I am looking at a relatively simple strategy..i think?..lol BUT have never done it so any suggestions would be much appreciated.
Buy a House on a piece of land.
Sub divide the land.
Sell the empty block of land.
Retain and rent the house on the other piece of land.
Where would i start after i have found a property that i may think suits but not sure of all the details i need to make a decision to buy. I do not want to buy then what i am thinking of doing cannot be done.
Anyone here done this or tried doing it.
SGMichael 888Participant@michael-888Join Date: 2005Post Count: 260
these work best on corner sites, but can be achieved on standard blocks also. Not sure where you are situated, however best is to pick two or three suburbs. Become an expert on them as far as what they have to deliver to residents/tenants, facilities, infrastructure, amenity and all the other buying criteria…..I could go on however beyond the scope of this reply.
BEFORE you buy, go to the council (and also their website) and seek town planning advice as to the requirements for lot size per dwelling, minimum width (this will affect provision for a driveway if not on a corner), open space provision, etc. I would also ask your solicitor for some advice on your proposed intention.
Look for sales of other similar type subdivisions to what you are proposing in the selected areas and also what they are selling for, lot size, widths, etc. Be careful to allow for any easements on title of your prospective purchases. They should not be built on and may affect the position of any subsequent dwelling.
A good and simple/cheap book on property development in Aus is by Ron Forlee – Australian Residential Property Development. This book is available at all the chain bookstores or it can be ordered. There are other titles also but this is a good start.
Also, run some figures on build and hold yourself for the rear subdivision. Sometimes, with the depreciation of a brand new box (despite the obviously higher lend amount) and the higher rent from a new dwelling, the rear one costs very little if anything to hold. That way you've manufactured equity from fresh air by subdividing the rear yard and have two properties working for you by way of capital growth. Perhaps also run this past your accountant.
As you've sensibly mentioned in your post seek out all this info before you buy and ensure it can be done. Also once you've narrowed it down to a couple of properties, before making you offer, take the addresses to the council town planner and ask for guidance if you can achieve what you intend. There are no guarantees however, they'll be quick to point out if you can't
Hope this helps and good luck with the strategy.crashyParticipant@crashyJoin Date: 2003Post Count: 736
Michael, if you plan to keep the house, why bother subdividing? why not just get planning approval for 2nd house on the block?
(thats a question not a statement)
that would save about $20k? and 4-6 months?.
you can always subdivide later. spend the $20k towards building the 2nd house instead?
I realise there may be a valuation issue but I cant see why you would subdivide if you have no intention of selling either part…….or did you mean sell the house & keep the block?Michael 888Participant@michael-888Join Date: 2005Post Count: 260
That's true crashy,
very valid point. I was providing some input to stargazer's question when I thought of adding that into my post. Thanks for adding that perspective.
Due diligence with council and zonings, etc still takes priority, no matter which way stargazer goes.
I seem to have 2 threads of the same title not sure how this happened….lol
Thankyou for the replies much appreciated. This is my thinking and i can be corrected as i am only tossing around ideas.
Buy property with say 800sqm block
Resident already on it
Providing all is well and the numbers look good.
split the land and sell one block.
eg property cost $400,000
rental $400 a week
80% loan so $80000 your money
sell block approx $250000
pay $80000 back to myself so my money is out of the deal.
reduce the $320000 @ say 8% loan to where it is neutral cashflow so it cost me nothing to hold ,and keep the rest of the money for other things
$250000-$80000-$100,000 leaves approx $50000 to myself this is after all costs etc
Loan now 220,000 not cost to hold.
Thats my thinking.
Tear it apart no problem.
SGcrashyParticipant@crashyJoin Date: 2003Post Count: 736
everyone is looking for the 800+ blocks while ignoring the 799 blocks. if you are not subdividing, the 799 blocks are a hell of a lot cheaper. not sure about other councils but you also need 20m frontage, so might be worth looking at blocks with 900m & 19m front or 799 blocks with 21m+ front
I might start looking into this as Ive noticed 800 / 20m blocks have about a 20% premium, therefore profit margin is already built in.
Where i am blocks can be right down to around 300sqm even a bit less in some cases frontage aound 10m. A block this size around 8km from CBD is around $600psqm round figures. Closer is more of course.
I had a 100sqm block recently valued at $200,000 in heart of CBD.