Hey everyone,
Brought my 1st house 4 months ago and am looking at what next. The people next door's lease (who we have become quite good friends with) is up for renewal in 2 months and have said they would be interested in moving into my place as it is a little bigger. My current repayments are $380 a week and they said they would be hapy paying $400 a week on a 12 month lease.
So in 2 months i'm planning on moving home rent free and saving a bit more money. I currently have $20,000 in savings. A friend of a friend is selling his house in Carlisle, Perth. The block is a corner block – 1121sqm with approval for 3 streetfront houses. He has been asking $675,000 but recently dropped it to $600,000. He said he would take $550,000 if I offered it as he is getting a bit panicky. My partners dad has a friend who owns his own building company that can build a simple but nice 230sqm 4×2, 2 storey house for $185,000 to $197,200 each. Has just completed 4 in Osborne Park, have plans with pricing if anyone wants to see. Also have a friend who does very nice driveway paving
So thats
Land – $550,000
House 1 – $195,000
House 2 – $195,000
House 3 – $195,000
Paving and Landscaping – $25,000 ????
Sub Division costs – $20,000 ????Total – $1,180,000
Each house would be completely seperate, own driveway and they would all have street frontage
Recent sales have been a 3 yr old 130sqm 3×2 non streetfront bedroom townhouse for $550,000 and a 4×2 streetfront townhouse with shared driveway and common walls, albeit a very very nice house for $650,000
I think a conservative amount for each house would be $550,000 totalling $1,650,000?
The streets are similar in niceness though I think the part im thinking of building in is a nice part of the suburb
It looks to good to be true but I cant see any other expenses except stamp duty and so on
I will be financing 1 3rd of the project and my mum the other 2 3rds
I probably have something completley wrong but I just cant see it. Only 21 yrs old so not a lot of expirience with this sort of thing
Carlisle is an up and coming suburb in Perth 4 min walk to train, 5 min drive to Tafe and Curtain Uni and 6k's to Perth CBD. Still a way to go to become a "nice suburb" but is getting there
I'm getting excited but no I have probably done something wrong
Sounds good. Just get some advice on the structure. eg it may be best to use a discretionary trust as it can save you tax, protect your assets and be flexible in helping with finanace.
Also consider asking the vendor to pay your stamp duty on the land. This may help with you forking out less cash.
As for the loan, you should be able to get 80% of the value of the land and 80% of the value of the fixed price building contract.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
All i would say on the financing front is if the Title is in your name your mother wont be able to finance 2/3rd of the loan so you will both be jointly and severably liable for the entire debt.
I assume your mother has a few assets of her own and therefore serviceability will be ok but also remember your existing mortgage will be consider a liability and whilst the rent will be taken in as income you will need a fair amount of income to show serviceability of circa $850K.
Richard Taylor | Australia's leading private lender
connection of services $ ?? $20K wouldn't do the job here for things like DA, surveying and connection of water and electricity and perhaps gas. Other things the builder might not be including: Driveways. Do you need car accom? Is there a Town Planning requirement for car accom? Fencing requirements? Insurance costs, rates, site preparation not included in the builders budget. Add at least a 10% contingency to budget for unforseen events. Some might say that is not enough.
What happens if you can't sell the finished project? What will it rent for and how long will you be able to last? At 6%, 7%, 9% etc etc. How long is the time line and have you factored in the interest for the amount of time you owe the money for? What happens if it takes 20% longer, 40% longer than you expected? Will you require LMI and what will it cost? Worst case scenario, interest rates to 9 or 10%, project takes twice as long as you expected, can't sell it so you tenant it at 10% less than you could rent out a similar building for now – can you service the loan? You can sell, but for 20% less than you currently expect – profit or loss? How big a profit or loss? How much is left after tax? Are you happy with that?
How are you going to apportion income (loss) between yourself and your mother. If she borrows some of the money, it won't be a tax deduction for you.
Good luck
SI should add solicitors fees, stamp duty and, importantly, agents selling fees and advertising for sale.
Hi, also holding costs = 7% x $1M = $70000
Your end values might hold up [can't see 2 storey houses less than $550K] but S Hales brought up really pertinent points.
Also GST on sale = 10% less construction costs.
You do have a margin but do factor in a large contingency cost.
Good luck,
KY
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