[wilko1Participant@wilko1Join Date: 2010Post Count: 510]

January 14, 2014 - 1:25 pm

I would agree that bridging finance can get messy. Trying to arrange same day settlements is not a thing you want to be involved in (which is ok because you mentioned its your PPOR in purely investment properties, not possible to have different settlment dates). You'll spend the extra costs in interest, fees, moving your moving dates several times if delays. It can cost just as much, although in theory sounds great that you settle on your house and move into the next.

in reality you should sell your existing house, have a offer go unconditional and then start looking. Otherwise you really don't know your budget.  Short stay accomadation is not that expensive and you'll have less headaches. 

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January 14, 2014 - 1:24 pm

Most bridging finances on PPOR's lend you the money to buy your new place, take security over your old place (ie a certain amount) when you sell your old home . The bank take the allocated security out of your settlement, if there any left you get it.  

Most times if you cannot afford to service "both debts" they give you a certain time period that you have to sell your home by. Most are 6 months. 

But if you can service both debts just take a new loan 

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January 14, 2014 - 1:15 pm

Banks love financing building costs. It's just not fun for the person borrowing money. Sometimes they can make you jump through loops of fire just for your construction loans.  As long as you got a minimum of 20 percent of the construction loan for residential you should be ok. Or have equity in the land 

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January 14, 2014 - 1:12 pm

Land – 300k home. 

As long as your focused about paying extra in the first 1-3 years you can really knock the long term payout down

Also since you only get one stamp duty exemption you might as well get it on a higher value property. Although that shouldn't be your main reason for choosing a more expensive property.

And yes you should put your money into a offset account set up against your first property because as you said you might only be there 6 months. So you want to keep the highest amount of debt on that property in case in becomes a rental prop. 

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January 13, 2014 - 7:36 am

You don't Find the cashflow,  you make the cashflow, via improving the asset that you buy, 

I think the phase of purchasing a positive cashflow property in inner city areas/ even most regional has passed. 

Other options to look for to get positive cashflow include 

– dual occupancy

– rent to buys 

– subdivision and development

– residential Into commercial or vice versa 

– granny flats 

– renting smaller spaces in larger commercial buildings 

– sweat equity in renovations

and then the smaller things

– cheaper finance 

–  paying off debt 

– bulk insurances 

– interest only 

– cheaper rental management 

– paying council rates yearly upfront if you get a discount. 

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January 13, 2014 - 6:29 am

Did you hear that from a property developer. Or just a friend of a friend. 

I actually believe education is beneficial. You can either learn things the hard way. By doing, making mistakes and you know once you've cost yourself a few 10,000s in unexpected costs on a development that maybe a couple courses part time could of saved you that money. 

I would be selective with those courses and only choose the the development/ site feasibility courses. If you are only doing it to gain knowledge and not finish some degree . It wouldn't be more then a thousand or so per course. 

Conversely site feasibility doesn't have to be some long winded uni course. 

It really is just.

– how much is the end product/products worth 

– how many of then can I build on a site

– how much can I purchase the site for 

– how much are my holding costs, building costs, subdivision costs, planning, consultant fee costs, selling costs 

thats pretty much it.

but I would also say that being aware of things that can cost extra addiontal cost is useful for site analysis 

-slope and lay of the land, soil type/ie bedrock underneath or volatile soil. 

-significant trees

-heritage listings

– easements (planning constraints) /restricts size of building envelope 

– changes in development plan (future amendments)

– zoning, policy area 

– sewer, water gas and power accessibility (ie are you going to need upgrading or moving these services/extending)

– building costs – coming back to the foundations required 

– contamination / previous site uses 

knowing your area and the value of a 2 bed, 3 bed , 4 bed home in the area. As building 2 high end 4 bed homes might be worth worth more then 4 2 bed low end units. 

Your just trying to select the best value building, with the highest end sale price per dwelling (as a proportion) , whilst trying to stick to a profitable budget. 

Sometimes this is just years of learning like a apprenticeship/ or a uni course.

a uni course might teach you the knowledge. But may not give you up to date costs on certain services, learning on the go, would be more hands on, but if you missed something you could be getting hard lesson. I believe a combination of the two. A few uni modules to make you aware of the subject matter and then get out and give it a go. I mean the worse that could happen is that you would lose money/ but you'll get taught a good lesson and then you have a good story to tell  

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January 8, 2014 - 1:58 am

I'll just comment on the new rules for SA, 

attached the link for the new rules for planning 

http://www.sa.gov.au/upload/franchise/Housing,%

20property%20and%20land/PLG/Private%20certification/Private_certification_planning_information.pptx

not every house is able to be privately planning certified

you have to be in certain areas which are designated as res code areas. Basically any area within 2-3 km of a main road or transport route..

