Forum Replies Created
I'm about to do mine thru
can't vouch for it yet (& I plan to do full agents licence flyer the 1st 3 you need to be a rep)
reason I chose them is
1 cost (also check out the funding avail via gov)
2 by distance – I have 2 young children & live in the country
Hi Sir Danger Mouse,
My first time logging in for some time (since being active on the forum last we're based back in Vic our home state and had 2nd baby this year). We'd be happy to chat with you about our experiences in developing.
One concern I have off the bat is what / who your end market is (the inner east is not an area where buyers typically want to buy a project house, as you've indicated you are in discussion with those large company style builders, that they'd find out in new developments. You mention the property is in leafy eastern suburbs (so I'm guessing you mean around Camberwell region which is my old stomping ground).
I'd recommend having a chat to a few good real estate agents in the area who could advise you what sells well in the area (if you are intending on holding them yourself). I started out work (too many years ago) in real estate in Balwyn and worked with Mark Rathgeber who I understand is still in the industry as an agent with Noel Jones I'm guessing Mark would be a wealth of information and is a really nice fellow.
Once you have an idea of the size, style, quality of fixtures and fittings etc to go into the dwellings that will then start the ball rolling on costs. Costs to develop vary incredibly.
All the best and I look forward to seeing what you do – as I said feel welcome to touch base.
Kind regards
Meg
peter.matey wrote:Meg,
Thank you very much for the elaborate response to my query.
You are right I am still trying to do my first project. Every time I do feasibility something or the other does not add up and my first project is still waiting to see light of the day.
But I am not complaining as the property market has not moved & I am learning more with every passing day about different aspects of property developments.
But I am committed to break the ground, I am thinking outside the box this time I have some friends who wish to develop a LMR property into a three town house property.
My friends are renting at the moment and I will help them monetarily to get this project off the ground.
I would like to know would they pay stamp duty twice, as in first to acquire the initial property and then to register individual unit in their names?
Will they pay GST ? Would you advise ?
Regards
Peter
Hi Peter,
You will need to speak to a qualified Accountant here (which I am not) there are implications for both stamp duty & gst depending on how you set this up.
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Kind regards
Meg
You need to speak with a lawyer, accountant and banker. The bank can't half sell a property so they would take security over the whole of it. Any changes to title aside from spousal to my knowledge incur stamp duty.
Sounds a strange set up, your accountant may suggest setting up some sort of company structure before you even start to sell shares in the company to the investor rather than the property being in your personal names. The company would then own the property.
Overall not my cup of tea….Know what about selling it? How the bank treats it (partial release of security), how to subdivide (generally see a town planner and surveyor) …..
Thanks Catalyst,
Turns out our property manager had the wrong property (wasn't even one of our houses)!
Our Electrician who we called out is annoyed (he turned up to the house where no one was home but the power was on) as is my partner Carl who built the house.
Another case in point as to why I'm progressively taking on the PM of properties myself.
Cheers
MegAgree – nothing wrong with Toowoomba – was just pointing out that choices don't need to be limited to there and a great idea to diversify if already in the Twmba market
Bendigo?
Hi Peter,
Great that you are getting into your first project. What happend with the two homes you were considering doing as 'owner builder' in your earlier posts?
Seems to be some confusion from the comments above as to difference between strata, community, company, single unit dwellings, freehold titles etc., Could be due to posters being interestate and the differences this could entail.
I'm a builder, investor & developer (also a mother & farmer and until last year a Business Bank Manager) I'm not a lawyer, town planner or surveyor but I am in Qld (as your proposed development is) and I'm going thru the process of creating a community title scheme for two townhouses that I've had in my rental portfolio since we built them 2 years ago outside of Brisbane and I'll be assisting one of our clients with going thru the process in Brisbane shortly with 3 adjoining townhouses we are about to build for them. So here's my understanding:
Banks are not gun shy of community title properties (they can be of company title which is entirely different where owners have shares in a company which entitles them to use of a certain area of that property).
The term community title is similar in meaning to strata – generally strata may be used for vertical subdivision and community title for horizontal.
A community title scheme is established upon the registration of an appropriate survey plan together with a community management statement (CMS).
