Forum Replies Created
- Originally posted by investron:
I’ve got some rough indications on the costs of subdividing, in my area.
Roads $30/m2
Kerbing + Channelling $35/metre
Water $70/metre
Storm Water $2000/block
Electricity $800/block
Sewerage $40/metre
PLUS Council Fees + Charges + Contributions, Surveyers, Engineers etc. etc.Hi Investron
These figures look great, and complement the “ballpark figure” my accountant (a very experienced property investor who specialises in suburban subdivisions in major cities) told me:
“My ballpark figure is $40,000 per block.”His ballpark figure doesn’t help me much in a Rural Residential zoning, however, when there’s no need for kerb and guttering, nor underground power/phone lines, nor street lights (certainly not those sexy little green federation style ones).
Investron, are your figures for suburban subdivisions? If so, do you have any indication re the cost of a 6.5 metre wide bitumin road with gravel flanges etc in a rural precinct?
Whether you can help out here or not, your figures are very helpful, so thanks muchly.
Cheers
Greg FHaving just read an emailed copy of Joe Scarcella’s information pack on the fully automated collection and Property Management services his company (Prime R/E) offers wrappers around Australia, I strongly suggest you PM him and ask him to email you his Info Pack.
Then pay the money to attend one of Rick’s Boot Camps (check out and follow ALL the links on http://www.webuyhouses.com) Yes, it’s expensive, but you have to pay to get the best info. A key point is that if you want to emulate Steve, his book clearly states that he started his journey by attending expensive, high-profile seminars.
Joe Scarcella manages Rick Otten’s entire portfolio, anywhere in Australia, at highly competitive rates.
You won’t get a better recommendation than that.
Cheers
GregOriginally posted by johngee:Hi Simon, The main idea I have with property is to keep them for long term and rent.[juggle]
Hi John
The “buy and hold” strategy is the only one most PI’s know. I held to that philosophy for the past 18 years, and during that time I found I was the VICTIM OF MARKET FORCES.
I suggest you need to do further reading, and attend some seminars from the few reputable guru’s people on this forum respect.
When you go BEYOND the “buy and hold” strategy, that’s when you become a PROACTIVE property investor, in charge of your own destiny, INDEPENDENTLY OF THE WHIMS AND VAGUERIES OF THE MARKET.
Better to be active/proactive rather than a passive victim.
Summary: do more and more and more reading
Cheers
GregOriginally posted by wrappack:
Regarding selling, I would completely forget about wrapping it. I do not think that anyone will enter a wrap agreement on a vacant, unlivable block, while needing drawdowns to cover building costs, while paying rent…. Also, send out something to all of the mortgage brokers, as they too, will want your business.
Regarding wrapping, why not just offer to vendor finance say a 10% deposit? This will really tip the scales in your favour, compared to the block down the road. I am sure that all mortgage brokers and builders would be aware of the ease of which a loan would be approved (and thus their business would increase), simply due to you leaving some money in the deal…. A good idea would be to heavily advertise and stress the delayed settlement idea, that they can get all of their building permits, council approvals, etc, done on your time and interest bill, and not theirs. They will love this idea!…. Another way of raising finance is through mezzanine lenders…. When you get the quote for the road in square metres, would you please post it, along with your structure. Also look at ALL of the posts in the past-yes it will take ages (part. without broadband, and especially if telstrawankers have put a pair gain on your line)Hi everyone
Thanks for all your replies. Now I’m able to roll my sleeves up thanks to your hefty info.
Wrappack, I was genuinely sorry to hear about your trial separation from your wife. This is always a really trying time for all concerned, especially if you have kids. I wish you both the very, very best of luck in sorting it out amicably.
Thanks SO MUCH for the awesome amount of subdivision info and tips. Your tips on marketing to local mortgage brokers, plus offering to leave 10% into each deal are brilliant. And yes, I did get a clear answer from our lawyer re structure, but first may I start with 2 quick questions:
1. You mentioned telstrawankers putting a ‘pair gain’ on our phone line. What’s a pair gain?2. What’s a mezzanine lender? Are they venture capitalists?
