andysarah

Hello,

We have been in Oz for 4 mths now and have started to think about putting down some permanent roots. Thinking about buying some land, but have no idea how it all works. We won't until our PR comes through (fingers crossed!) but would like to be prepared to proceed as soon as we can.

Our idea at the moment (or mad brainwave, depending on how you look at it!) is to look into buying some land now, then in the future either build on it or sell it to help fund a deposit for another place. The reason i say this is that we are in our rental until at least December and we don't really want to break the lease, rent is pretty reasonable so may stay longer than December. We want to be settled for a bit with the kids etc etc so would be in no rush to build. We also thought this might help to spread the cost of such a big purchase, especially with interest rates as they are and rising costs.

Anyway, is this a reasonable proposal? If we did buy a plot, are there time limits of when you must start your build by?

And can you get the first time buyers grant for land purchase only or do you apply for it once you contract the builder?

Really, how do you do it?!?!?

Cheers

Sarah

Timber Floor Au

Gday Sarah.

In answer to your question, land is always the best deal, IMO.. for profitability. As its a diminshing resource. They have stopped making it !

Regards, time constraints.

hmm..
2 part answer really.

No. You can build when you like.
Yes. If there are covenants, or mortgage on the land, then you may be time constrained.

ie. got to build or start within a specific time frame.

Also if you are an Owner Builde, your permit only last for a set period of time.

Ste

paulhill

Hi Sarah

When do you expect to get your PR? What sort of visa are you on?

Each area has different convenant therefore in some areas you have to finish building in twelve months, your may have to have render finish, colourbond roof etc.

You will not be entitled to the "first time home owners grant" until you start building and until you are a PR.

There is money to be made in purchasing land holding on to it for six/twelve months and selling it on........................... if it was bought at a good price in the first place. Land is coming very expensive near me however I purchased 12 months ago and yes would have made a good $100k profit in six months.

Your proposal sounds great if that is what you want to do, have confidence in yourself and good luck.

Sue

andysarah

Thanks guys, thats helpfull. Its pretty complicated stuff to those of us who are new to this game!

We will be submitting our ENS application very shortly, so who knows how long that will take but we can only be positive it won't be too long

The idea is that if we know what we were doing and have researched it thoroughly before hand we may be able to act fast if/once we have our PR.

Could we buy land on a 457 does anyone know or is that complicated?

Sue - the investment idea is something that is appealing. Buying it sooner rather than later then we can decide what to do with it when we are nearer ready to move again.

Do you just look for land in the same way as property via agents etc?

cheers

Sarah

Timber Floor Au

Best returns in my opinion, are acreage purchases.

Especially in Samford/Dayboro/ even D.BAY !!! if you can get it.

This area, has a lull in prices at the mo... also Burpengary ( beware of flood affected blocks ) and Caboolture.

oops and. Not sure if you can buy land on a 457, you may need FIRB approval, look at their website. Also think it applies only to newly unoccupied, constructed dwellings ( primary residnece )

Jacque

Hi Sarah

As others have said already, check FIRB approval before proceeding with any purchase. Biggest downside to buying land is that you're not receiving any income from it as investment, as opposed to rental income on an existing place. Best of luck and check out the major sites for land and prices
www.realestate.com.au and www.domain.com.au

Buzzy--Bee

...equally there are minimal ongoing costs compared to a house...

Buzzy

Jacque

Whilst I agree that there are costs associated with housing, the extra ongoing holding costs of a house vs land generally only include water usage (as council rates are still payable on vacant land even unimproved) and building insurance.
However, the other upside to purchasing land is that you only pay stamp duty on the land only, as the dwelling you build is exempt.

Keep in mind, though, that you cannot claim the loan interest on the land as a tax deduction if you change your intention to build an IP on it or decide to build your PPOR on it instead, or onsell it: Read p10 of this ATO document for futher clarification: http://www.ato.gov.au/content/downloads/NAT1729_07.pdf

Using a very simple example, if you borrowed $400K to purchase land (non income producing) your wkly payments on an IO loan @ 8% would equate to $615

Compare this to a mortgage of $600K to purchase an existing dwelling on same value land (income producing @ $500 wk rent) your wkly payments on same IO loan @ 8% would equate to $932-$500=$432

I'm not saying don't buy land- but do know the rules beforehand about tax deductions, be realistic about holding costs and choose carefully

windog

But on a 457 you can only buy for a "primary residence", so you would not be able to rent out untill after PR is recieved!

longreach

Buying and selling land is indeed profitable in the right area where demand is greater than supply. We have done what you are proposing.

There are FIRB issues though. Generally speaking, you would need to build within twelve months to gain approval as a temporary resident.

http://www.firb.gov.au/content/_down...0lodgement.pdf

Also, to get through mortgage insurance, you would need 20% deposit
(assuming you are not in certain medical professions)

Mark.

Wol

And, ifyou are lucky enough to live in NSW (That's a joke, BTW), there is land tax to pay on an annual basis in many cases.

Jacque

Hi Wol

A subject dear to my heart (not!) I hate land tax!!! Every year the bills keep rolling in and getting larger, especially now with the new averaging system, which coincided nicely with stagnant values... very inequal system.

NSW currently has a threshold of $359K for investment property, which basically means that you pay a land tax rate of 1.6% (+ $100) on any unimproved land value above this amount. PPOR's are exempt, however, so it only affects IP's and entities such as trusts as they pay land tax from $1, unfortunately (NSW).

To provide you with an example, a small coastal unit I own (in a trust structure) has a land value of $120K so I'm hit up with an annual land tax bill of $2020. That's an extra $39 a week I need to find to subsidize my holding costs on this particular investment- and it's going to increase as land values do.

Land tax is an archaic and outdated system which state govts have been enjoying the increasing coffers of for some time now... once a tax like this is in, it's almost impossible to have removed.

Wol

Ignoring the millions that find their way into thetreasury in land tax, you actually illustrate the problem. You hold land as an "investment": it's legal, and sensible from an individual's point of view but from the community view it's not.

To my mind an "Investment" should be money that is put into plant, machinery or something that makes industry work better - not just a bit of dirt that sits there, waiting until scarcity makes it worth selling.

longreach

That would be capital investment made by a business to make itself more efficient / increase productivity.

An investment to me is placing funds into something that you expect to make a return on. What it is doesn't matter... it's the fact that you expect to make a gain.

I take your point about whats right from the community point of view.

Wol

That's my only point!

Until we as a community realise what's happening with land values and housing affordability, "investment" in land will go on decreasing the ability of people to afford a house.