Stamp Duty Concessions

First home buyers are offered incentives to purchase property by getting stamp duty relief. The State Government of Victoria offers these incentives to give first home buyers and the building industry a boost. It is in the interests of the State that there be a vibrant and healthy building industry.

If a contract for the purchase of residential property ( a house )is after 1 July 2017 and the property value is under $600,000 then the property will be exempt from stamp duty provided certain conditions are met.

If the property value is between $600,000 and $700,000 then you get a concession.

You must qualify for the FHOG (The first Home Owners Grant) to get this concession.

so this is great news for a first home owner who wishes to build a brand new house to live in.

The basic FHOG requirements , among other things, are that you have not previously held an interest in a place of residence that you lived in elsewhere in Australia and that you have not previously received the FHOG.

Working from home

Working from home has been our method of operation for a number of years now. We have been stable in that because we own our place and there is no need to move about at the whim of a landlord wanting to change the purpose of their investment. Property owners can change the purpose of their investment frequently which then involves tenants having to move on. Investors can rent ,air bnb,move back in to the place themselves,rent the place to a freind or relative and this leaves you the renter out in the cold looking for nesw premises.

So owning our own place has kept us operating from the same place now for about four years and we are not planning to move any time soon. If we did plan to move somewhere say by building a new place more suited to our business we would build based on the purpose for which we are going to use the house . So we would build in a front office for people to meet and sign documents at the front. We would want to be around public transport schools and places of interest such as parks and shopping centers and cinemas.

People who are renting can sometimes be disadvantaged if they are setting up a studio because they can be asked to move on with notice which can disrupt the flow of work and people coming to and from the house.

BUILDING INDUSTRY BOOST

I wrote in an earlier blog that the building industry is an important industry to the Australian economy. With the economy suffering at the moment it would not be surprising to hear of announcements around building incentives for people wishing to purchase new homes. So one such announcement that has been put up but not finally agreed upon is a $50000 cash grant for new home builders. This kind of announcement is not surprising given the environment that we are now living in. If one were wishing to take advantage of such a proposal the important point would be to prepare yourself by say getting together a deposit . There are a few sources which could be helpful in that regard for example government stimulus payments and early withdrawal of super.

Being prepared is important because if this causes an increase in building orders it may be better to be at the front of the queue.

First Time Investors

Three big issues for first time investors are depreciation and tax,getting the property finished and getting it rented.

First time investors are usually already a good way down the track to having paid off their first home loan for the property they live in. They reach a stage where they want to take the next step toward a retirement nest egg or maybe they just want to try their hand at residential property investment.In this scenario there are some great reasons you may consider a new build. A brand new home as opposed to a second hand property allows you to claim depreciation as a non cash item against other income you earn from wages. You are permitted to depreciate the asset each year by very specific amounts. To work out your depreciation you need the report of a quantity surveyor who will present that report to your accountant. This can reduce your annual tax bill.The taxation benefits of investing in residential property have been much publicized and is often a major motivator for people to take this investment opportunity.

Much of the anxiety around the first investment property will be around getting the property finished . All fences,driveways ,letter boxes,fixed antenae ,solar panels,landscaping ,driveays paths all need to be installed and completed so a prospective tenant can move straight in. You cannot have a tenant moving into an unfinished property. This must be properly planned from the very beginning. This is a major focus of what we do is to make sure all of this is done as soon as is practicable around the time hand over of the property takes place.

Finally getting the property rented is another major issue that need sto be organised well and truly ahead of time. We organise a professional property manager who tgwetrs a rea estate photographer to market the property with professional phpotographs an d then manages the rental for the owner. This elimimnates alot of the first time nerves and juncertainty. We recommend using a professional manager the first time you rent property because as a novice in this area there are many mistakes you can make.

FIRST HOME LOAN DEPOSIT SCHEME

Running at the moment is an exceptionally good offer for first home buyers. This is a federal government initiative.

This is a limited offer. There are a limited number of applications being approved up to the end of the financial year ended in June 2020.

Next financial year another 10000 approvals will be made. Because this is a limited offer the earlier one gets in for the offer the better the chance they will be approved.

This offer allows you to get into a loan with a 5 percent deposit without LMI insurance. LMI insurance stands for Loan Mortgage Insurance. With any loan where the buyer has less than a 20 percent deposit it is a requirement of the big banks that LMI insurance is taken out by the buyer. LMI is usually a large upfront expense.

However with this offer the government guarantees the remaining 15 percent of the deposit so that you do not need the LMI insurance. This is a terrific leg up for a first home buyer.

Usually having to come up with LMI insurance is a huge hurdle.

Your broker or bank will be aware of this application and it is well worth discussing it with them.

Regional Victoria First Home Owner Grant – 30 June 2020

In then housing industry this grant is known as the FHOG.

The $20,000 grant for new builds applies for contracts signed before 30 June 2020. If you are not buying in regional Victoria the grant is half full the amount $10,000.Its an incentive to get people to build new and get the economy going. Its also good for people who really would rather build a brand new home the first time around.

There are some criteria to meet. In essence you or your partner do not get the grant if you previously owned a place that you lived in or if you previously received the FHOG. Its a one time helping hand.

If you qualify for the FHOG you may also be able to get the stamp duty concession for first home buyers under $600000.

Quite apart from financial incentives you get to move into a brand new home and there are great reasons to go for a new build. Over time house depreciate, bathrooms date ,kitchens need updating . With a new build you need not worry about that for 10 years.

Deborah Macnamara (Y S New Builds)

This is the first of many news items that will be posted to this website on a regular basis. It is my intention to write about issues that are presenting themselves in the new build market .

I am a consultant on the process of building your new home and help people through the process. I find the land ,I look at plans with a client ,have meetings with the finance people and walk through the process with the client from start to finish.

There are issues that arise about how the deal is financed and structured which are legal issues. There are contracts and conveyancing processes involved here. I have a law firm that I work with who deals with these aspects. They will answer any questions around legal aspects of the transaction. I work closely with the legal firm.

There are also practical issues as to the purpose of the build the idea of beginning with the end in mind is important here. A build project for an investor is going to look different to a residential owner occupier project. There are practical issues around handover and completion . Arranging for quantity surveyors and property managers to rent the property are other issues. Dealing with trades if some of the finish of the project is handled separately to the chosen builder.

Some people consult with me about a property proposal they have been shown or have initiated by themselves for a new build or even for the purchase of a second hand property . I am happy to talk to them and they are simply looking to run a proposal past me. I like add some value to their lives even if there is no transaction that happens between me and them.

There are many practical issues that arise just by looking at an overall deal that from experience you can spot at an early stage. You might see someone buying in a company name which might appear wrong under many criteria and the thought might be to send you back to your adviser if you have an adviser to check that is the correct structure. I do not assume always that the structure was prepared by an adviser. It has not been unknown for people to organise their own structures online but when it comes to getting involved with a structure such as a company and a property a tax professional needs to look at the set up.

It is my goal to be a go to person on matters relating to choosing a new build to live in or to invest in.