and you HAVE to be complying with all the rules (or all the rules but one), in which case the council would only need to asses the one deviation from the res code requirements and will refer back to the development policy.

it basically stream lines the planning requirement and says if you can build a house with the min pos areas and side set back of 900 mm and you stick to the frontage and min block size that is in the development plan for that area that you can get it approved. There are some difficulties with it though still, it will only accept 2 carparks in the form of 1 in front of another ie the standard 1 garage / 1 carpark in front. And a double garage to get your 2 carparks for a 3-4 bed home. Would have to be your 1 alteration from the res code requirements. Any more then 1, you have to be assessed on merit by the council. There's also stuff in there like if your a cat 2 application and the planning consultant is the one that ticks it off, that your plans have to be available to anyone at the local council officers for. Free for 5 years. Basically the Council accept no responsibility for properties approved by a register planning certifier, which is fair enough. P

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January 7, 2014 - 9:43 pm

Yep that would be a tough question to answer and you won't get a answer besides examples.

but you should at the very least look for $1 for 1$ return that means spending one dollar is adding 2 dollars of value.

if you did nothing to a house but paint a new colour scheme on the outside and paint internally. This prob adds around 10:1 

i actually used to buy my renovations based on if I could get out my 20 % deposit stamp duty and renovation costs.

for example I would buy a property for 160k stamps is prob 10k I would spend 30k renovation (this is a house with no kitchen no bathroom etc) and I would revalue at close to 250k –  take a loan out for 80 percent of the new value which is around 200k (get all my cash back out) Rent has increased from $0 to $280-300 a week ( as it was unrentable previously) and now with new depreciation schedule. My mortgage, insurance, sewage, rates costs are being covered.

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January 7, 2014 - 12:06 pm

The more active strategy would be to either buy renovate straight away and revalue. Or buy renovate and sell , release your profi, pay your tax and leverage into a bigger deal or 2 seperate deals of the same size. But each to their own. In the end it's your decision and only by action can you figure out if that was the correct action or if you get a reaction you don't like that option was not for you. But if you do nothing you will get nothing 

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January 7, 2014 - 5:42 am

And when you apply for council. Just apply for "planning permission" only not planning and building. Use a private building certifer.

also I would recommend speaking to a planning consultant first because new laws are coming out that mean if you can put forward a complying development (or comply with everything all but one thing— council would only need to assess the one non complying problem)  that complies with res code that a certified planning consultant will be able to certify your plans. Without ever having to go to council. This means that if you got your plans drawn up to comply with res code. That your planning consultant could sign off the plans. In 2 to 3 days and then you private building certifier could tick it off in 2 days -5 days. 

This is going to change the way people apply for developments to council. By cutting that 3-6 month design and planning stage down to under a month!! Get excited about that 

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January 7, 2014 - 5:36 am

That's hiring the services individually.

a consulting company would charge you their fee plus a bit extra to organise "all that"

But hiring individually will save you a few thousand a least. Once you learn it once you won't forget 

contour plans prob 500-700 average 

and footings reports depending on soil type around 800-1000 inc gst. 

These charges would vary say in a mining town or regional. But for Melbourne you should be able to find decent people for those prices. 

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January 7, 2014 - 5:15 am

@ mbuilding-  30k for planning and builder approval. Are the drawings done in golden ink. 

Youd be looking at 2-3k for planning drawings another 2/3k for working drawings. Hiring a planning consultant for a cover letter for application to council will cost you around 1500. Or for services just at a hourly rate is a bout $200 a hour. Worth every penny though. They might look at your site and say. Well instead of building 4 3 bed homes.

you could build 6 2 bed home + study within planning regs. 

And then council application fees are around on average 0.125 percent of the total development cost. And then there's some misc costs like if you have to get a contour plan, civil engineer for flood risk areas, footing/soil report.

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January 7, 2014 - 3:22 am

Melbourne investor. 

– why do people do subdivisions? 

– if you could subdivide your block into 2 allotments it's going to be worth more in total then just a single block. If you can subdivide into 3 blocks or more often it is worth more then the 1 block or 2 blocks. 

Just like a piece of pizza buy itself costs more per unit then the equilivent piece when you buy the whole pizza. 

The individual slices sell for more then the total. Same applies to housing. Unless there is not a market for the resale of the proposed 3 block subdivision. 

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January 6, 2014 - 8:08 pm

3-5 years. If you were happy with a passive income of 50,000 per year (as retirement) 

would be about 3 developments. 

1st development. Might be a 1 into 3 or 1 into 4 split. Where you sell 2 or 3 houses and keep the 4th debt free. Or with low debt.

that should net around 300k in equity and produce a rental of at least 300 after expenses a week

take 18 months time

2nd development – 18 month to 36 month period. 