Single unit developments which are common in Brisbane (your post doesn't state where you intend to do the development) but not across Qld. They are likely to achieve a premium in market however can be more expensive to get thru council. Single unit dwellings are on their own freehold title as opposed to having 'common property' and they don't have a body corporate.CTS – Community Titles Scheme
CMS – Community Management Statement
Body Coprorate – is established at time of registration in the titles office. Comprises owners of all lots in the CTS & is administered by body corporate manager, in accordance with CMS. Resolutions are made from time to time at meetings.
Common Property – all the property outside the lots. Includes exclusive use areas.
BFP – building format plan
SFP – standard format plan
Lot – the individual parcels created for ownership
A CTS must have at least 2 units/parcels (lots) & common property & must have a CMS.
The CMS is usually prepared by solicitor or body corporate agent.
The CMS must be signed by council & is lodged with the plan at the titles office. It sets out rules, deals with exclusive use area, voting, decisions, sinking funds etc relating to body corporate. The body corporate (owners of the 2 units) deal with matters relating to the CTS in accordance with the CMS.
There are 2 ways the property can be surveyed:
1. Building Format Plan.(BFP)
This is more common – the survey is conducted to locate & measure the units and prepare the BFP. Building elements define the extent of each lot. Often an 'exclusive use plan' is also prepared. A survey is conducted to define areas within the common property that can be assigned for the exclusive use of each lot. For example in my property each of the townhouses have their own gardens but share the driveway. All of the area outside the actual dwellings is considered common property however the parts that are fenced off to each will be surveyed and deemed 'exclusive use'.2. the less common option is to subdivide the land into separate lots with common property. A standard format plan is prepared as opposed to a BFP. It still requires a CMS & CTS and the Body corporate still controls the scheme bu each lot is a standard format lot like a conventional subdivision.
The following links may also assist:
http://en.wikipedia.org/wiki/Strata_title
http://www.legislation.qld.gov.au/LEGISLTN/CURRENT/B/BodyCorpA97.pdf
http://www.justice.qld.gov.au/justice-services/body-corporate-and-community-management/online-training#Unit 4: Maintenance
http://www.derm.qld.gov.au/property/titles/guide_to_forms/pdf/guide_form_14_cms_first.pdf
http://www.brisbane.qld.gov.au/bccwr/lib181/chapter5_rdsingleunit_code.pdf
http://www.strata.com.au/aboutstrata.html#What_is_a_Strata_and_Community_Title_
http://www.livinginstrata.com.au/articles/qld/your-body-corporate
In terms of costs….
Surveyors:
– prepare building format plan
– exclusive use areas
– draft services location diagramto give you an idea my Surveyor is charging $2,200 but depending on the project I'd advise you for feasibility purposes to allow up to $5K
Body Corporate Specialist / Solicitor (or you are permitted to do this yourself – see titles office link)
– prepapration of CMSCall your solicitor for a quote.
Council:
– Sealing of plan & CMS
My local council has advised that these are to be lodged with IDAS form 32 and to allow 20 days if everything is in order. They're fees are currently $358 for Council to Seal Building Format Plan & $129 for Council to Seal CMSDepending on which council your development will be in – call or check out the website and find out.
You might also find useful:
http://www.brisbane.qld.gov.au/2010%20Library/2009%20PDF%20and%20Docs/2.%20Planning%20and%20Building/2.5%20How%20apply%20development%20approval/Development_Assess_Fees_Brochure_20112012.pdf
Titles Office:
– lodgement of plan & CMS
I'm to check this but my understanding is: $275.50 & $132.50
http://www.derm.qld.gov.au/services_resources/item_list.php?category_id=152Hope that assists, feel welcome to contact me direct.
Kind regards
Meg
Hi James,
One size doesn't fit all. For my two bobs worth…
You are in a great starting position.
The buiding boost is only around for contracts signed before the end of January 2012 (construction within 2 years).
By buying vacant land or off the plan you minimise your stamp duty costs
Take advantage of the boost, the current great time to build anyone (lot of suppliers and trades keen for work) and build some instant equity thru that.As the boost is not limited to being for your PPOR you could consider 2 new properties (you'll get 2 x the boost)
either – one for yourselves and one as an IP.
Or my favoured options if everything is going well with you living with your in laws buying or building 2 new investment properties and delaying getting back into a PPOR for another 12 months….From what I can see of your numbers you could get approval for say up to $624,000 of property without mortgage insurance (subject to servicability but remember the bank will be able to take into account at least 70% of the rental income). Plus you'd get the extra $20K from the 2 boosts.
