Below are some thought I have. I have been investing in property for 20 years on any off and have used buy & hold. CF+, renovations to add more value than costs, completed a remote and locla renovations, relocated a house and completed a subdivision. Next I'd like to do a duplex or multi dwellgn site where I can make enought profit to retain one for income.
My first developement was a hands on relocatable house where we purchased the land, relocated the home and rennovated. It was something I always wanted to do, and it was fruitful in adding equity and we still hold that house three years later and value can still be added in the desiign in the right market in the future.
Where I am at now is delveloping to add value without relying on the market to rise. I think that works in any market. I purchased a house sometime ago on a corner block where the rear yard had a street frontage. After my due dilligence, among other things I knew it could be subdivided. We held the place for five years and have only just finsihed the subdivision only having started that last year.
To give you an idea the value of the house on the larger block was approx 320k, The cost of the subdivsion was $40k. I choose to outsource the project management as it was the first one I have done, and to be honest that was about 20% of the costs, and meant I completed it much quicker then me doing all the liaising as I also work full time in a busy corporate environment.
The block is currently on the market for 140k and the house on the reduced block is now worth approx 270k. I am looking to onsell the block to a developer who should be able to get at least a15-20% return. So roughly its a 50k equity gain, but I should realise 100k in cash, and based on discussion with my accountant, there is no CGT when we worked out the cost base. I run a trust structure so I could distribute the cash in a tax effective way if I needed to, so structure is something you must get advise on before you buy a block etc.
If I find the right market I could possible churn out a few of these scenarions where I buy something I could do similar to, perhaps get the subdivision done while reovating the house to be sold for a small gain to cover my subdivision costs. Then I could either sell the block, develop it, get a line of credit against it to do another deal while continuing to holding it if I thought it may increase if value in the short term. Depending on zoning and size I might even be able to build multiple dwellings.As you can see there are a few options.
Until you get a couple under your belt I would strongly advise doing something small and simple without risking too much capital.
Its more about learning when you start. My first foray was a 75k town house with a buy and hold strategy in the early 90's in another state, as when I lived in Sydney its was three times as much then and I did not feel comfortable with that exposure
Cheers
Simon
