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GPD
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if youve got that much spare time on your hands, i dont see a problem with expanding into property. if your business is self sufficient then you can afford to.
i have a couple of associates in a similar position to you. whereas they act as full financial backing, i handle planning building and sales, and split profits. because im not financially tied to it, it works as a sideline for me, and we both make substantial profits. perhaps you can look at this option with another developer..
Thanks for the feedback everyone. There’s been some interesting points raised, ill try and answer some qs as best as possible.
As far as the land price goes, this is where the market currently is in Darwin. The cheapest house block in a new suburb would be around $200k-$300k in the same suburb. Most blocks are 450-900m2. I’ve based this example on a block I purchased about a week ago for $270k, and have intentions of building a $400k house (my cost as the builder). This property is expected to reach a sale price of $900k, as the neighbouring property of the same quality recently fetched this price.
I doubt there will be much difficulty in sparking the public’s interest in such a system, the way the market is here at the moment, people have literally been camping out over night to secure a block of land at new releases. At a new suburb called Lyons, a release of 6 blocks saw more than 15 people camping on the sidewalk from up to 5 days prior to the release. And these blocks all sold in excess of $320k.
With the build cost, $400k is fairly standard contract price for a 4bed 2 bath double garage home. Apart from our building code being one of the strictest in the country, we overpay for nearly all material as it’s all got to be sent up from down south, and most tradies are on higher incomes comparing to wages in other states. Obviously this makes our labour more expensive.The reason I suggested 20years is to avoid the operation having any effect on the current market. If a surge of 200 blocks were released at lower prices, it could possibly flood the market and lower values for other homes. As mentioned such a period is a burden but I consider it necessary.
The management of resale of these blocks from the developers’ perspective would have to be as a caveat, the developer would maintain some of the equity in the property, which could cause some difficulties as far as future lending goes. To solve this, the developer could offer a written consent to the bank to approve reasonable and viable lending within the boundaries.
The Territory Insurance Office implemented a similar system earlier this year in conjunction with the NT Gov to address the affordable housing dilemma. They basically buy up to 30% of your property and maintain ownership until you have paid them off. If you sell prior to doing this, your debt is 30% of the current market value, minus any improvements you have made to your home. It allows first home buyers/lower income families to enter the market at a reduced loan, so it suits their needs for long term housing. As far as future lending against the property is concerned, it is granted by Gov consent for approved purposes/amounts. http://www.tiofi.com.au/wps/wcm/connect/58a59c804eec8371bd70fd80398ce46e/FACT_isHomeStartNTforyou02.pdf?MOD=AJPERES&CACHEID=58a59c804eec8371bd70fd80398ce46eIn saying the above, this system proves much more appealing to the home buyer as if they manage to complete the 20 year period, the initial saving they made on purchase is theirs to keep. As far as the potential investors are concerned, this system allows them to buy a property for 20% less than usual, but still receive appreciation on the properties full price. With the lower loan, rents would be more than sufficient to cover repayments, and effectively the property services itself like a good investment should. Furthermore, the interest repayments would be lower on the smaller loan. For example, @ 7% a $500k loan incurs $35k interest p.a. whereas a $400k (20% less) loan @ 7% only brings $28k interest p.a. saving the investor an extra $7k per year. On these figures, if the property was to appreciate from $500k up to $600k, the 20% owed to the developer would go from $100k to $120k. Even if the investor was to sell prior to the 20 year period, they have still acquired $80k in appreciation.
It’s an interesting question, to ask who would give away the $140k, but if it’s a process that could be repeated, serve well for the community and market whilst making a substantial profit, then its better to make a little less, a lot more often. Even with such a reduction in profits, the exercise is still more than worthwhile to execute the subdivision. The Company aims to make profits from the construction of the homes after the land is purchased. As previously mentioned, if the buyer opts to use their own builder, they will NOT qualify for the same price reduction on the block. (Only 25% of land value)
Hope this answered your qs and look forward to reading your responses. Cheers
<font color=”#000000″>i think thats a bit underpriced, but brisbane has a much more relaxed building code than darwin.
in saying so, up here, id bank on $200-$250k per unit to fully develop the property.
i cant be too much more specific than that unfortunatley as i am unaware of the building code down there, but in regard to the ground floor parking, concrete is obviously one of your major costs, to give you a figure in mind, i poured a 180m2 suspended slab up here and it was worth around $25k, without the cost of formwork, this was also for a elevated home so the load bearing rating of it would be quite minimal comparing to a larger unit complex.
when i was looking at doing a 4 storey 12 unit complex, i got a draftsman to do some plans for about $2500. that was him designing and drafting. theres not really a much better way that im aware of, i doubt youll find a set of plans for such a complex that fit trouble free on your block. always worth a look..
hope this helps..</font>
Hi,
im new to the site, but like many others have found alot of interesting and useful information in my short time here.im 21, and got into property just over 2 years ago, im in a partnership with a friend from school. we purchased two blocks of land in 2007 for $630,000. both were zoned for 4 storey 15 unit complex's. we on sold the blocks after a few months for $ $850,000. purchased a MD 1200sqm block shortly after for $230k and built 4x3bdr townhouses. sold 3 of the townhouses for $450k average, leaving the 4th as equity. since have secured 2 more duplex blocks, one partially through construction, the second to follow.
paid approx $350k each block, but in a very good suburb where the average 3bdr house price has reached $867k.id like to continue along this line for the time being, as long as the market stays as healthy as it is. and as far as goals go, id like to aquire a few investment properties and perhaps one day engage in doing a larger unit development.
i guess most of my lessons learnt so far have been with tradies, which is nothing unusual. some real estate agents have been very dodgy and tried cutting personal deals with vendors whilst ive been negotiating offers. i guess if you ever sense that, search the block your after and go straight to the vendor. some people dont like to be directly contacted but its in their interests.
im still learning alot, but its a great career as its always challenging.cheers.
