Property Options – Automatic Acquisition plan

Hello all,

Firstly I would like to point out how highly motivated I am right now to get stuck into progressing towards financial freedom! I am located in Perth, renting @ $550 a week close to the CBD. I have an investment property that is located 32kms from the CBD purchased in 2010. The growth of this suburb is not looking positive when comparing it to other suburbs closer to the cbd, but as always hard to say. I have a mortgage value of 252k and the valuation came back at 345k.  I have a tenant in there but they have broken lease over xmas, worse time!

I have taken a liking to the property options ( call option contract) . so I have been doing my research identifying suitable properties within the nominated city council that allows for the correct zoning to undertake  simple splitters, subdivisions or further development of townhouses etc. My feasibility will consist of contacting local developers, civil contractors, builders, architects, town planners and council to get an understanding of the costs involved and profitability of a project. I have access to RPdata and I have the name of the property owner and write a letter to them to propose an option for greater the market value in exchange for time. 24 months to get a development approval, and depending on the feasibility make the necessary plans and actions to sell it on to the ultimate buyer, I am also in the process of trying to find a buyer before i option a property, this is my number one exit strategy. This strategy appeals to me as you do not have to settle on the property, and make the profit in between. The hardest thing is going to be getting a seller to commit to the deal ( masterful negotiator) . I have made contact with one seller and they are keen to sell but they are not too sure about the contract side of things, so I am in the process of trying to find a decent solicitor who is familiar with options and assisting me with writing up the contract. The plan for this particular project would be to split the block, the block size is 812sqm, get the rear block ready to build on and sell the raw land.

Although this strategy may take time to get some runs on the board, In the meantime I want to buy an ‘off the plan’ deal to take advantage of the fast moving market, I plan to get a deposit bond, so I can keep my cash flow for any development approval costs I may require in the near future. But even this investment decision takes time as I am researching demographics, federal spending, and private industry projects.

I have a few questions if anyone can elaborate that would be much appreciated:

1. If I feel that my investment property is not serving me well for the full tax deduction benefit due to the home being 1970 built and the rental income is $20 less than the interest rate payment per month ( interest only). Should I move back there and make it my PPoR to save on the cash flow of paying out rent close to the cbd ( great lifestyle) or sell the damn thing, cut my losses and buy closer to the city to get the most from the growth over the long term? I do not necessarily need to do this as I can borrow at this point in time 700k

2. Has anyone had success with property options, through the DA process and beyond to full scale development – this is where I want to go….

3. Is it best to try and stick to one council as it would be too much work trying to get to know all the different council rules and costs for development approvals?

4. Whats the easiest way to get the relevant feasibility costs without having to get a quotation – without drawings etc.

5. How can I set up a Caveat on the property that I take option over – mainly if I do some substantial renovations to the property and then they decide they like it and want to sell themselves.

6. If anyone is looking at getting an off the plan or house and land package to take advantage of not settling on the property until its built and getting equity over that time and using it as the deposit, maybe some suggestions of locations and developers would be helpful

7. My 10 year plan is to create a portfolio, over time say 1 property a year at least, and over 10 yrs increase my holdings by selling off some and paying off the mortgages to create a 60%/30% split.

I am only a month into my investment journey, with my self education and motivation to create wealth through decisiveness I feel that this is going to be an exciting path and know there will be some brick walls and I will fall down but I just need to keep persisting and I am in this for the long haul…