Forum Replies Created
Cashwalton,
It seems from your posts that you intend to act as "project manager" for your project – and this is a good way to save money – but also means you need to know what you are doing.
In order to know what you are doing you need not understand every detail of every part of the project, but you must understand the process so that you don't get in your own way! I suggest generating a project plan and then assessing exactly what you will personally attend to within the project plan, this should also help to avoid over-committing and potentially slowing down your own project.
The best way to understand the process is to devise a project plan and timeline so that you can monitor progress and ensure that each step is completed in due course. You are also talking about a relatively large amount of cash for which you are ultimately responsible, and again, the project plan is your key to staying on or close to budget.
Hi Teds01,
You can do one of two things to find a definitive answer:
1. Go to the town planning department of your local council and ask them.
2. Have an architect or planner assess the proposal for you.The town planners are on staff to answer questions, however, they don't always give the straightest answer so if your proposal is "borderline" in their opinion, or if you feel they are not being 100% straight with you seek a private planner's opinion.
Plenty can be done with a 10m wide allotment!
Get in touch with a planner or architect and assess your options.
Ryan seems to know his stuff, maybe he can help?Hi Frugal,
Let's get straight to the nitty gritty here!
If the works you are proposing are not structural and do not exceed $12,000 in value, you will generally not require building approval for the works.
However, if you are changing the use of the building (in this case by adding a bedroom) then you may be required to obtain planning approval for the works. This may also have a "knock on" effect with car parking etc.
I think you're quite right in suggesting it's your right to divide the spaces as you see fit, and Ryan also makes a good point about the legality of the works down the track. So, if the works are easily and cheaply done, they will be easily and cheaply undone if required.
Hi Cath,
Good luck with your search for the property that's right for you. I have heard good and bad about buyer's agents, and would suggest that regardless of whether you use one or not, don't take short cuts on doing your own research to establish what you want and where you want it. This will ultimately make the job easier.
I sourced several properties for a buyer last year and the process was made much simpler by having a clearly defined brief. This meant I was able to find the right properties in the right locations for the right price.
YoungInvestor wrote:Hi Christian,Have you had any experience with banks in terms of pre-sales to related entities?
Generally pre-sales will only be classified as such if you have 10% cash deposits and the sales are to non-related parties.
Now there are of course variations to this, but these terms will give you the least problems with your financier.
Yes I have. For the financiers it's a simple risk control. I believe you need to consider these "related party" transactions as transactions between entities. Establish the entities to serve their relevant purposes, and allow them the legal autonomy to do so.
In terms of cash deposits, I have purchased with 5% deposit (and recommend this to any investor as a matter of course) and would accept this as commercial between entities. In the end, you're effectively paying yourself the deposit, and you may be kind enough to allow yourself (as the vendor) to release the deposit via a S27 agreement as well :. the deposit amount becomes immaterial….having said all that, you still need the cash to engineer these positions.
propertyboy wrote:Looking at purchasing a 2 bedroom terrace home.I know that they have heritage overlays on them
But, are there any hidden costs/things I should be looking at that the real estate agent may not tell me about?
Is it true that all though there are no body corporate fees you have to paint the front fence and facade every year to meet the required street character?
Does this heritage overlay affect the value in any way? Should I just purchase a normal house instead? Or are these good investments?
The heritage overlay probably affects the value in two ways: 1, It protects the local character, and so increases the value of the property, but 2, it also means the pool of potential purchasers is smaller because they have concerns just like those you have raised!
Just because there's a heritage overlay doesn't mean you can't extend or otherwise change the property – it just requires a TPP to do so.
You'll get plenty of feedback on this topic!
For me, West Heidelberg and Seaford.
There's also plenty of other great posts on this elsewhere on the forum.propertyboy wrote:I am looking to purchase a warehouse in West Melbourne to live in for residential purposes.What is the deal with these properties? What should I be looking out for? What are the disadvantages/advantages?
1. Could there be contamination issues?
2. Title issues?
3. Heritage overlays? Can you demolish and build a new house on top?
4.Crime/unsafe environment???????????
There's unlikely to be contamination issues that haven't been addressed in the planning or building process assuming the warehouse shells are being sold for residential purposes.
Same could be said of the title issues, but the BC could have considerable maintenance costs to deal with.
Building a house "on top" would mean you would need to "own" the property in title. You can determine this by having a look at the strata boundaries on the plan of sub-division.
As for crime…West Melbourne ain't what it used to be!
Good luck.
Given that the PPOR is CGT exempt, and the goal you've outlined is singular and clear, I reckon I would think about a 7 year plan to purchase, upgrade (renovate) and sell every 1.5 – 2 years. Buying and selling costs could be a burden, but at least it would provide a simple path. A more complex twist might be to do something similar, but instead of just renovating, perhaps developing on a small scale with each property….this may even allow the retention of one or two IPs as a "bonus"! BTW, I like your topic, and look forward to seeing how others might attack this sort of goal.
There's nothing wrong with shopping a few quotes. There are different types of valuations, the most common (and the most expensive) is a valuation for mortgage purposes – this is what a bank relies on.
When buying off plan you are ultimately relying on the strength of the documentation to describe exactly what you are buying. So the first piece of advice is to understand that documentation. If you're not familiar with plans, elevations, specifications and the like then find someone who will look over them for you and explain anything you may not be sure about. The second issue is understanding your contractual obligations and those of the developer/vendor. Things like completion dates, settlement dates and damages clauses need to be understood.
