building houses

Hi All,

Could anybody share with me their experiences with regards to building a new home on vacant land and then on selling the finished product, would you say it was worthwhile financially and what tips can you possibly offer?

Regards,

Alastair

the market has changed since i did my last one but you should still make a profit, I made $120,000 in 10 months, with a $250,000 outlay.

at the moment, if I did it again, it would cost me $310,000 and I would only make $80,000.

the profit is definately in it, but so are the headaches, with everybody, from the word go, the draftsman, the builder, the plumber, the electrician, everyone.

if you don't mind a constant headache the profit is definately there.

Just dont forget if the intention is to build for a profit, you are not entitled to the CGT reduction even if you hold the land for more than 12 months and you are also liable for GST as it is the sale of a new premises. So when you work out your profit margin, dont forget to factor this in. It was mentioned in one of the API magazines that it is possible not to make a profit on a new building but still have to pay GST. It should go without saying that you should check with your accountant to verify this.

I dont want to dissuade you, but I have witnessed another who made a decision without factoring this in - and it came back to bite him in the bum so to speak.

Mick

thank you for the feedback, Ruk, can  you please elaborate on  your checklist  with regards to the purchase of the land ie. regional areas,  new estates, established areas etc. and what type of dwelling you would generally construct?

Best regards,

Alastair

Now
land is $130,000
4 br rendered block house around 200m2 = $170,000
Legals + stamp duty $ 10,000
Sale price $ 400,000
Agent $ 10,000
all amounts are approx. but you get the idea.

even if you only make $ 10,000, it's still better than nothing, and you get a #*%@ load of experience, so you will do better on the next one.

RUK

I've done this twice now and done pretty well. I have done both as PPoR and both times its taken about 24months from to find/build/move in/landscape/unload. I'm just about to unload my second and from recent sales in our immediate area for the same type of house we're looking at about tax free profit of over $100k. Its not great compared to some others and considering that its coming off an $660k investment the % return aint fantastic, but an extra $50kpa tax free is not to be sneezed at.
Land value increased by about $40k in the time we've had the current property

Its pretty hard to find land in sydney for <$300k
I've already started looking for the next one......5 acres on the Hawkesbury River mmmm I can see it now.

I've bought vacant land and built on it but have decided not to sell.  I made about $70,000 equity in each case.  Fortunately I bought the land just before the end of our current boom so can't guarantee that I'll be successful again.  I'm currently building another house in Carseldine, Brisbane and am fairly confident but not positive that I'll be okay again.

As long as you can cope with the holding charges such as interest, rates, government charges then you should be able to manufacture wealth in this current environment.  Most people are too lazy to build so why not do it yourself and reap the rewards?

My advice (as a builder) is to make sure your build costs are locked in first.   Don't assume that just because the project home builders advertise in the papers for new homes from $700/m2 that you will be able to build for that price.  Remember, they build 2000+ per year and are building the closest thing we know to mass production in this industry.

Rule of thumb, custom made one only buildings will be 40% - 60% more expensive per m2 than what you see in the newspapers for standard designs.   What this means in reality is a build price of between $1100 - $1500 per m2 incl GST - depending on what level of finish you are after.

Hope that helps - investing is a numbers game and the numbers don't lie!

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