So lets say you buy 2 new properties at $312K or less each (total outlay $624K)
Which means a total debt of just under $500K if borrowed to 80% (I'm a fan of avoiding mortgage insurance or extending beyond 80% in any case)
If you budget on 7% interest rate thats $35K per year for the 2 properties
If rented out at $285 per week each that would bring you in $30K before taking out management fees
Additionally you'll have the benefits of depreciation on new property and the immediate capital growth you've created thru new property and you would have taken advantage of the current grant (is not limited to one property).
I would then consider selling one of the 2 properties you've bought a year after you've bought it (so that you are eligible for the 50% CGT discount) and buying or building your next PPOR then with more equity to begin with.
Being that they aren't the properties you are going to live in they could be anywhere in Qld not limited to Toowoomba (which by the way I've nothing against – from everything I've seen is a good steady long term market, just that there may be other areas where you might be able to get into more affordably for an investment property with good capital growth prospects).
All the best with whatever you decide to do.
beedie wrote:Wolfe……As promised links below on our latset development 5 aparments and the house . .just hit the market only couple of weeks overdue……
http://www.realestate.com.au/property-apartment-qld-greenslopes-107993056
http://www.realestate.com.au/property-house-qld-greenslopes-107993066
Hows the civil unrest in the suburbs over your development going my freind?
Your places look great Beedie! All the best with them.
I only just came across this great thread by DWolfe this evening…. If I'd put my goals down at the start of the year would have been….
– to have a successful pregnancy
– to sell our Graceville houses that were mid construction at the start of the yearWe had a difficult pregnancy but now have a beautiful healthy boy – all worth it!
The market was such that we'd built a great product in a currently declined market and hence have rented the Graceville homes out rather than sold (we already hold 12 rental properties so weren't looking to add to that).
We've changed the direction of our business successfully as a result of Graceville – things happen for a reason… now solely focused on client's developments for the next couple of years and then we'll go back to doing both our own and client work.
So by this time next year…..
– I will have sold one of my Victorian rental properties
– we will have built and sold our Gympie – 4 townhouse development
– have leveraged off the current client work we are doing to grow the snowball (pipeline) to the point where we can get back into another development of our own concurrently.
– I'll be more web savvy and if I haven't engaged someone to help will learn how to build a new website for ourselves from scratch, start a regular newsletter
– investigate a business idea I've got for other developers
– all between playing; new Mum, Farmer – we have 500 acres, Builder's Wife, property investorThere – now I feel accountable.
All the best for the rest of 2011 and beyond!
Cheers
Meg
Hi Scott no mates,
Not sure if you are involved personally with the reao site?
If so could you please let me know?
Meg
On the surface Sunni1 you are in a good position to take advantage of some of the many opportunities at the moment.
Without paying mortgage insurance work off 80/20 ie.,
Your existing property is worth $700K
Thats a lending value against it of $560K
Less the $300K you are already using
Leaves $260K to use towards your property investment portfolioA great start!
So lets say you find a house or house and land for $500K
Assuming everything else (your servicing) is approved the bank will lend you up to $400K (80% of $500K)
Which means that you put in the other $100K plus any purchase expenses.
That then leaves you with $160K of equity left in your existing property to go again….First however, what are your goals? Do you want to buy and hold for 20+ years with the view of a normal age retirement or be a more active investor looking for shorter term equity gains and make investing / developing your full time gig within a few years? Is depreciation on a new property important to you or the cash flow of an older property? Do you have a preference for regional or metro (benefits in both)? Do you want to put all your eggs in one basket with 1 higher quality property or development or to buy multiple? Lots of questions for you to work thru….
In terms of financially what you would be approved to do I'd start with a visit to your local bank (if you have a good person you know there already) or there are plenty of good brokers about – many on this site. You could also take a look at some of the major banks websites for a guide – they all have calculators.
If you'd like some specific thoughts on your situation, feel free to contact me.
