Are there some deals out there that don't get taken up due to an investor not having enough capital or have they failed due to thorough due diligence? Quick "napkin planning" seems like a profit would be made,maybe i am missing something?
One i have seen, 7 acre block, very likely candidate for a 6 1 acre block subdivision.
Purchase price 900 k
Stamp duty and legals 100k ?
Planning and subdivision permits and titles etc 80-100k ?
Road construction services etc 500k ?
Interest @ 8% 80k
Sale price 6 x 380k = $2,280,000
Gst 6 x 38k = $228,000
Selling fees 70k
Profit of 530k – CGT….If i had the funds available i would like to do something like this. What am i missing? Any forumites with development experience i would like to hear what you have to say?
I do these on a back of an envelope rather than a serviette as they don't fall apart!
What you've calculated looks reasonable and a quick calculation like this will certainly tell you whether it's worth further investigation. There may be easements, overlays, access to services etc. etc. that will change these numbers but they're a good starting point.
Without knowing the area it's difficult to confirm your assumptions re sales price and the costs.
The GST calculation is overstated as it's 1/11th of the sell price, unless you use the margin scheme in which case it would be less. Private message with the location if you would like a more detailed answer…
Cheers, TraceyThis one is in Healesville 3777 if that helps.
Doing calculations is one thing. Getting the approval is another. Just because it's big doesn't mean you can subdivide it. That is where most people come unstuck. Every block on RE.com over 900sq these days has "subdividing possibility (STCA)". Unfortunately only a small % can actually be subdivided.
Tracey, what are the "overlays"?
Cheers..
Wise words Catalyst, agents would have you believe that anything can be divided up. Obviously i wouldn't take what they say to be true and would check it out myself before buying.
Your figures look reasonable, and there certainly are opportunities out there to make a profit in properpty development.
I think you just have to evaluate the risks and work out whether you're willing to go with them.
What happens if bad weather blows out the project by 6 months?
What happens if you can't sell the vacant blocks in a reasonable time?
I think if it's your first time doing such a development, aim to make a profit but be prepared to make nothing and learn a lot of lessons. Then you can carry that experience into your next venture.
Good luck.
Yes, i know it sounds pessimistic but i always look for the worst outcome before what is the best outcome. More profit won't hurt, but less profit or no profit at all will definitely hurt the bottom line.
Serviettes are as good as anything else, just get that great idea written down fast.
Ideas are priceless.
Cheers
thecrestthecrest | Tony Neale - Statewide Motel Brokers
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Im finding good deals on a daily basis wish I could buy them all haha
When its an absolute cracker I will make it happen. Im not into developments as to many things can go wrong. I would rather stick to smaller deals with smaller profits but do them more often.
Brick by brick and you build a house.
EngeloRumora | Ohio Cashflow
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Solomon10 wrote:This one is in Healesville 3777 if that helps.A nice are indeed I don’t know what the growth projection it has. But as I said a great area good luck with it.
Thanks bardon.
Hey engelo10 how is the reno on your 22k house coming along,finished yet?
thecrest wrote:Serviettes are as good as anything else, just get that great idea written down fast. Ideas are priceless. Cheers thecrestAgreed, i have lots of ideas, it's the capital i have the problem with. Only on 100k a year so the big ideas will just have to stay ideas for now…
Hi Solomon10
I havent started yet. I got caught up with a few other deals im working on so should be going to Coonamble in the next few weeks. Im negotiating on another cheapy, will post details if I buy. Its a cracker better than Coonamble..
Solomon10 wrote:Thanks bardon.Hey engelo10 how is the reno on your 22k house coming along,finished yet?
EngeloRumora | Ohio Cashflow
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engelo10 wrote:Im finding good deals on a daily basis wish I could buy them all haha
Feel free to throw them our way – haha
Am struggling to find these great deals, still inexperienced. The last one I bought for $310k with two dwellings, the house behind just sold for $450k. To be honest, that was a fluke, I was actually on my way to see another house down the road and was curious why the real estate agent (who I had seen previously) hadn't mentioned it.
Turns out the vendor was a nightmare to deal with, they never wanted to call him, and greatfully, not many people ever saw the inside of the house before me after months on the market. Realised it was a bargain and made an offer within 20 mins.
Sounds like a great deal. How much rent are you getting? Did you pull out the equity?
