All Topics / Help Needed! / How to determine if a site is feasible for development

Viewing 15 posts - 1 through 15 (of 15 total)
  • Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    Hi All,

     

      I have a Property in Wantirna South (763 SqM) and looking to sub divide and build two new properties. Current property is  renting at $350, mortge balance 475K . This property is in bit of angle and need bit renovation if we going to build only one unit in back. then with open space and  keeping car park for both properties will not much space for the back property. ( Know City Council)

    I thought of knocked down the current property and build two 4 bedroom homes  with two side entrance( Separate Titles) to go with.

    But i need your expertise advice for costing and my aim to boost my portfolios and hold the new properties long term?

    MI

     

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    How much is it going to cost to subdivide?

    Are you going to subdivide into torrens (green) title or community title? Community title will be $5-10k cheaper. and really makes no difference Unless they both have street frontage then torrens is worth the extra money.

    How much are you going to spend to rebuild the two new homes, What level of finish ?

    How much does demolishing cost ?

    If you plan to keep both, how much is the rent going to be for both? Can you afford to keep both

    Work out how much you renovation would cost. How much would the front property be worth after a reno and after removing the land at the rear.

    Write down all your end values, Write down your costs, write down how much capital you require for both option and also write down the amount of time required for both.

    even though for example renovating and building one at the rear say might make a potential 100k. If demolishing and rebuilding 2 made 80K then you have to factor in your time and effort. The effort of rebuilding two houses can be conducted over the phone and email. Whilst the effort of managing a renovation might not be worth the additional money.

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    Hi Wilko1,

    This is just number without any details research. Thought of build 2 x 4 bedroom Houses.( 26 /M2)

    Buy Price              $475,000

    Plans and Permits ,subdivision, demolition:  $  35,000

    Building costs        $550,000

    Total Costs            $1,060,000

    Estimated Sale cost House A . $ 550,000

    Estimated sale Cost Unit  B     $ 550,000

    Total end values: $1,100,000

    Potential gross equity to be created:$40,000

    Estimated rental returns:47,870

    Gross yield on completion of development:4.9%

    I'm not sure where is the Interest come into play and no income for 6 months ( Construction Time) ?

    MI

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    Hi melb investor.

    I'll be frank so I don't waste your time.

    On those numbers I would not go ahead. 

    Your outlaying  over a million to make a 40k return. That really is not good enough.

    you also have to consider holding costs interest on the initial property 

    interest on the construction loan

    rates water taxes power whilst not being rented.

    also sales costs of a minimum of 2.2 % even if you intention is to hold. Because you require several backup options.  There's just not enough fat in the deal to justify that amount of of outlay. 

    Also  as a gross yield of 4.9%. That is very low for a developed solution. My honest opinion is  you need to focus on your product. 550k got building 2 x4beds is a 1/4 million a house plus builders profit . 

    Too much risk not enough return. You'll lose your. Potential 40k profit on any number of unforeseen circumstances. 

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    Hi ,

    Thanks, I was doing bit more research and found following in this area.

    1.http://www.realestate.com.au/property-house-vic-wantirna+south-115047763

    2.http://www.realestate.com.au/property-house-vic-wantirna+south-115277471

    Median property price:  Buy $621,000  and Rent $420

    If i put those calculation into above. 

    Buy Price              $475,000

    Plans and Permits ,subdivision, demolition:  $  35,000

    Building costs        $550,000

    Total Costs            $1,060,000

    Estimated Sale cost House A . $ 620,000

    Estimated sale Cost Unit  B     $ 620,000

    Total end values: $1,240,000

    Potential gross equity to be created:$180,000

    Estimated rental returns:47,870

    Gross yield on completion of development:6.7%

    Again Interest ($4.2K Per Month) and depreciation didn't count?  Both of us are paying 45K TAX also.

    MI

    Profile photo of Ryan McLeanRyan McLean
    Participant
    @ryan-mclean
    Join Date: 2010
    Post Count: 547

    Have you considered a subdivision and then simply sell the parcel of land instead of constructing a house yourself?

    You could potentially use the profit from the sale of the land to buy another property (as long as it doesn't devalue your existing property as there will be less land).

    That way you could avoid all the construction costs and headaches and just buy another property with subdivision potential?

    Food for thought.

    Ryan McLean | On Property
    http://onproperty.com.au
    Email Me

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    Hi Ryan,

    I like to keep this Properties after developed and also want to know how its look like this Development journey. LOL

    MI

    Profile photo of Hari YellinaHari Yellina
    Participant
    @yellina
    Join Date: 2007
    Post Count: 101
    MelbInvester wrote:
    Hi All,

     

      I have a Property in Wantirna South (763 SqM) and looking to sub divide and build two new properties.

     

    Dear Melbinvester, 

    If you have 763 sqm in Wantrina South, Which is a good are in Melbourne. I think you might squeeze in 3 properties. I was having a discussion with a Councilor from other area in Melbourne. They advised me, some changes are going to come 1st July 2014, Which might entitle you to put three properties. 

    Please talk to a good town planner in the council. Making a visit to council office worth a shot. 

    Thank you. 

    Hari Yellina
    Email Me

    Keep Investing - Grow while Resting.

    Profile photo of Ryan McLeanRyan McLean
    Participant
    @ryan-mclean
    Join Date: 2010
    Post Count: 547
    MelbInvester wrote:
    Hi Ryan,

    I like to keep this Properties after developed and also want to know how its look like this Development journey. LOL

    MI

    Why development in the first place?

    Why not buy more investment properties rather than develop?

    Is the return on development really going to be that good for you?

    Ryan McLean | On Property
    http://onproperty.com.au
    Email Me

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    Creating income streams will net a higher result long term then buying income streams. Good development can return great equity gains and positive cashflow at the same time and is repeatable. Purcashing 100,200,500k below market value that has a positive cashflow is less repeatable.

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17
    yellina wrote:

     

      If you have 763 sqm in Wantrina South, Which is a good are in Melbourne. I think you might squeeze in 3 properties.  

     

    HI,

     How this help please explain? i thought two specious houses are more value than putting 3.

    MI 

    Profile photo of wilko1wilko1
    Participant
    @wilko1
    Join Date: 2010
    Post Count: 510

    Melbourne investor. 

    – why do people do subdivisions? 

    – if you could subdivide your block into 2 allotments it's going to be worth more in total then just a single block. If you can subdivide into 3 blocks or more often it is worth more then the 1 block or 2 blocks. 

    Just like a piece of pizza buy itself costs more per unit then the equilivent piece when you buy the whole pizza. 

    The individual slices sell for more then the total. Same applies to housing. Unless there is not a market for the resale of the proposed 3 block subdivision. 

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    HI,

    This property is sitting there costing me money every week . But 100K equity create during this time. ( 2010 To 2013) If the subdivide and build project is not the option.

    can cosmetic renovation make rentals high? 

    MI

    Profile photo of RedwoodRedwood
    Participant
    @redwood
    Join Date: 2013
    Post Count: 340

    Highly doubt it in Knox shire, or most others, perhaps 3 cubby houses not units or townhouses

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
    Email Me | Phone Me

    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

    Profile photo of MelbInvesterMelbInvester
    Participant
    @melbinvester
    Join Date: 2013
    Post Count: 17

    Hi Redwood,

     You mean renovation or Build?

    MI

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