Same as above 

3rd development 18 month to 36 month period 

same as above

Net result is 1.2 approx of equity and net rental of 900 a week. 

you would need to have a decent income circa 80k plus / combine with other people and or would help a lot / make it quicker if you already have some equity in existing PPOR or have cash available. 

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January 5, 2014 - 6:50 am

Selling PPOR for a deposit on a subdividable investment property would be my advice as well , would get you Another 60-75k based on your sums 

personal loan from bank, family or friends, to cover hard costs of (assume 30-40k for everything) it would be variable due to property and number of subdivisions.but for single that would be a good amount with  contigencys  

80k income would cover a Personal loan and a investment loan and a construction loan as well . 

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January 5, 2014 - 6:46 am

Subdivide to sell the existing house. Whilst building on the subdivided land. New home will build in more profit then selling vacant land and also if kept for rental you have great depreciation for first couple years.

Things to research and or will help you

– land division costs (surveyor) differences between Torrens and community pricing
– hire a planning consultant if this is your first time cost 1-2k get them to show you have to read council development plans
– understanding the development polices is crucial, without it you cannot set your searches to find what actually are the profitable deals , because you don’t actually no the minimum requirements that are required. And also don’t know the fine detail that can put you above everyone else at auction day. If you know you can subdivide a property once twice 3 times, 40 times over someone else you have the advantage.

I would say that if you don’t know how to read the development plan don’t even bother looking at properties.
Because the properties that agents Advertise as subdividable are the ones that are not profitable as they load the land price into the house for sale price.

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January 5, 2014 - 2:42 am

How much Servicablity do you have ? 1-2 mil or more. With 5 mil / cash (not equity),

I think you can make a bit more then a million in a 18 month-2 year period.  Plenty of medium/ high density developments in good areas, 20/30 2 to 3 storey houses. That would bet closer to 2.5 mil.-3 mil (depending on intrest for loans if required or not)  With land at 1 mil purchase price. 5 mil of construction 1 mil of development costs: 10 mil end value. You could gear at 40-50 % LVR and not require any presales. Could sell 15/20 houses and keep  8-10 houses  free hold (end value 300-320k a home 3bed / 1 bath.  Subdividing land as well instead building a apartment building is going to give you that extra equity before you commence building. 

Pm me and I can show you some of the types of sites I have been putting offers on with my business partners, sites are in Adelaide even though u said Sydney. But money is money.  

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January 2, 2014 - 11:05 pm

I'd take that advice with a grain of salt on the surface it sounds pretty. But in actuality sometimes it is not practical. If the unit you buy is completly trashed. Stained floors, no kitchen, smashed tiles in the bathroom, broken windows, bad smells etc. I don't think it's reasonable to consider that a person would live in such conditions.

plus a lot of early investors benefit from completly the renovation before the tenant moves in for several reasons some which you stated

– a higher rent 

– change in depreciation schedule 

– and most importantly, I think is the creation of equity/value of the property. Which combined with the increase in rent you could find you could draw out the etc equity and the extra rent you are receiving covers the cost of that. Assuming at least a cashflow neutral position. 

enabling you to use the same amount of money to go out and do it all again.  You cannot do that if you buy a Unrenovated bomb and sit on it for 10 years. (Money pit) 

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January 2, 2014 - 5:39 pm

I reckon I'll be steve here and comment.

if your buying a brand new unit, your buying a solution. By buying a older, Unrenovated unit you are buying a problem and by renovating it your are Turning a problem into a solution and the excess is equity or cash upon resale . 

And honestly gutting the whole thing or just tidying up is completely based on the property and location.

if you bought a ugly unit on top storey in Bondi. Then you would prob gut it and start again. Units can be profitable in renovations. But from my experience if your only buying a single unit and not a block of units ( which means its a internal renovation only) then you should buy the ugliest, smelliest, unit internally you can find. 

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January 2, 2014 - 5:32 pm

– paint the unit. Tissy it up a bit. Renovate it on a budget, Try get a revaluation done in say 6 months time. Or less depending on the lender.  That will gain you some extra equity you could draw out as a 2nd loan for a deposit. (don't over spend, just spend like 3-5k to add 10-15k in your 300-350k max sale price range.

– your partner paying half bills? Is that just rates and water power or a little bit for rent as well

– rent out the second bedroom. (Extra cash means deposit saved quicker)

Or make the some times better option and rent a "large room with ensuite" with your missus in a bigger house. And rent the whole unit out, which would bring up a host of deductions and depreciation (not sure how old your unit is). 

– work harder, do overtime, save more, spend less. Put the hard yards in now, none of this yeah I have ages. No you don't, make the sacrifices now cause you don't have children and can set yourself up. 

– upskill in your career as quick as possible, do further training, reinvest additional money into property shares or business.