Assuming you can gain an adequate understanding of what you are buying, for how much, and when – in my opinion there are advantages in buying off the plan. For example, there is usually a smaller pool of purchasers early on, so perhaps there's less competition. Also you should expect to save on stamp duty as the duty is calculated on the value of the "land and improvements" at the time of purchase. You also have the competitive advantage of a "motivated vendor" as the developer will often be keen to get the first pre-sales underway so they can finance the project.
therock1 wrote:What CGT will i be up for if i subdivide and sell off the vacant block off the land but still keep the existing IP on the other block? (QLD)
I'm not an accountant, however I have done this myself and found it's rarely that simple, but all else equal you should pay CGT on the value of the land at the time of sale. The value of the land should be determined as "fair market value" for land of that size in that area.
In my experience there is nothing precluding you from getting your own valuation done. I have found that if you prepare properly researched, well presented "valuation support" documentation your valuer will be happy to use this as a reference. Make sure of course that the valuer you engage prepares a "valuation for mortgage purposes" and that they are a board valuer for the bank you are using for funding.
Aspiring Developer,
As others have already mentioned, the category of "property developer" is a trigger for your banker to increase shading because of the perceived risks involved in the field. They're all just terms – semantics I guess – but "investor" seems to strike a more positive note than "speculator" or "developer" right now! This, of course, may change in the future.
My recent personal experience has shown me that it's a good idea to go into discussions with the bank as an investor. In order to do this convincingly, investment needs to be your primary objective. I also believe that separating development and investment is good business planning. This can be done by underwriting your own developments as an investor. In doing so you should perhaps be transparent with your lender. It can work like this:
Your development entity purchases the property with the intention of developing for a profit. This is nothing more or less than a business proposition (that your lender will probably see as high risk) and requires a business plan.
In offsetting some of the perceived risk, you (or your investment entity) agrees to underwrite the development by buying all or part of the finished product. In this way, you can use your equity in other investments to help secure the proposed purchases and in doing so provide pre-sales that will diminish the risk for your development entity.
This should mean that you do not secure the development project directly to your investments. This is good for you, and good for the financier. The development proposal should stand up on its own, as should the investment proposition.
dnh83 wrote:Hi All,
Just wondering if anyone can recommend some decent Property Development/Sub-Division Software ??
I want to be able to design Site Plans, put together Block Layout Proposals, etc as well as do the internal designs for houses needing renovations and also design new dwellings from scratch…
I know its a bit of an ask, especially given I'm keen to try one that is either free or doesn't cost an arm and a leg to buy…
I'm happy to work my way around a program, just want to know what does (or doesn't) work for people.
Cheers,
Darren
Darren,
I'm not being a smart-arse here, but this is my advice: Use a pen and paper! Use transparencies to fine-tune your concepts.
This is what I do for early stage concepts and it's quicker, easier, more creative and probably more engaging.
Once you've got through the conceptual stuff your best bet is probably a cheapy CAD program.Thanks for the heads up!
GRM,
This sounds like a very inexpensive property to support that sort of density. You need to get some very basic, high level planning advice as to the feasibility of your proposed project – particularly in terms of the likelihood of the Municipal TP department getting behind your project. Great advice from Scott and DWolfe, understand what it is you want to do, what the numbers are, get your idea in front of the local town planners, then work on the process.
There are also other considerations as to the suitability of the property type you are proposing, and less may indeed be more! Is there demand for the type of project you envision? All that said, get some advice and press on.
sinkers wrote:Hi all we own our own home outright( no finance/ yea) in Camberwell Vic and want to develop two townhouses on the block,We are at the stage of designing the townhouses and are concerned about the TAX implications on the development.At what stage do we loose our tax free status on the land, after we have demolished the existing house that we live in or when we subdivide the block into 2.How is the development taxed after we sell one of the property's / we will live in the other for 12 months. thanks SinkersHi Sinkers,
I am certainly not a tax expert or accountant so I can only speak from my own personal experience. It's my understanding that the basics of what you are proposing is that you will be creating two properties (and titles) from what was once one title.
With this in mind, there needs to be a value ascribed to the land both before and after sub-division. This is important later. It seems you are proposing to develop two new dwellings, and sell both – although you intend to live in one for a year. If your intention is to retain one of the properties as your PPOR then this should remain CGT exempt.
The structuring then becomes important. Thinking in entity terms, you are proposing to sell half of the land and keep the other half. Theoretically, half of the land can be sold in accordance with the proposed plan of sub-division and contingent upon the registration of the sub-division.
So I would suggest you need to be clear about the intentions, and thus your strategy, and then seek property accounting advice to ensure your intentions are satisfied. If you are sub-dividing and selling for profit then the ATO would probably determine you are not investing but actually trading – you are a business. This then means there are also GST issues to contend with, along with reporting requirements. There are well established benchmarks for this and I have also found lots of useful advice on the ATO web-site.
What you are proposing is not particularly unusual or complex, but it is worthy of full consideration and quality tax advice.
Good luck with your project.
Hi Bronte (and Dave),
This is a broad question!
There are of course many, many variables, some pitfalls to avoid, and potentially significant financial rewards.
Here are (some of) the things you must do:
1. Assess your property and idea (or have someone assess it for you) to determine if you're barking up the right tree!
2. Create a strategy for your proposal – however simple it may be.
3. Put together some concepts you can use in explaining your proposal to council and other stakeholders (for example, to get early support from your banker)
4. Turn these concepts into a formal application for a TPP or DA.
5. Assuming your application is ultimately successful, turn this information into the technical information (working drawings) required for a building permit and for the builder to work from.
6. Build (and sub-divide) according to these plans.
7. Realise (sell) the property, or move the tenants in.This is a simplified summary of what's involved.
Best of luck in your endeavours.
