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What'€™s the real cost of a dream home?

My wife and I bought a ‘knockdown rebuild’ property 18 months ago to build our dream home. We haven’t been able to sell our current reserve home in this time and have put renters into the property to overcome a tightening cash flow, due to increasing interest rates. Are there any implications that will affect our financial position considering our property prices may not have increased at all over this 18-month period?

I’m not exactly sure what you mean but I reckon you’re talking about capital gain on the knockdown property. If there is no gain then that should not be a problem and anyway you only cop a capital gain issue if you decide to sell the knockdown property.

I presume you will sit and wait for the market to improve, sell your current home where there should be no capital gains tax, if you have only ever lived in the property. Eventually, when you demolish the knockdown property and rebuild to move in, capital gains tax is negated if you move in before six years of renting occurs.

In reality, this sounds like a very lucrative play and I would recommend you talk to a great accountant who understands these kinds of development plays. The small cost of knowing what you don’t know could save you packets.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, March 07, 2012

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