Now it’s my turn to reciprocate:
STRUCTURE: My wife and I are forming a Joint Venture with another investor. Our skills, experience and expertise complement each other nicely, and we are mentally at the same stage, keen to keep moving speedily and proactively along our learning curves as RE investors / developers/ wrappers. Both our JV partner and ourselves already have our separate Family Trusts in place. Our ‘wrap savvy’ lawyer advised us to set up a SEPARATE Trust (plus a separate Pty Ltd company as its trustee) for the purposes of this subdivision. Our two Family trusts will each own 50% of the units in the new trust structure, with 3 directors:
~ Our JV partner with 2 votes
~ Myself with 1 vote
~ My wife with 1 vote
Assuming we are happy with each others contribution /vision etc throughout this current subdivision we intend to keep our JV association going afterwards. We asked our solicitor what we should do if /when we wanted to do our 2nd, 3rd, 4th subdivision etc together. He urged us most strongly to DISSOLVE our 1st Subdivision Trust and set up a totally new 2nd Subdivision Trust, 3rd Subdivision Trust etc etc. Why? In his words: “What happens if someone falls into a hole, breaks a leg (or worse) and sues your 1st Subdivision Trust? You want to INSULATE or CONTAIN THE DAMAGE within this Trust structure so it doesn’t stop you moving ahead with new projects. The $1500 cost to set up a new trust for each new venture is necessary insurance to make sure you won’t be tied up for years in possible legal battles etc when you’ve finished and sold all the blocks years ago and want to move on.”FINANCE:
Our Mortgage Broker says we apply for finance in the name of our new 1st Subdivision Trust structure, and the banks will require each director to personally guarantee the debt.COST OF ROAD, KERB & GUTTERING Vs. GRAVEL FRINGE QUOTES etc etc: I’ll post this info when we get our “ballpark qoutes” back from the 2 companies we have approached for quotes to Project manage the whole project.
WRAPPING LAND
Sorry if I misled you. We have no intention of wrapping land. We’re investigating the feasibility of building and marketing house and land packages, some of which we may wrap if we can keep the cost of such brand new houses at an entry level price which suits our wrappees’ demographic. By the way, I was impressed with your idea of leaving 10% in the deal as a way of sweetening the deal and advertising it to local mortgage brokers. I assume this is not a wrap, but a 2nd Mortgage carry back? Unless you don’t trust the security 2nd mortgage carry back gives you as the vendor, and have a cleverer way of getting stronger security than 2nd mortgage offers?I’ll keep you posted.
Cheers
Greg
Originally posted by Seano:What is PMing- I am new to this site. Drop us an email some time buddy Seano
Hi Investron and Seano
Investron, Peter Comben’s http://www.smartpropertydevelopment.com.au
is an excellent site. I have it saved to my Favourites list. I appreciate your tip about running the private adverts asking for “Expressions of Interest” which we can take to the bank.Seano, I’ve just sent you a PM, to show you how easy it is. A PM (Private Message) is where you click the PM button on the bottom LHS of your (or anybody else’s) post to send a “Private Message” to a respondant. It’s handy if you are prepared to say something in private to a respondant which you don’t want advertised on the forum
Cheers and Many Thanks
GregOriginally posted by Terryw:Hi Greg You might want to look at http://www.chrisbatten.com.au as there is some information there on best structures for doing developments etc. You may have to may for the good info, but I am sure it will be worth it. Terryw
Hi Terry and Calvin
Terry, thanks SO MUCH for the tip re http://www.chrisbatten.com.au I logged on and his site looks AWESOME. Have no time now to dive into it as deeply as it obviously deserves from a quick scan of his home page. I’ll devour it tonight.Calvin, have a quick look at the current post on Mt Isa, where I’ve made some comments to the poster there. He asked if he should buy in Mt Isa, I said I own some QUALITY brick properties there, gave him a couple of agent suggestions and then said (I’m paraphrasing):
“Bottom line. Buy one or two HOUSES in Mt Isa if you must (to get it out of your system so to speak). Then get yourself off to a seminar run by a reputable guru (Steve McKnight’s or Rick Otten @ http://www.webuyhouses.com.au ). The key point is you’ll make money ANYWHERE, AT ANY TIME IN THE REAL ESTATE CYCLE, as long as you move beyond the traditional BUY AND HOLD mentality, and get into wraps, lease options, sandwich leases etc.”I know a mate who flew from Perth to attend Rick’s Boot Camp in Surfers Paradise, paid nearly $5000 for the privilege (plus airfares etc) and said it blew his mind and he’ll make his investment back easily in the next few months.
