Forum Replies Created
subdividing the land could cost around $10k, but if the original house is in good condition you could sell it for $20k (they remove) and that would cover your costs. For a 16m frontage it would be to tight to have 2 skinny blocks, so you could battle axe them (have the second house at the rear), or build a duplex with the front of the houses facing the right or left of the block.
if the house is no good (or cant be removed) and no one wants to buy it, it could cost $10k to knock it down, but some people around might even knock it down for free if they can have all the pieces of the house. Get a quote.
find a builder, get plans that will fit your block, get a quote, get an evaluation off the plans to see the profit (or loss) margin to see if it is worth while doing, get your finance and go go go…[medieval] keep chargin.
Seano
posative cashflow is great and all, but every now and then we need to take a practicle look at things. If you can buy a house for $270k and it would be worth $310k giving you a $40k profit, I couldn’t buy it fast enough. $40k is a years income for some and is hard to save that money from a job. I think you could buy it move in for the reqired period of time and sell it. You could put the money into twice the posative cashflow properties with the tax free profits, or pay off more of your morgage and use the equity. You might want to get a building inspection and check the house has indemnity insurance just to be safe. or you could even flip it (on sell it before it settles) but you’ll be taxed. If you don’t want it, send me the details. Good luck.
Seano
looks like we opened up a can of worms!! we could almost publish a book from all this info. awsome.
Seano
your getting some answers which is great. what is PMing- I am new to this site. Everyone seems to think you have a great deal, which is comforting and should give you heaps of confidance. drop us an email some time buddy
Seano
Wow I might try to walk behind you to catch all the money fallng out your pockets(joking). sounds like you got most of the info you need, where is your block located, and how much are you going to sell them for? That 3 stage system is an awsome idea, and if your mates buy some at whole sale, it will pay for the rest of your development costs, create demand and those who get them at wholesale could make some great capital gains in the next stages.
If you dont get info from anyone here on off the plan contracts, try a few real estate agents who have sold off the plan properties. They would have all the contracts you need hopfully. Run everything by your lawyer before you sign anything just to be safe.
so what will be your most profitable subdivision. I am looking at a 5000 m sq block at the moment. It could fit 6 blocks on it but I would sell them at a loss, but if I split into 3 I could make $30000 off each one. Just depents if council approves what I want(unfotunatly).
any way I hope you get some more answers Greg, sound like your doing great.
rock on buddy
Seano
gday Wayne I am building 2 houses. I will move into the first and put it on the market to sell tax free imediatly. I will then move into the second for over a year before I can sell tax free.
here is how the deal stacks up. block=$60000, building house to completion=$$190000, total =$250000. house value= about$320000. Profit (before interest)=about$70000 (hopefully) They would rent for $450 per week if I wanted to rent them. There may be more profits by building in country areas, but geting in early in a new estates in the city does work vey well. buying land early has been profitable for me, my blocks went up $15000 in 2 months after I bought. keep up the good work.
Seano
any progress???
Seano
you could get help from a builder or an architect to advise you on the process or they may have the info that you are after, a lot of you trades men will have done similar developments and will be a bundle of info if you are in there good books. You could try reading “an intelligent guide to Aust poperty developing”
good luck let us no about your owner builder experiance.
Seano
Sounds like a fantastic idea. I could think of heaps of areas to do similar deals, it could be a great money spinner for you. You need to do a lot of work for your $$ but I asume it will be very worth while.
you will need to contact surveyers to survey the bock and give you the subdivision map on paper to take to counsil(and many other people). Then extensions of electricity and sewage and water to the blocks, fencing the blocks.
once you have your subdivision approved, see a lawyer to help you draw up the contracts if you are selling them your self, or just go straight to a real estate agent and let them sell the properties and they can find the right contracts sutable for you if they have done similare deals with other clients. They could advertise to a much bigger market like nearest city areas, and on the internet.
See an accountant about your company structure. if you go for certain structures you will have to pay gst on all that you sell then subtract the gst aquired during the subdivision then take away 30% company tax on your profits. you could decrease your tax maybe by increasing your expences (make improvements to some blocks, maybe including the one you are keeping if you are keeping one). pain in the arse but it beats paying 48% on all your capital gains
so see a surveyer, council, accountant and then lawyer or real estate agent and then sell away.
I hope I was some help for you, at least you got a reply hey.
Seano
I have read “an intelligent guide to Aust poperty developing”. It is written be a professor in architecture. It was one of the most demanding books I have ever read. It is written for building students and owner builders. I think it is the only book of its kind in Australia. It is very thorough. The down side is that it is more of a builders manual than an investors guide to developing. A great book, it gave me a huge understanding of building houses and the procedures of building.
