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Id say that strategy is more akin to gambling. Most of the people on here would agree. Thats a quick way to get yourself into some financial trouble and not a investing model i would use.
10% deposit can come from – equity which would be in the form of a loan against other property and assets you own
or cash
Or a deposit guarantee (which is backed by equity in other assets)
Its either you get you solicitor and conveyancer to use a deed of assignment or a nomination form having signed the property your name and or nominee And they agreed to pay you some form of payment for being the initial offerer. Or you have to settle on the property yourself which means getting finance and at 10% deposit you would have to Pay LMI costs as well unless you put in further money.
Nothing in life is free or easy and that strategy is a hit and hope play.
More so for cities then for Regional and rural areas. I have seen some 2 bed unit into 3 bed unit and they can add 50-100k in equity.
but you have to find a large 2 bed unit to start with to make that viable. But I have seen it a couple times and it does work
A lot of older housing used to have 2nd living areas. That was there actual design back 10-20,30 years ago. Not some much in fashion now days. So there is a better use for these spaces.
trying to fit a room in the original floor plan. Because more often then not you don't have to get council approval. Council approvals and development approval, if your buying the property to resell takes extra time, extra money and if your spending 1200-1500 sqm building a new room at say (10 sqm-12 sqm) that's a cost of 12k to 18k (for building alone) plus xouncil fees, drawing fees, interest.
It just doesn't have that good a return as say If you giprock off a 2nd lounge area for 1500 dollars.
Bank will Pay off Line of credit from proceeds but wont have to come value property B again (advantages if you were half way through renovation on a new property etc)
– Bank will make you repay some proceeds from house into House B to ensure their LVR ratio is kept
– Take out 2nd loan on Property A, Can be called Line of Credit.
– Use this as deposit on property B
– Take out 3rd Loan on Property B (Line of Credit + New home loan for new property)
Couldn't really see going to a bank as another option. Unless you said you did work on the property and ordered a upfront valuation see if they will lend on a higher value. But they will also look at when you purchased it. And the new valuer will see the previous valuers report and 9 times out of 10 will value the same unless they can see significant changes and improvements. They don't want to risk their insurance
If you have the cash. You could go out and buy a property tomorrow.
that would mean minimum of 5 percent deposit and 5 % to covert stamp duty and legals. So say 10 % of property's value to be safe.
Unless you do work/ renovate or make improvements to the property. They might not revalue it for up to a year- or if booming markets could be as a minimum 6 months. But a valuers statistical evidence would have to show increasing sale prices in the area.
Banks can value a property higher then contract price but in the loan documents. They state they will lend as a percentage LVR, loan to value ratio of which ever figure is lower between the contract price and the valuation
Ie if you bought at 300k and the value came back 330k they will lend you 80 % on 300k but if the value came back in at 270k they will only lend 80 % on 270k..
It should last for the duration of the property's depreciable lifetime. So on a
Brand new property can be 40 years.
It usually has the amount you can claim
in a table on each year ie year 1 (from year 2012-2013 – $5,000
year 2 – 2013/14 – $4800
etc etc
New bedroom – but only if it can come out of the original floor plan of the house. Ie making a 2 bed home into a 3 bed home provided their is the room. Or increasing a 1 bed unit into a 2. Adds value to property Because of the additional income stream that can come in.
But My top 5 things i would do first to a undesirable property or just to increase its value is. In no order of expense or preference.
Paint
Render
New kitchen
New bathroom tiling
Additional carparking or bedroom (If in areas like Sydney or inner Melbourne)
Then 5 lessor things i would consider
Flooring
Lighting
Landscapping
Outdoor area
Front fence / curb appeal
Its not going to be worth significantly more.
ie if the block can fit 3 homes on it and thats within the development plan. it might only be worth the cost of the plans more ie 5-10k more. Not significantly more. If it was something that was extremely valuable. Ie a uncomplying development approval that has managed to get through council. This can be valuable… A example is say 10 units on a 800sqm block that is not complying with council but got through and got approval. This would be a significant increase.
Depends on if the owner is leaving equity in the property for you.
The bank will only usually value at contract price. The only exceptions i have seen with that.. Are with commercial property, large residential holdings and if the contract had a longer then or 1 year settlement (more often then not if the prices in the area went up significantly the long enough time period is enough to value at the higher amount)
Depends on if you have the money now..
Because you already have approved plans for 2 units/ this means you have submitted those plans to council.
Now all you need to do is get a surveyor to put in their surveying plan.
But they usually wont submit their final plan until the house is demolished and they have a clear site. ( but can have it all drawn up, the intial 1st plan)
You also need to get services hooked up to the new block If torrens titled. This can be arranged by the surveyor.
Then once that plan goes in they allow at least 2-3 months.