Cheers
GregOriginally posted by calvin@thirty4:Sorry Greg F, I only came accross your thread today. My father origianlly wanted to do something like this (WA) but it fell thru because he couldn’t raise the capital. I got excited when he started as I am for you, simply because it would have been the once in a life time deal for my dad…. sorry again for not being helpful. C@34
Hi Calvin
You’ve got nothing to apologise for MATE, unless you’re the Moderator. You’re not, are you? Thought it was Peter Comben.
I was saddened to hear your dad’s opportunity didn’t work out. My secret? This is not my “once in a lifetime opportunity.”
I have spent, and am continuing to spend a fair bit of money on educating myself in learning how to apply a rich, diverse basket of RE strategies. My business partner and I are in the process of working out our offer to purchase the block. We’ve written down our list of 5 creative offers. We’re both experienced RE investors in our own rights, and this particular deal is our NEXT STEP ALONG OUR LONG, ONGOING LEARNING CURVES. This deal is definately our next step up the ladder, but when (not if) this turns into healthy +CF with capital gains, we’ll do another deal, and another, and another….
Bottom line? We’re not only learning to become developers, but we may also apply wrap and lease option strategies as back ups if the RE market takes a sudden swing down and land sales are slow. So…
WE HAVE A PLAN..[cap][biggrin]
I appreciated your comments, Calvin. Thanks
GregHi Steve
The fellow in the article pushing Capital Gain puts a strong case, but he’s also probably a developers agent. To learn from him (and he has got something to teach you), pay close attention to his summary paragraph:
“There are ways to generate positive cash-flow from property but to achieve the greatest returns you need to look at investing in high growth properties and you must also utilise other strategies such as purchasing property below market value & adding value to achieve maximum rental yields.”
Bottom line is this sentence: “There are ways to generate positive cash-flow from property….”
I suspect he’s talking about:
~ Becoming a developer yourself
~ Become a wrapper, flipper, lease-optioner, sandwich lease man etc etcAs I said, the key is knowledge, and you’ll have to pay a reputable guru to get it. I wish you not only good luck but more importantly GOOD FORTUNE in your ongoing learning curve.
Cheers
GregHi Steve
I bought in Mt Isa before the rush, and am doing quite nicely.
Yack’s comment: Will they still be +Cf when interest rates rise 2-3% is valid, but I have a slightly different slant on it. Pundits tell us that won’t happen for quite a few years to come (whether rates rise that much in the short term is your call).
Speak to:
1. Lorraine L’Estrange at Jays RE (0409 485 856) and
2. Sonja at Ray White (07 4743 9499)
They are both straight shooters. Tell them “Greg from Gympie” suggested you give her a call and that “Greg spoke very highly of you, especially the fact that you guided him into the good streets, and well clear of the bad streets.” (You need to tour Mt Isa on a street by street basis).I have a number of quality units and townhouses (no w/board, all of them are brick/block, 2 are brand new 3BR, 2bath, DLUG, reverse cycle a/c executive townhouses), and, critically, all of them are in very well regarded areas. I enjoy very close to 100% occupancy, but there was one flat which was vacant for nearly 2 months. I dropped the rent, and it rented very quickly.
