Forum Replies Created
No worries Simone,
A planner or designer will have all the contacts you need.
Keep learning, and keep going along!
Simone,
It could be better or worse than your projections!
For example there are CGT and GST issues to consider.Often the margin is directly related to the initial land value.
That is to say, the costs for subdividing expensive land are similar to the costs for cheaper land.
The building – in essence – just creates a purpose for the land.Subdividing a $1m allotment will cost a similar amount to subdividing a $300,000 allotment.
If we assume that amount to be say $50,000, then this helps explain it.If after subdivision each allotment is worth say 80% of its original value then:
$300,000 x 2 x 80% = $480,000….less $50,000 = $430,000….margin = $130,000 (before adjustments)
You may not make any additional profit by building on the land.$1,000,000 x 2 x 80% = $1,600,000….less $50,000 = $1,550,000….margin = $550,000 (before adjustments)
Added to this are the complexities around the value of any building retained, the cash flow, and holding costs.
But probably most important (in terms of margin) is the density yield. If you can develop three allotments, the yield will be demonstrably higher without the costs being too dissimilar to a proposal for two.A couple of quotes from unlikely sources. For fans of the sweet science.
Mike Tyson: "Everyone has a plan until they get punched in the face."
To me it says be ready to accept things as they are.“The Service you do for others is the rent you pay for your room here on Earth.” Ali.
“If my mind can conceive it, and my heart can believe it – then I can achieve it.” Also Ali.
Subdividing a property "horizontally" is generally known as strata titling.
As pointed out there are a lot of planning and compliance costs to be met.
The value of the property will probably dictate whether this is worthwhile.
The first step is to establish if it can be done – perhaps talk to the local planning department.
Then, if it can be done, at what cost? Talk to a surveyor or private planner.Kris07,
All good advice above, but perhaps I can clear up a couple of issues.
Funding for developments of more than two dwellings is tough since the GFC. Much easier to develop two dwellings.
In your case – and as you alluded to – it may be prudent to subdivide the land first. Once this is done you have two titles and the existing property can be excised from the larger allotment and set aside for financing purposes.As Ashley pointed out, this is generally done when construction is well progressed. However, this can be overcome by subdividing the land firstly into two lots, and then developing the second lot as two dwellings. When the two new dwellings are under-way the subdivision of those two properties can commence. Thus, you will end up with three titles.
This should all be done under an overarching planning application so that the municipal planners are aware of, and supportive of, the proposed development.
I am a subscriber. If nothing else it gives an insight into a niche market.
The bargains may be those properties that have been listed for a while.
David,
BMT quantity surveyors have good information on pricing. Google them.
Depending on what you are trying to measure, different feasibility formats are around.If it's a development project, the 3/3 theory is a good starting point:
1/3 = acquisition, 1/3 = development costs, and 1/3 = margin.
Buy for $500,000, develop for $500,000, end value of $1.5m.Most dwellings seem to look the same for tenants. A bedroom is a bedroom. So they tend to look then for the points of difference, and I believe these are most notable in kitchens and bathrooms.
Getting back to the original question about Granny Flats particularly.
Generally it is – in planning terms at least – an accepted right for people to build a "dependant person's unit" in their backyard. As such there is often no need for planning permission as long as the guidelines are met.
These guidelines are to do with size (floor area and height) and use – they must be for a dependant person.
For the sake of clarity, I would also note that Victoria has a similar sounding zone (R1Z) which refers to land zoned for residential use. Unfortunately there are no rigidly prescribed densities within the Victorian Planning Scheme, instead this is a negotiable outcome based on planning arguments and subjective advice.
Or, in simpler terms, a carriageway easement allows for part of the land to be used for access to the property. So, all or part of that land within the easement will "belong" to one title, but be accessible by the other landholders.
Again, these costs vary a lot from "off the shelf" or volume builders at $1,000/m2 or so, to custom built houses and townhouses at around $1,500/m2, and then more sophisticated buildings in the $2,000 – $5,000 range.
With regard to the last two posts particularly:
715m2 is an adequate size to subdivide, not withstanding any preclusion on title or by planning overlay.
The size of the land (220m2) is more of a practical concern than a statutory concern. That is to say, a density of 2:715m2 is an average of 362.5m2 per dwelling which again is adequate.
120m2 is enough for a well designed 3br dwelling. And there are 9.29m2 to a square.
A separate driveway is usually worth the effort, or you could consider a carriageway easement to avoid common property.
And to jasedc5r's question; council may permit the construction of a double storey dwelling to the rear of a property (we have had a number approved) but it does require more detailed and sensitive design and planning. The usual issues with this sort of proposal are overlooking and overshadowing. If these two issues (and the other controls) are handled sensitively there is every chance of a permit being granted.
Keiko,
Average m2 cost for this type of construction varies according to all sorts of inputs, however, expect to pay between $1,500 and $2,000 per m2 at the lower end.
Because these costs are so significant it's important to get the planning and unit yields right. Look to make the dwellings feel spacious without having too much "superfluous" space. Good planning may also mean an additional unit yield that will help with returns if not costs.
CeeKay,
Perhaps you could consider using what you already have to get what you want.
If you have the right type of property, you may be able to redevelop and subdivide that property so that you can down-size and invest at the same time.
For example, you could build a second dwelling on the land – suited to your needs – and then either sell or rent out the existing dwelling. This obviously won't work in all situations, but it may be worth considering.
Great advice Richard. From bitter experience I can concur it's worth the effort to get it right.
If you engage a consultant to make inspection specifically on your behalf, the advice you receive should then be impartial. A matter of hundreds of dollars now, may alert you to a much more expensive problem you may not otherwise have considered.
Jacedc,
I would recommend doing the early sums and understanding what you want from the endeavour.
Here's a simple feasibility exercise that works well:
The 3/3 exercise.
1/3 = Land acquisition costs
1/3 = Development costs
1/3 = Margin (before taxes)This will help you to understand the the budget and land size constraints.
For example if you purchase land for say $600,000, look to spend a further $600,000 on development costs and to end up with "as if complete" values of $1.8m. In this case it might be 3 dwellings with a value of $600,000 each. This in turn means you would be looking for land suitable to build three dwellings at a cost of $600,000.
Once you have established your budget and land constraints you can more easily communicate this to agents and vendors. Then get some good planning advice prior to making your offer. A consultant will be able to tell you what title and planning constraints exist and will also be able to help with land use planning to ensure it all works.
Best of luck with your research.
Solomon,
Thanks for the kind words about our site.
It's not an easy process to get a covenant removed, but there is sometimes ambiguous wording that can make the process much simpler. If you think it's an awesome opportunity it may be worthwhile to have someone check the covenant for you.
Matt,
I like you post above, and the considered approach you are suggesting is instructive.
I would however take care with the first point. A greater number of units – in my experience – does not always generate a greater profit. I think there are a few reasons for this; a) there can be increased infrastructure and contributions costs, and car parking can get expensive if you need to go underground, b) the value of the completed dwellings may be diminished by the density, that is to say that 4 dwellings on a lot may be perceived (and priced) differently to say 8 dwellings on the same allotment, and c) there are less builders competing for the work once you get above say three units on a site.
