Hi all,
This is my first post so please be gentle on me.
After being a builder for a number of years, I’m looking at doing my first build as an investor/seller. I have found a piece of land in a mining town in QLD. I have three renters on a waiting list all willing to pay $230-250 p.w. I should be able to sell the property (3bd, 1 bath) for about $200k, which would give about a 6-7% yield. And I’d make a 10-15% profit depending on costs.
The average rent in the town is $250 though most places are still fibro shacks, the newer houses command more but I’ve been keen to lock in tenants, either for myself or if I sell the property as an investment. The average sale prices are between $190k-$320k.
It is a small town under a few thousand people live there and one major mine being the biggest employer. I think the market will continue to be really good as the two closest real estate agents have waiting lists for renters and buyers in this town. But I’m concerned that it is a small town? Do you think this is a problem?
My question is do you think this is a fairly safe investment/build for me to undertake?
Do you think I’d find many buyers either before or once it is built?
Can anyone else recommend any other factors I need to consider before, commencing the build?I’d appreciate any advice, thanks.
Lack of building trades & remoteness contribute significantly to the cost of construction in these areas so be prepared for blowouts in cost esp if you only have a 15% margin.
Capital growth is usually negligible so returns will be from rent so either go the developers profit or keep it as a rental.
HI Scott,
Thanks for the heads up for the tradies, I’ll make sure I account for that in budget and timeframe.
Given the lack of capital growth do you think a 6-7% yield would be enough to be able to sell this property to investors?
Thanks for your thoughts.
Hi Dave,
I wouldn't look at a development if it was 10-15%, a minor set back will soon eat up your profit. Do you have a feasability calculator? This is a great tool to help you decide if you want to proceed.
How do you intend to fund the development, can you gaurentee the presales?
It sounds like you are building just one house, what size is the land can you subdivide?
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