Hi
We own our property (20 hectares) and have just realized we can subdivide, We want to keep the majority of the land for farming (15 hectares) but are considering subdividing 5 lots (1 hectare each) which is the minimum we are allowed. We need a larger house so are considering a loan for this and when we move onto it the existing house will be vacant (on one of the subdived 1 hect. lots). Eventually we want to build 4 more investment houses on the other subdivided lots. Can somebody please give opinions/advose on two issues.
1. Would it be more beneficial to sell the existing house block so that we pay off our new hosue and can therefore borrow to build the other 4 investment houses, or would it be wiser to keep the original house, also as an investment and get the loan transferred to that in order to claim for interest, etc on tax, then borrow for the other houses when we can afford it?
2. We have considered costs such as electricity, water (tanks), telephone, subdivision costs, surveying, home, plumbing, etc. Are there any major costs involved with “developing” that we are overlooking.Any suggestions would be greatly appreciated.
Hi Lesleigh
I see you have run some numbers on some of the issues you speak of such as power etc.
Being in the country are you also responsible for providing roadworks to the new blocks?
It may be a good idea to subdivide and then build or it may prove more profitable to just divide up the parcels of land and sell them off vacant. Another option might be to just lodge the develop application and sell the whole lot as is ( including the place you wanted to keep, take the cash and go somewhere else.
One thing to remember here is that building one or more may not be the best scenario, particularly if there might be funding issues.
Can I suggest that you look at a range of scenarios, pick the brains of agents, surveyors, builders etc in your area to find the most appropriate solution, only once you have done this sort of research along with comparisons via say RPData, are you going to have a realistic idea of the costs involved and the preferred option.
Hope this helps
SueMIT | Owen Real Estate
Email MeHi Sue
Thanks for your reply, muchly appreciated.
Yes, we are responsible for roadworks. In this situation we only need driveways as all the blocks will front our existing roads, which, at long last, is bitumen. We also have to provide a 20m roadway to the back property, in case of future development. If we use the subdived blocks as investments, we thought we might build the houses one at a time, as we can afford them.
Excuse my naivety – we are VERY new to all of this- what is RPData?Thanks again, Sue.
LesleighHi,
just to remind you the building costs may be more than many people realise unless you can be a hands on builder yourself. I’m a complete novice & I’ve found that major builders have got it down to a fine art.What I’ve done is choose an established builder (been around for 100 years), not too expensive as advertised & put everything into their hands. They give a fixed price quotation so there’s no nasty surprises.
Re funding, once you’ve got your application approved by Council, the banks are quite good about construction loans. They loan up to 80% of the end valuation of the project i.e. the houses you build may be worth 1 million (4 x $250000 each) for 4 houses for instance, then they loan you up to $800000. This is generally more than enough to complete the building plus interest & other costs.
However, to be very conservative, a 60%LVR is much better. I try to gear only 50% myself.
Most importantly, can you sell the finished product easily? If not, can you rent them easily? What will the yield be?
Good luck with your plans
Kum YinHi Kum Yin
Thanks for your reply. Yes, we are definately going to get an established builder. Our area is going ahead quite fast and we don’t think we will have any trouble selling, if and when we go down this path. We intend on building cheaper, lower maintenance houses, therefore will be able to offer cheaper rent. People are literally “screaming” for rentals in our area and we definately believe we will have no trouble finding long term tenants.
We’ll keep you posted on our progress.
LesleighHi Lesleigh
I agree a staged development might be a useful approach, you could then have some vacant land, some built and some underway, that way purchasers can have a choice of vacant land where they can add their own design, partly built ones where they can coose some fo the colours and others completed for those who have no vision in terms of colour etc. You could also hire some furniture and set one or more up as DISPLAY homes, including a higher standard of fixtures etc.
Good luck with it all it is an intersting journey
Sue
MIT | Owen Real Estate
Email MeHi Sue
It certainly is an interesting Journey! So much to consider and so much to learn! I guess we all have to start somewhere (with a headache) but it will all be worth it in the end.
Thanks for your help and suggestions. It really is appreciated.
Lesleigh
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