Hi Everyone, my name is Logan
I've been looking at getting into investment properties for years now.
I'm 70% through building my PPOR with completion around July. So all my savings and equity are tied up in that at the moment. When my PPOR is complete there should be about about $110,000 equity i can draw on.
I've looked around at a few small projects like renovating, subdividing large blocks of land into two, duplex, triplex and Units. All of these would most likely have been a better starting point for a first time developer with most of these probably cheaper, easier, less complicated or quicker than what I've decided to sink my teeth into.
I've been doing a lot of reading into Development finance. The main hurdle that always worried me how how would i afford ongoing repayments while my project was being constructed and I was receiving no income from it.
I've come across 30 acre lot, that i believe i can subdivide into 13 or 14 two acre lots. The land is valued at Approximately $400,000. The two acre lots on completion should be worth a very conservative value of around $200,000. I have no idea what value to put on the other hard and soft costs.
Alongside and behind this block are a further 100 acre i believe can also be acquired and subdivided too. I'm hoping to get this first stage done and use the profit from it to fund the other 100 acres.
I want to do the development with a GRV loan. With the total resale at about $2.8Mil, 70% of that is $1,960,000 minus the land @$400,000 is $1,560,000. I haven't done anything like this before but i can not see 800m of road and services, legals, marketing, commissions, permits and what ever else costing that much. Though I could be wrong.
Also i know I'll need a $120,000 deposit on a $400,000 to keep the LVR to 70% as specified in a GRV loan.
Also am I able to option the land until the development application is approved to minimise the risk of being left with a piece of land i cannot develop?
So this is my plan. What I'm looking for is some guidance, tips, tip falls, holes in the plan.
Most of all I'm looking for a place to start.
Thanks
What state are you in?
I will leave the lending to the experts on here.
Remember to allow for council infrastructure contributions. They would be up to $28k per lot in Qld.
regards
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
I'm in NSW.
Is that on top of the cost of actually running water and phone lines and power?
just looking at the amount of money that you have. you dont have near enough money to even think about doing a large land subdivision like that.
You would be up for $100,000's of services costs.
Unless you could presell the banks required amount of land blocks before you started the development. That might be all of them. They might want you to presale all of them which could take years if the this couple acre lots are located semi rural to residential.
One normal standard torrens titled subdivision where the sewer water and power are located in the street already can cost between 15-30k depending on the state.
times that by 13-14 lots.
Add on the cost of roads if required. and lamp posts electrical wires perhaps even upgrading the nearest transformer.
Power poles can cost 10-20 k … Per pole
upgrades on transformers 5-7k
then you have crossovers as well.. ask a concreter for that they would be 2-3k a pop per cross over
it would be a very expensive project and not something i would even consider doing with only a expected 110k in equity.
Hi Logan
Dont want to be the bearer of bad news but i have to say with the information to hand it isnt going to happen.
Sure there are some private lenders that offer GR loans however they are looking for a combination of past experience as well as a good asset position.
Such lending is based on a combination of GR or cost price net of GSTand then in most cases you cannot for the soft costs.
As i say lenders are going to want to see some good asset backing before they consider such a deal.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
We recently completed a 33 lot subdivision with block sizes ranging from 1.200 to over 2,000 sq m, the cost of civils was in the order of $75K per block. We had to put in a retarding basin and childrens play ground as condition of the permit, in addition to roads, services and fencing, all of which cost a fortune. Even if you had no issues like this, the size of the blocks would mean costs could easily be over $100K per block. I agree with Richard re the difficulties you would have in getting finance, if you don't have any experience but i would also be concerned about you taking on such as large first project. Its a good idea to take baby steps first, I formed this view from bitter experience by the way.
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