Hi all,
A theory I have had to assist with purchasing some property without having saved much of a deposit is as follows, could someone more experienced in such things comment as to the validity of this and any potential pitfalls I havent catered for ?
I have been looking at several properties (houses only – zoned 2A or 2B) on large blocks of land (800plus sqm)
and was thinking I could offer to purchase the property from the current owner with a (call) option.
I would then get a DA to subdivide the property into two blocks and then sell the second block, using the proceeds of that sale to assist when I executed the call option originally purchased. (I understand I will need the original owner to agree to the DA request)Some of my questions are:
1 – Does this theory fall into the realm of science fiction ?
2 – How long will it likely take and what will it cost to get the DA and subdivide (where can I go to research this aspect further ?)
3 – Would it be profitable to sell (quick flip) the complete property with the DA approval for subdivision ?Thanks for any insights anyone may offer
Marek
Marek
It is possible, but very difficult to do. Just finding a property will be hard, but then getting the owner to sell you an option would be harder unless the price is right. generally option fees are around 2% of the value, but this can be negotiated.
You should contact the local council where you are looking and enquire about the costs etc.
And once there is a DA for the property the value usually rises so you could sell your option.
This is all theory to me too, but I do know someone that sold an option to a developer and they allowed a DA to be submited. They were offered double what the property was worth, and couldn’t resist.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Marekm,
The only thing to consider (actually, it’s not at all… but one thing to consider) is make sure the council will allow you to subdivide before you place the option. (Otherwise you will waste your option fee)
Funny you should post this though, because I have another idea kind of similar… If anyone could give me thier thoughts on this it would be good…
Put an option on 2 blocks of land next to each other in a zone 2B area. Submit for DA approval to build as many townhouses as you can fit on the land, then sell the option to a developer. If you do the maths, there is alot of money to be made, with only small outlay. The only down-sizing, is that it will proberbly take a lot of door knowcking before you find 2 consecutive houses that will agree to give you an option. But if the money is there…
Dan.
If you want an extraordinary life you have to be prepared to do things that ordinary people aren’t prepared to do.
Dan
this is like my frinds situation. the option taker eventually sold the site to a developer and made about $10 mil.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the input Terry and Dan – I’ll do some more research with local council.
Everyone else, please keep this thread going, would love to hear any further input to either Dans or my theories.
Marek
Hi Folks I live in Lake macquarie and the new rule is that you must buy 2 blocks if you want to do villas duplex ect even if you hzve a back entrance very hard to find 2 blocks here
aaronHi Marek,
Here are some comments.
Firstly, a zoning like 2A or 2B doesn’t necesarily mean the same thing for two different councils.
And yes, there are pitfalls. Too many to mention in this post.
It is essential that you get hold of the council’s guidelines (or code) so that you know whether or not you can do what you think you can do.
Getting an option from an owner is something that is very common so you are on the right track there.
>>I would then get a DA to subdivide the property into two blocks and then sell the second block, using the proceeds of that sale to assist when I executed the call option originally purchased.<<
You cannot sell the second block unless you pay for it first.
However the buying and selling can be done simultaneously i.e. you settle your purchase and your sale both at the same time and you can therefore use your buyer’s money to pay your vendor.And yes, you do need the owner’s consent to lodge a Development Application. You also must have a fair idea how long council will take to approve it so that you don’t run out of time.
Some of my questions are:
>> Does this theory fall into the realm of science fiction ?<<
No, it is perfectly feasible as long as you know that you need to be able to come up with money to pay the council’s application fee and the surveyor’s cost and the architect’s fee (if required)and a deposit if necessary.
>> How long will it likely take and what will it cost to get the DA and subdivide (where can I go to research this aspect further ?)<<
Go and ask the council, take holiday periods into account and thence tack a couple of months to the time OR have a facility in the option agreement whereby you can extend the time by paying the vendor a certain sum of money.
>> Would it be profitable to sell (quick flip) the complete property with the DA approval for subdivision ?<<
Yes, very much so.
Someone mentioned that it will be difficult to do. The right answer to that is : ‘Search and you will find’
The property will be worth more as a development site than as a house so you can afford to pay the vendor more than just house value.
The option fee can be any amount you and the vendor can agree upon. I have tied up properties with a $ 100 option fee (and even with a mere
$ 1-00)You can start selling the property the moment you
have plans prepared !!!I posted yesterday that I would be happy to team up with someone who lives in Sydney and who would like to get involved in development sites.
(There is a lot of money in this type of real estate).Because of physical problems I find it difficult to walk longish distances though I have extensive experience in this area and I would welcome someone who is prepared to do the basic work.
I am actually quite surprised that no-one as yet has bothered to talk to me about this offer.
Pisces133
PeterM,
Thanks for your insights, very detailed and helpful – much appreciated.
If you would like a partner in Sydney who is a complete novice in the property world, yet has a lot of spare time and energy available for running around, and is keen to attain more experience, then I could be your guy.
Please drop me a line at: [email protected] and we can discuss further.
Regards,
Marek
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