Cockburn council in Perth, are in the process of re-zoning Coolbellup, and it looks like my block is going from R20 to R40 .
I built a new house last year on the block, but left enough room for the planned future subdivision, as I was aware the area was probably going to be re-zoned. My question is what option below, would you take given my current circumstance:
PPOR, is the new house on the sub-divisible block ? Current value approx 550k, owing 400k. The future rear-block value should be in the region of 225-250k
IP 1 ? Value 600k owing 200k- rents for $375 week - CF+
IP 2 ? Value 750k owing 480k ? rents for $725 week - CF neutral
Current income 110k per annum - two credit cards 13k (no debt owing), no other liabilities.
Option 1:
I estimate the cost of subdividing and build a new house to be around 300k (house for around 250k, subdivision cost up to 50k), with a resale value of 550k to 600k. So a potential profit in the range of 250-300k.
There would be a capital gain tax on that but having had a few bad years on the share market I could offset all of that CGT on my past share losses.
This option would require borrowing 300k - if that is even possible given current debt on existing mortgages?
Option 2:
Subdividing the block, with a cost of 30-50k, sell the block for approx. 225-250k, so potential profit of around 200k ? no new loan required. CGT offset again by capital loss of shares.
With option 1 and 2, I was thinking I should pay down loan on PPOR to reduce my non-deductible debt.
Obviously, looking at these two options the profit seems to favor option 1, if I could get another loan, but I might be missing something?
Option 3:
Borrow 300k and build a new house and rent it out. According to my calculations it should be cash flow positive to the tune of around $300-500 a month depending on the final rent returns, interest rate on loan, build price and subdivision cost.
I built a new house last year on the block, but left enough room for the planned future subdivision, as I was aware the area was probably going to be re-zoned. My question is what option below, would you take given my current circumstance:
PPOR, is the new house on the sub-divisible block ? Current value approx 550k, owing 400k. The future rear-block value should be in the region of 225-250k
IP 1 ? Value 600k owing 200k- rents for $375 week - CF+
IP 2 ? Value 750k owing 480k ? rents for $725 week - CF neutral
Current income 110k per annum - two credit cards 13k (no debt owing), no other liabilities.
Option 1:
I estimate the cost of subdividing and build a new house to be around 300k (house for around 250k, subdivision cost up to 50k), with a resale value of 550k to 600k. So a potential profit in the range of 250-300k.
There would be a capital gain tax on that but having had a few bad years on the share market I could offset all of that CGT on my past share losses.
This option would require borrowing 300k - if that is even possible given current debt on existing mortgages?
Option 2:
Subdividing the block, with a cost of 30-50k, sell the block for approx. 225-250k, so potential profit of around 200k ? no new loan required. CGT offset again by capital loss of shares.
With option 1 and 2, I was thinking I should pay down loan on PPOR to reduce my non-deductible debt.
Obviously, looking at these two options the profit seems to favor option 1, if I could get another loan, but I might be missing something?
Option 3:
Borrow 300k and build a new house and rent it out. According to my calculations it should be cash flow positive to the tune of around $300-500 a month depending on the final rent returns, interest rate on loan, build price and subdivision cost.