If you want rental security:
~ Buy a good quality HOUSE in a good area (w/board/zincalum etc is fine if it’s in a good area) rather than a block of flats: there’s a lot of old, rubbishy flats in the Isa, and houses are much easier to rent in the inevitable hard times).
~ If you can get anything in Happy Valley, GRAB IT: more expensive, but highly desirable area.
~ Ask Lorraine and Sonja to let you know immediately anything in Happy Valley comes onto the market
~ Don’t rush, you’ve got plenty of time
~ Do it in the knowledge that you won’t get capital growth for quite a long time
~ Feel comfortable dabbling in the market while you…
…simultaneously spend money on seminars etc educating yourself to the next stage/s BEYOND THE TRADITIONAL “BUY AND HOLD” PHILOSOPHY.Steve, in fact, that’s my biggest tip of all. Buy one or two HOUSES in Mt Isa to get it out of your system (so to speak), then spend the money to get yourself to a well regarded, quality event such as Rick Otten’s Boot Camp
http://www.webuyhouses.com.auIt’ll cost, but it’ll change your life helping you get into wraps and lease options, sandwich leases etc so you can make money in Real Estate INDEPENDENTLY OF THE STATE OF THE MARKET. That way, you are taking out de facto insurance against future interest rate rises. As long as you KEEP MOVING ALONG YOUR PERSONAL RE LEARNING CURVE, everything will work out fine.
Cheers
GregOriginally posted by Seano:Wow I might try to walk behind you to catch all the money fallng out your pockets(joking)…. I hope you get some more answers Greg, sound like you’re doing great. Rock on buddy
SeanoSeano, looks like it’s you and me, buddy (for the time being anyway). Thanks for your support, and I’ll ring my RE agent to follow up your suggestion re getting sample contracts off them.
I’m off to see my lawyer today, so I’ll keep you posted on the legal technicalities.
Cheers and thanks again
Greg
PS: I’ll be PMing you soon to answer your other questions
If you guys keep sharing your expertise/tips with me, I’m more than happy to reciprocate. I’ll let you know what my lawyer says.Hi Folks
At last count, around 140 people have read my post, but only Seono (thanks so much mate) has tried to help me out with their experiences / advice.
I’m happy to keep spending money on lawyers, surveyors, town planners etc etc etc (I’ve already set up my Family Trust, have purchased the Wrap Kit plus stacks of other RE products) but I was hoping a few people out there might be able to shed some precise, detailed advice on the more technical aspects (which is what I thought this thread was supposed to be about).
My current thinking re building win/wins to bring my son plus a couple of friends into the deal is to let them buy a small number of blocks off the plan at wholesale prices (ie., what it cost me per square metre) in return for their deposit cash up front. This way they get title on property as their ultimate security, and I get to use their deposit.
DOES ANYONE HAVE ANY SAMPLE “OFF THE PLAN” CONTRACTS you might be able to scan into your computer and email me? If so, I’d be consumed with happiness and gratitude. [hat][headset][helmet][brave][chief][jester][joker][laugh4][lmao][mad][mario][mickey][party][rolleyesanim][santa][snorkle][sunny][thumbsupanim][toff][tongue]
At the risk of overly repeating myself:
1. “If you guys keep sharing your expertise/tips with me, I’m more than happy to reciprocate”2. Moderator, where are you?
3. Help
Cheers
GregHi Brenda
Key questions to ask Council:
~ What is your Headworks charge?
~ Will you DEFER HEADWORKS CHARGES UNTIL I SELL THE BLOCK and/or build on it myself? (Crucially, most councils in small towns are flexible, support development, and prepared to negotiate)
~ What are your other charges?
~ What is the exact location of sewer and water pipes on the block? Crucial re placing buildings on the blocks
~ What “footprint” do you allow (ie., the ratio of the total area of the slab to total area of the block, crucial if you want to build units etc)
~ What is the zoning on the block?