Seano
You could sell your negative geared houses. Would you have capital gains tax? have you had much growth in your houses. you could sell you block.
another alternative if there is too much tax from selling your neg geared houses, is to sell your home tax free and move into one of the negative geared houses.
could you do a cheap renovation on the 2 neg geared houses and try to get more rent from them.
you want to become financually independant, so hold onto what will help and sell what will not. If you built on the block that you have would that be profitable to sell? Would it be posative geared if you rented it? Would you live in it and sell your current home? or move in and rent your current house?
heaps of options, you just have to nut out which one is going to help the best for you next year and for your future goals.
buy more pos geared houses.
Seano
it was my pleasure. glad you got some good ideas to work with. In rockingham near Perth I saw years ago signs on vacant land saying things like: for lease owner will develop. So in one instance that I kno of, the owners of a toy shop got together with a local gym and approched the owner of this land. the land owner developed a 2 story building, the first floor for the toy shop and the 2nd story for the gym. It may have tacken 6 months to build the place, and the land may have been empty for years, but until you have a deal you have no expences.
Seano
Not to many reponces yet! I am a bit of an ideas man so we will see if I can help . You could sub divide into 2 or more blocks, and sell off the block/s without the house on it. By doing this you may pay off completely the morgage for the block which would increase your profit margin. and you could use all that equity to buy more property.
alternitively you could could advertise your land for lease stating: for lease owner will develop for customers buisness(something like that). This way you could land a big comercial rental, or 2,3 of them
you could build a long building or shed which could be sectioned into 10 stations, they could each be rented out to mechanics, carpenters, cabnit makers, plumbers etc.. it could cost you about $200000 to build something like that but if you had 7 regularly rented at $150 per week the return would be very good.
what do you recon.
seano
Not to many reponces yet! I am a bit of an ideas man so we will see if I can help . You could sub divide into 2 or more blocks, and sell off the block/s without the house on it. By doing this you may pay off completely the morgage for the block which would increase your profit margin.
alternitively you could could advertise your land for lease stating: for lease owner will develop for customers buisness(something like that). This way you could land a big comercial rental, or 2,3 of them
you could build a long building or shed which could be sectioned into 10 stations, they could each be rented out to mechanics, carpenters, cabnit makers, plumbers etc.. it could cost you about $200000 to build something like that but if you had 7 regularly rented at $150 per week the return would be very good.
some great tips there thanks guys
sean
If you bought it for $120000 and had a 20% deposit, the interest repayment would be about $140 per week plus principal. that leaves you with a huge return. check for any similar properties in the area, previouse sales to see if the property is priced right(they could be increasing the rent to increase the value of the property). you could get an agent that managers comercial rentals to do a rental valuation to see if the property is realy worth $800 per week. If it works out well then it looks like a deal that could put you one step closer to retirement.
sounds good. have you checked the zoning to see how many houses you can fit on it? you will need to get comparable sales of houses similare to what your building and subtract the price of the development to completion and this will give you you profit margin before tax. alternatively you could look at a number of option for your block such as, sub divide the block into 2 or 3 blocks build on one block and sell the other block/s massively reducing your morgage; build 2 houses on it, live in one for a little while and then sell it tax free and rent the other; or even just build 1 house on it and then move in and sell it tax free. look at all your options and all the potential profit margins, and then take them to an accountant and see which one is most profitable after tax. If building 3 houses on it is the best option, you could look at having some of the expences of the house you will rent put on the 2 you will sell which will reduce your profit on the ones you will sell and reduce the tax you pay an the profits, while your rental is built for a much lower price and you would have a smaller morgage and greater return. check your accountant if it is ok to do it.
Sean Chinnery
you could also get the text books for a tafe builders cource.
Tool, thanks for your input. I just had a good look at my contract, and is says 140 “calander days” not working days, I am in WA. some food for thought for any one building would be to put in a clause for penalty interest(I couldnt find much about it). one posative is that I have found out that I can get out of our 2nd contract due to them not working on it. I guess I should have tacken our contracts to a lawyer, I was a bit nieve this being my first 2 developments. But I have learnt some huge lessons from this which some of you guys out there might learn from(Get legal advice and check your contract thorally).
Cool thanks Jo and tool. we did have 2 variations, but were told that the builder has to ask for an extension if it was required due to variations. our builder went into volantary administration which slowed things down, they have almost finished our first project after 9 months(the contract was for 140 days!). we have a second development with them. The pad has been done 3 months ago and they havent touched it since. can we get another builder to finish it?
Sean Chinnery
