Hi guys I am interested in purchasing my first investment property however im unsure which way to go about this.
I am looking at blocks around 1200 sqm, Im aware i have to check zoning etc so im just looking for some general info.I'm thinking of two options,
OPTION#1
Is to buy and build 3 units or triplex, live in one for short term & then possibly sell whilst leasing remaining 2.
I am wondering what the average size is for a 2 or 3bedroom unit in sqm?
Am im wondering what the average cost of constructing such an investment might be without including land price.OPTION#2
Buy block of land around save size, subdivide and build 2 houses, possibly rent one and sell the other?
Again costs would be involved in this?
I'm aware of the building process of home with project home specialists etc however im wondering if there are any restrictions or additional fee's involved when subdividing and building x2 homes.?It seemed so simple in my head, however when i started to research Ive started to lose hope.
Perhaps im just better off building and selling the property or renting it out and stay living with the parents LOL..?Any help would be appreciated: I currently live in Lower Hunter Valley 2325 NSW & this is where I would like to develop.
Thanks In Advance ..
Hi Jessica
Firstly welcome to the forum and I hope you enjoy your time with us.
There are many factors to consider but personally i would start at the end and work backwards.
What are you end goals?.
Do you want to sell and achieve some capital, pay Tax on the money and move on.
Do you want to create an income stream and equity from the construction.
How will you finance the property? 3 units on the same block will fall under a residential deal with some lenders but not others.
Do you have a big enough deposit to go forward.
The cost per sq M will vary depending on what you put on the block but even if you worked on $1000 / Sq M for a square box house this should be something to go on. Course this only covers hard construction cost and non of the soft costs involved.
As i say i think you need to see what you want from the project and then work from there.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks for the extra quick reply and the welcome,
Ive been reading all day and everyone seems extremely helpful, this site is a great source for anyone thinking or involved in investing in real estate.Well to be honest since my initial posting , im becoming more and more reluctant to go head first into 3 units, so im contemplating a townhouse (singe story) or duplex, as you can tell im still not 100% certain.
Overall my goal is to make a decent profit and build my own home..
I'm uncertain of exactly where I want to be at the end, I would like to either sell them both to build my own home or sell one and rent the other out..
Im not sure of what sort of deposit I would require, im looking a couple of blocks at the moment for around $180,000 – $200,000 for around 1200 sqm, however im beginning to think I woulds need something this big for a duplex?
Any advice is good advice so thanks again for taking the time to talk to me about this stuff.Hi Jessica
The build prices, the sell prices, and the land size required will depend on the suburb. This is because in some towns, labour costs more than others. Sell prices will be impacted by affordability. Minimum block sizes council will allow in a subdivision will depend on the council. That considered, perhaps pop into your council, smile nicely, indicate what you're hoping to do, admit you don't know anything about block size requirements and so forth, and ask if someone from the planning department could spare you 10mins to give you a few guidelines to help you point your thought processes in the right direction. The other thing to do at this early stage is get on http://www.realestate.com.au and literally look to see what homes are for sale, and what they costs. Compare cost of "dated" property to new property. This will help you understand the stock available in the area, the ballpark sell prices, and thus help you understand what the benchmark is in the area.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Hi Jessica
Ok well if the end goal is to sell and come out with a profit to buy your own PPOR then you need to factor in Tax and selling costs in your overall calculations.
Construction of a single storey duplex with a standard builder should come in a lot cheaper than $1000 / Sq metre however is a good guide especially if the block requires work or the local authority has additional costs.
Realistically you probably need a minimum of 10% deposit on the land and construction cost plus sufficient to cover your soft costs which cant be financed.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Ok no worries THANK YOU!!
What would be the best formula for calculating such costs, (obviously on an estimation basis)
By tax I assume you mean CGT- How can I estimate this also?Also when you you say to estimate $1000 per square meter : would I calculate this as follows:
$1000 x 600 (if the property was 600 meter square) thus equal to $600,000?? excluding land?
I didn't realise it would be so steep.Im a little confused as to if this is so, how on earth would I make a profit?
Jessica you make a profit by buying well.
Assume the property was 100 Sq Metres then an estimate of construction cost would be $100,000.
To work our your Tax position you need to take the net sale price (after agents fees etc) of the 2 / 3 properties and deduct all of your expenses i.e land acqusition costs, construction etc etc.
This will hopefully give you a positive figure and you will pay Tax at your marginal rate.
If the project takes more than 12 months to complete there is a concessionary rate of CGT.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Excellent thank you again.
Are you aware of the minimum requirement for a duplex in NSW?
Hi Jessica,
Development guidelines should be available on the local councils website under DCP.
In the Hunter valley for single level dual occs, say 110 to 130m2 of IFA (excluding garages) for 3 bedders is fine.
Allow circa $600,000 for a turn key duplex, obviously the land price will vary this figure greatly.
Your question of how do you make any money is answered well by Richard – `Jessica you make a profit by buying well.`
buying the land at the right price is paramount to the project especially if you intend to on sell at completion.
an alternative maybe to by an existing house on land suitable for sub division, the income from the existing house helps relieve the financial pressure while you go through the DA process. non income producing land will drain your finances & if the market heads south you may find youself in an unfortunate position, i dont mean to scare you from your epiphany, just be sure you have an exist strategy or plan B. if you find a suitable property & need a second opinion, feel free to call.
thanks,Jessica,
Hope the research is coming along.
A few things I would note from my own experience:
Lower land value equates to lower margin. By this I mean that the margin is made by the subdivision of one lot into several, and the building on that land is simply to make the land viable, to give it a purpose.
An estimate of $1,500/m2 for building works, $1,000/m2 for garaging and 10% on top of all for site costs and peripherals is a budget I would be more comfortable with.
A useful, but certainly not foolproof, rule of thumb is for 1:300m2.
Jessica, as well as CGT there will be GST payable on the sale of the new properties. To offset that if you are registered for GST you can claim back all GST on payments made. You'll need to speak to your accountant about all this.
Be prepared for lots of stretching on your investing journey!christianb: great advice! & i like your website.
Thanks Rick.
Hi Jess,
I'm not sure of his forum name but I follow him on Facebook. His name is Michael and seems to do alot of work in the Hunter, he may be worth having a chat to.
http://www.facebook.com/#!/KeyStrategist
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