Kind regards
Meg
Hi Chazzawazza,
From what you've said I'd definately recommend staying off the tools yourself – would cost you more in time (holding costs) and stress than getting in the guys who do this day in day out.
dcwwood made a great point about the current grant that is available in Qld for total value (land and construction) of up to $600K for building contracts signed before then end of January (doesn't have to be built by then). By buying vacant land your stamp duty costs are minimal, you'll benefit from immediate capital gain out of doing the build, costs of building haven't been this good in a long time (suppliers and trades all keen for work), obtain the boost of $10K, depreciation benefits of new home…. list goes on…
Anywhere you turn – opportunities at the moment!
Go for it
Hi Charlitayla,
Goomeri is a lovely little town (we have a farm at nearby Kilkivan).
I'm certainly not against investing in rural areas however I caution over Goomeri's size. You could be lucky enough to get a tenant who'll live there for years without a problem – we don't ever hear of much trouble from Goomeri despite it having a great pub!
Goomeri is in the Gympie regional council. Despite the fact that the vacancy rate is not extremely low in Gympie I would suggest considering Gympie over Goomeri for it's stability of multi industries, size and growth potential. There are currently some great buying opportunities for older properties around $200K and for around $250K you can get into a new property (feel welcome to PM if you'd like specific details).
The region overall at the moment has been relatively flat on the real estate scene but we hold a number of rental properties in the area and our personal outlook is positive; close to beaches, Brisbane, great weather (not far enough north to be overly humid) and also although not in the Surat Basin it's proximity is drawing some people to the area to base their families. Additionally there is exploratory work current underway for the Tiaro Coal Mine (google it) which could have a dramatic effect on the region (think triangle of Gympie to Maryborough and out to Goomeri).
All the best with your choices.
Kind regards
Meg
Hi Bamboocow,
You don't say which city but I'm guessing Perth (from the R40 zoning)?
You could be onto something, or you could end up holding this (could be less than desirable tenants, if the area is) for longer than you intend. What is going to change in the area to bring this suburb up; is there new infrastructure coming, jobs, push of prices into the area by neighbouring suburbs?
Perhaps look into Terry Ryder's 'Hotspotting' thoughts for the area…
All the best
MegEngineers aren't cheap – the figure you've been quoted doesn't sound OTT.
Hi ChazzWazza,
Bit like Alice in Wonderland – which road you take, depends on where you want to go….
Consider your goals, how fast you want to get there, risk tolerance, strategy including tax etc.,
ie., if you have plenty of discretionary time you might want to consider renovations to buy and sell. However this could be affected by your financial situation. If you have little time and a great personal income your choices could be quite different ie., you may choose to build a new property or small development (I'm assuming the $100K is available equity) and hold for at least a few years. So in other words there isn't one size to fit all…..
My personal choice at the moment… I've been investing in both established and new properties for alot of years now and to be honest I'm fed up with tenant problems this year (all of which have been thru Property Managers), I'm progressively taking on the management myself which so far is working out alot better however my strategy is not to hold long term any further properties, in fact have a few on the market at the moment. There are opportunities at the moment to buy properties with development potential at reasonable prices and with current market conditions a great time to build (lots of suppliers and trades keen for work).
In terms of location – I'm not sure where you are, but you have 2 properties already – so I'd recommend some diversity – ie., if you are already in the Qld property market consider Victoria or vice versa.
All the best
Meg
I'm not sure that I'm seeing the benefit to you or the builder in your proposed strategy… By the time you buy the property, pay stamp duty and acquisition costs, holding costs and selling costs – too risky in my view.
You might like to consider instead taking the step back which the current vendor has already done and find a property without the approvals/plans in place that meets local council requirements to be approved and make your margin there either by purchasing under contract subject to approval being made or better still under option agreement which you can then sell onto a third party such as a developer or investor without paying stamp duty (at your end). You will wear the costs of DA and plans but this is factored into your total feasibility versus risk.
Hi Robtan777,
I've bought a couple of properties in the past with DA's / plans already in place. In both those scenarios the vendor needed out due to their own circumstances changing and I was fortunate to have done nicely out of them as I didn't have any lengthy holding costs waiting for approvals to come thru (we started building on the same day as settlement in both instances).
There could be any number of reasons; they might not be financial enough to do the development themselves, may not want to, could (as in one of above responses) simply be making their money out of the improved value on the property thru having the approvals in place or it could be change in circumstances such as the ones I've picked up (one was due to a marriage separation the other a mortgagee sale).Simply comes back to the fundamentals of any investment / development: what is your expected end value against your expected costs.
If its a good deal then go for it.
Meg