~ How many metres street frontage do you require on each block? Another crucial question, because if you don’t get hung up on the “neatness” of linking your new boundary line to the line on the back block, you may be able to run the boundary across the block at a slight angle, thus saving yourself the expense of moving the carport to the other side.All the above is academic. The key question, as you don’t intend building on it yourself, is “Will someone buy my new block, or will it sit there unsold for 5 years?”
2000 sq m is a good size. Apart from your lawnmowing problems, does the town enjoy high rental rates for quality properties? If so, and you can buy another IP cheaper than building it yourself (remember, new brick buildings are much better re depreciation etc) would it be more feasible building a duplex or triplex or block of 4 units (strata or non-strata)?
Good luck
GregOriginally posted by Seano:I hope I was some help for you, at least you got a reply hey. Seano
Hi Seano, and THANKS SO MUCH for your reply! It was quite lonely hanging out in cyberspace for so long (but hey, I’m having fun!) [bike2]
Went to see the Town Planner, and have an appointment with a wrap savvy local lawyer today (a friend of mine “trained him”). Boy, did the Town Planner have some GREAT NEWS:
~ The 23.4 ha is currently zoned 1ha (ie., 10,000 sq.m)subdivision with a 50m frontage to the bitumin road, but the NEW Draft Town Plan soon to be approved by govt. allows for 6,000sq.m lots with a 40m road frontage.[cowboy][cowboy][drummer]
~ He gave me a CD of the entire Draft Plan
~ He said “If I had the money I’d be doing it myself”. I didn’t have the heart to tell him I’m trying to stitch up the deal with precious little of my own money.[cigar]
~ 23.4ha = 234,000sqm div. by 6000sqm = 39 lots in theory. Allow parks and gardens space and road (6.5m wide bitumin, with 4m gravel sides = approx 20m frontage for the road, you’ll maybe get 32 -34 saleable lots.”
~ Doing my feasibility figures on 20 lots, treating anything else as a bonus
~ Asking for a 6 month settlement on the purchasing contract, to allow time to get my survey plan drawn up and into council.
~ A local Shire Council is hungry for sub-contracting work (he tipped me off they’re doing a nearby subdivision) so I rang Vince, this Council’s Works Dept overseer. Vince is giving me an approximate price for the road per lineal metre so I can start getting a ballpark idea of key costs.
~ He gave me the names of key surveyors and Project Managers with local experience/track record in managing such projects.
~ Suggested I put in the application as a 3 stage development:
~ Stage 1, cut off 5 or 6 blocks already on the existing bitumin road, sell them to get my money back I spent buying the block (land for Stage 2 and 3 is free!!)
~Stage 2: Build road half way up the block, carve up and sell say 16 blocks
~ Stage 3: Finish building road, carve up and sell the other blocks
~ Boy, is this guy GREAT VALUE [gossip]If you guys keep sharing your expertise/tips with me, I’m more than happy to reciprocate. I’ll let you know what my lawyer says.
Cheers
GregModerator, where are you?
No one seems to want to answer my rural land subdivision questions. [confused2]
Do I need to post this in another section?
I’m keen to learn what’s involved in selling blocks of land “off the plan” in my proposed subdivision. Does anyone have any Contract templates which might help me?
Cheers
Greg F
PS: It’s embarrasing having to “answer” my own post.[blush2]Our youngest son got out the movie “Big Fish” last night, and my wife and I watched it with him (Danny DeVito, Ewam McGregor, Helena Bonham Carter etc)….Big Fish is BRILLIANT and SO, SOOOOOO relevant to this topic of our goals in life, about a son’s attempt to:
1. Understand and
2. Sum up his father’s lifeYou’ll love the ending.
A real feel good, human, family / personal relationships based, down to earth masterpiece. I’m off to buy the book which inspired the movie.
Oh, and my personal goal in life?