Engelo
NHG wrote:engelo10 wrote:Im finding good deals on a daily basis wish I could buy them all haha
Feel free to throw them our way – haha
Am struggling to find these great deals, still inexperienced. The last one I bought for $310k with two dwellings, the house behind just sold for $450k. To be honest, that was a fluke, I was actually on my way to see another house down the road and was curious why the real estate agent (who I had seen previously) hadn't mentioned it.
Turns out the vendor was a nightmare to deal with, they never wanted to call him, and greatfully, not many people ever saw the inside of the house before me after months on the market. Realised it was a bargain and made an offer within 20 mins.
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
engelo10 wrote:Hi Solomon10I havent started yet. I got caught up with a few other deals im working on so should be going to Coonamble in the next few weeks. Im negotiating on another cheapy, will post details if I buy. Its a cracker better than Coonamble..
Solomon10 wrote:Thanks bardon.Hey engelo10 how is the reno on your 22k house coming along,finished yet?
Wow must really be a cracker of a deal if it's better than your last. Are you concerned about lack of capital growth with all these regionals? Or just after the cash flow? I ve spotted another regional one it rents at 420 pw and sale price is only 180k,prob never get any capital growth though hmmm.
engelo10 wrote:Sounds like a great deal. How much rent are you getting? Did you pull out the equity?
Engelo
Settlement is on May 28th. I have a 3 bedroom fibro 1 street away renting for $360. This is a much nicer 3 bedroom brick veneer. Will rent it to existing owners mum for $340/wk which will benefit in that I can carry out repairs on the other building and claim deductions (all under one title).
Talked to a few agents in those 20 mins before I made an offer :p and the whole lot would rent for $450/week. However renting it separately after council approval (already in the process) it should rent for about $620/wk minimum. I don’t know why the place behind mine sold for $450k, I really wouldn’t pay more than $380k for something similar to mine in that area even in mint condition.Will probably sit on it for a bit, pull out equity in a year, study the Victorian market in the meantime. 2 properties and pumping money into granny flats at the moment has eaten up all my cash and strangled my cash-flow L (lesson learnt).
I only focus on the numbers in the deal. I like to manufacture the growth with a reno and not wait for it to happen. If I can find cheap properties that will put $50 per week in my pocket after all costs, I will buy those all day long. From the year 2000 – 2004 most properties all around Australia doubled, even in regional areas.
Solomon10 wrote:engelo10 wrote:Hi Solomon10I havent started yet. I got caught up with a few other deals im working on so should be going to Coonamble in the next few weeks. Im negotiating on another cheapy, will post details if I buy. Its a cracker better than Coonamble..
Solomon10 wrote:Thanks bardon.Hey engelo10 how is the reno on your 22k house coming along,finished yet?
Wow must really be a cracker of a deal if it's better than your last. Are you concerned about lack of capital growth with all these regionals? Or just after the cash flow? I ve spotted another regional one it rents at 420 pw and sale price is only 180k,prob never get any capital growth though hmmm.
EngeloRumora | Ohio Cashflow
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Well done,
If you can get $450 in rent for both dwellings the numbers work well. Whatever is over that becomes a sexy deal haha
Engelo
NHG wrote:engelo10 wrote:Sounds like a great deal. How much rent are you getting? Did you pull out the equity?
Engelo
Settlement is on May 28th. I have a 3 bedroom fibro 1 street away renting for $360. This is a much nicer 3 bedroom brick veneer. Will rent it to existing owners mum for $340/wk which will benefit in that I can carry out repairs on the other building and claim deductions (all under one title).
Talked to a few agents in those 20 mins before I made an offer :p and the whole lot would rent for $450/week. However renting it separately after council approval (already in the process) it should rent for about $620/wk minimum. I don’t know why the place behind mine sold for $450k, I really wouldn’t pay more than $380k for something similar to mine in that area even in mint condition.Will probably sit on it for a bit, pull out equity in a year, study the Victorian market in the meantime. 2 properties and pumping money into granny flats at the moment has eaten up all my cash and strangled my cash-flow L (lesson learnt).
EngeloRumora | Ohio Cashflow
http://ohiocashflow.com/
Email Me | Phone MeF@#$ THE REST WORK WITH OHIO CASHFLOW TO INVEST
What you've calculated looks reasonable and a quick calculation like this will certainly tell you whether it's worth further investigation. There may be easements, overlays, access to services etc. etc. that will change these numbers but they're a good starting point.
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