Then it will take another 1-2 months for the services and finally at least a 1 month at the LTO before you are issued to New titles.
This can be done at the same time as you are building.
ie you can demolish that house have the builder start building the 2 units and have the subdivision running concurrently.
Make sure you confirm with the builder that they will allow this as some bigger companies only want you to subdivide and have a clear title first before commencing.
445 sqm total. Your development subdivision options could be limited. Best to check with local council about what policy area you are in and seek advice from a Planning consultant. They can determine your options for subdivision. Or you can read the development plan for the local area.
You can then get building designer drafts person ( cheaper then a architect) to draw up a proposal.
You then submit to council obtain planning and building approvals
Obtain demolishing and rebuilding quotes.
Industry averages can be found on BMT tax deprecations on the cost of sqm. for 1,2,3 bed of high medium and low quality with single or double story.
How much is your property worth? How much do you owe? How much would a 3 bed 2.5 bed home be worth in your area.
Australians have a obsession with negative gearing i sware.
Anything for a bit of tax back. Btw theres extra setup costs involved in that structure
RP data also shows the previous photos from when it was last available to purchase if they were there when they advertised last time.
I personally am not going to invest 1-2 million building 10-12 units etc
without knowing 95 % certainty what my end values are going to be and that means I need to
Be able access all sales history's in a suburb not just select ones from auctions and or people that allow the agent to declare their price.
which most people don't.
It wasn't really a theory it was more a assumption on human nature that, the guy believed he had made 200k in the last 7 years . Even if he had shelled out 100k in negatively geared interest payments and maintence
Just off the what you have said. It is a fairly large development proposal and with only 40K i wouldn't think a good first option. As much about the deals your don't purchase then the deals you purchase. If you had said you had 240K then i would say go for it. But 40K isnt enough really.
But if he is willing to sell In stages with settlement on completion. That changes things. You could sign the contract subject to building and planning consent and even subject to the completion of the 3 initial dwellings. with a higher purchase price to cover the interest. I think that looks pretty attractive and not often you could negotiate that type of deal.
Can you draw out any equity from other investments ? a couple Lines of credit etc.
you can always claim the grant later… provided they dont get rid of it.
I think the potential CGT excemption outweights the alternative of having it as a IP for the whole duration. Better off living in there for 6 months taking the grant money and then renting it out after that and being able to claim it as your PPOR if ever sold
When your buying more then 2 properties a year or doing million dollar plus developments. I would say its worth it. When your negotiating a first home purchase, how do
know accurately what a suburbs/house value is.
A lot of those "free" websites only get generic data that is available from auctions or declared sold prices. They won't tell you the current owner, won't tell you the previous sold prices or how many times it has been listed previously. All important information for negotiating 10,000s under the asking price.
i used it once on a asking price of 550k I looked up and saw that the previous owner had purchased at 322k 7 years prior. I thought physiologically if he makes a 200k gain in 7 years he would be happy to perhaps walk away. I offered 1st offer of 522k and it was accepted.
$850 for a yearly subscription to RP Data.
Worth its weight in gold if your purchasing more then one property in a year. OR are developing/renovating
Can link you the web address if you want (Not through RP data direct)
If the site is really that attractive and or you cant afford, cant find people, cannot find investors to come in.
I would buy, get the DA for as many townhouses/houses as possible on the site and then onsell the site.
Perhaps try negotiate a long settlement. maybe 8 months to 1 year.
The key is here if you only have 40K is that You wouldn't be able to afford to settle. so long settlement is crucial (did you say the owner would leave equity in the property, vendor financing a portion of it for you?). 40k would just be enough to get all the planning approvals etc drawn up.
Previous property experience ? first house or 10th house etc.
previous development experience ?
building design/ building experience?
Is your Job occupation relevant to developing, or do you have significant wage that you can buy yourself out of trouble when you invariably make mistakes and delays?
People go out trying to make a killing and get killed more often then not
Experience tells me how much I would need to spend on a home for a renovation. But if you were completly novice. You could write down the external measurements of the building (get off the floor plan) and give that figure. Say 100 sqm minus windows etc to a render and maybe a picture of the house (I would avoid saying
you haven't bought the home yet) and ask for a couple quotes. Get at least 3 then you have a rough idea of costs if you had never done anything before.
For kitchens on low value homes (in adelaide, you can shop at building auction places, as with melb and Sydney. And pick up a new imported kitchen for under 1000 dollars. The quality is low to medium but it's brand new and in condition)
typical figures to spend on a kitchen include 2-2.5 % of the value of the home.
1-1.5 percent for bathrooms/laundry.
You can also get unit rates of a building estimating company, called Cordell's, but you would have to pay. But these give unit rates (combined supply and labour) for things like painting in sqm rendering, electrical plumbing, kitchen installations etc.