Nirvikalpa Samadhi [angel] after a life of giving to others (do a Google search on it, and you’ll really know how weird I am! It’s the Yogi Bear in me that made me say it [biggrin])
Cheers
GregOriginally posted by Jeff Butters:I wanted to get it at 128k, now it is getting closer….Owner will not go below 135k. I want to consider alternative offers but am unsure of sums. I thought to ask for 2nd mortgage. I would buy the house for less than what he wants, but he will eventually get what he wants over time with his interest payments on the second mortgage. Can anyone advise what methods are available? Do you buy property at less because you are paying second mortgage interest, or do you buy it for more because they are being flexible with sale terms? If the latter it cuts down cash flow due to higher interest rate, how much interest rate do you offer for it?
Hi Jeff,
I’m sorry I don’t have specific advice to offer you, because I’m facing a similar position myself and want to know the answer to your questions from more experienced forumites. However, if I understand the process correctly, you / we make 2 written offers, for example:
1. Cash 128k. OR
2. $135k in 2 parts:
a) 120k /125k cash (whatever you can get away with) PLUS
10k / 15k as a 2nd mortgage.To me, the goal is to get the vendor to pay your deposit for you, thus allowing you to buy a 2nd (different) IP.
My key concerns are:
1. How do the banks view this sort of deal?
2. Will asking for a 2nd mortgage prejudice your chances of getting bank finance?
3. Do the banks (or more specifically the mortgage insurers) put more onerous terms/vary their servicibility formula in some way?I’m particularly keen to hear comments re the role/attitude of mortgage insurers (can we use 2nd mortgage vendors finance to allow us to avoid paying MI if the collective deposit: cash plus vendors 2nd mortgage, is above 20%?
Looking forward to the comments of other forumites.
Greg FOriginally posted by Fablan:Get a new broker! My broker has financed over 60 properties for me…. As far as I could find they are also the only ones left that do fully dislosed (in writting) wrap finance. So there are still good ones out there…
BlanyiHi Blanyi
I’m just about to start out as a wrapper. Could you let me know, either here or by PM, contact details for your mortgage broker, and/or which banks offer fully disclosed wrap finance?
Cheers
Greg FOriginally posted by SALACIOUS:Hi Greg,
Small world my wife was a school teacer at kiora.
Are all your ip’s in one area and with 16 of them how do you find time to build?Good luck and hope someone answeres questions soon cause im getting older not richer.
Dom[biggrin]Kiora, just down the road? It really IS a small world!! I used to be a travelling Learning Support teacher, and Kiora was on my beat for a short while. Now I teach High School Special Education kids, and love it (strange, huh)!!
I’m sorry if I misled you: Niki and I own 16 IP’s, but we still haven’t built our first one yet: we’re only just starting out as aspiring owner builders. And no, they’re not all in one place, they’re spread all over Qld: the Sunshine Coast (Mooloolaba, Maleny/Montville) Gladstone, Gympie, Mt Isa etc).
Sorry I can’t help more, but I’m hoping to learn more of the specifics of what’s needed to become an owner builder, and specifically, can I call myself an owner builder when I really have no intention of ever living in the places I want to build?
Cheers
Greg FOriginally posted by SALACIOUS:GregF,
Hi,
My question is what is the advantage of registeringas an owner builder?
Thanks Dom[biggrin]Hi Dom
You and I are in the same boat, chief. My wife and I own 16 IP’s, all bought pre-built, but we’re just about to launch into our steepest learning curve by:
1. Buying a block suitable for sub-dividing
2. Beg forumites to help re sub-contracting advice
3. Research pros and cons of:
a) Getting builder for whole project VS
b) Sub-contracting out bit by bitAnyone out there who can answer Dom’s question with the usual precision??
Cheers
Greg[blush2]
Originally posted by Monopoly:Originally posted by Greg F:NOW WHO’S THE WISE ONE????? [blink] Too true Greg!!!! Jo
Aww shucks, Jo, now I’m blushing. My red locks are quickly being matched by my rosy cheeks[blush2]
Cheers
Greg
10k / 15k as a 2nd mortgage.
