might be better to sit on the land and wait.

    I would also recommend you speak to the local real estate agents and ascertain their thoughts on building a house and renting it out, what is the rental market in that area like, are you going to get the return you want/need etc to make it worthwhile. Also remember if you are building that will take up to 6 months sometimes more to be ready to move into. What is the rental market going to be like then.

    Alternatively it might be an idea to approach some builders and see if they want to take on the land themselves or alternatively they may agree to build a spec house and either rent back from you as an exhibition house or agree to do a house and land package for sale where a purchaser knows that all the approvals are done and they just have to pick colours.

    Good luck.