Forum Replies Created
- I have to agree with darren, level blocks arent particularly great when the time comes to subdivide.Make sure the block slopes to the street,If it doesnt and your truley buying for this potential WALK AWAY from it.
Why? I can understand that the land on the down side of the road would have worse views, and thus be worth a bit less, but then again, you would be paying less for it to start with.
What would be the problem with level land? I would have thought it to be ideal?
Any idea of the costs involved? Is it weekdays/weekends/correspondence?
Pair gain- the bane of many dial up users. Lets say everyone in the street gets 56k dial up. Then, a few new subdivisions by Greg F and Co go in. Obviously, telstra must pipe some more telecommunications equiptment in. They can do it properly, or cheaply. Guess which way a company making billions of dollars a year does it? Cheaply. I dont know the ins and outs, but they put pair gains on the line, which means everyone may only get 33k, or 28k, etc. Happened to me, overnight, went from 56k to 28k. Absolute bastards those telstrawankers.
Regarding mezz lenders. Say a bank will lend 70% to a project, then you need to have/raise 30%. A mezzanine lender tops up the equity, allowing the deal to go ahead easier. I understand that the going rate is if you put up all of the 30%, then you receive half of the profits, but can obviously be negotiated. The yourproject site has a good (but not brilliant) section on finance.
Go through all the posts in the finance section, paying particular notice to the comments made by the brilliant and knowledgable Michael R.
Chris battens site seems to say to get a hybrid disc. trust, and get all the prop in a unit trust. Havent bought his papers (yet). He also seems to say that if you set up the correct structure to start with, you can avoid stamp duty and gst on things you dont sell. (In different structures you may have to pay gst and tax, even if it is NOT sold!) I would not proceed without this info!
Regarding voting rites, should’t it go on the amount of cash that others are putting in?
Nice to see your enthousiasm Greg, but I think you may need to tone down your comments regarding the amount of help you feel as though you are receiving. My understanding is that moderators are mainly here to stop the arguments and flaming, and perhaps offer some guidance, but not to answer all of our questions. The info which we seek is scattered around, there are few people who know it, and it is a bit like putting a jigsaw puzzle together. Each piece fills in the picture just that little bit more, but you still need more, more, more, more, and even more info after the last piece you found. Ill give you a few starters, to bring you up to about where I am, which will really reduce the amount of time you need in your search
I am also searching for almost exactly the same info as yourself, as I intend to do almost the same in the near future. Unfortunately, Mr and Mrs Wrappack are having a trial seperation, so that my property plans are somewhat on ice at the moment. I think that if this proceeds, I may have to just try and get ds’s and then sell with approvals in place for a profit, as opposed to doing the development myself, which is what I really want to do. Again, think of contingencies.
Regarding trust structure, check out Chris Battens web site- I havent subscribed, but I certainly will, prior to starting. You must have the correct structure in place, prior to putting your offer in writing. Why? well you dont want a contract for sale in Chris R’s name, then be up for double stamp duty when putting it into your trust/unit trust. As for questions regarding finance, you can put them into the finance section here, or, go to the acounting and tax subsection in somersoft.com.au, which has a HUGE information database. Getting your structure right is probably the number one thing you need to do yesterday, because then you can start making offers- either by a subject to da approval for subdivision, or by an option agreement.
Buy the book ‘Clauses made simple’ by Robert Balanda- the ad for it is in the back of the api mag. There is heaps in here, and you will probably save more than the eighty bucks in simplifying your legal costs.
Get on the net and jump onto the moderators web site, smartpropertydevelopment.com.au There is about five pages of free downloads, that you will be continually rereading in the months to come.
Then, go to yourproject.com.au and buy the downloadable ebook – about $20 if I remember correctly. This has heaps of info, that is not found elsewhere, and is one of the few sources of good information regarding some specifics of financing. Do not even bother buying the ‘developers toolbox’ for $20- it is not really property related, and is total junk.
Ron Forlee’s book ‘An intelligent guide to australian property investment’ is also a good read.
Another web ebook by Colm Dillon is under A$100. Another great thing about this is that you can email the author! I wouldn’t hound him with too many questions, but again, sometimes that little piece of information may complete the picture about something that you have been unable to find elsewhere.
Regarding selling, I would complety 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.
I would sell this way- approach all of the home builders in your area, with detailed maps of your block. Why? Well, if you are going to build a house, you will check out all the display homes, and the builders themselves may just end up promoting your blocks, so that they get the building contract! A true win/win from different businesses in the same industry.
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!
When talking to council, the first question to ask is ‘are you a town planner’, otherwise you wind up talking to a receptionist, or the work experience kid. Ask regarding the new planning scheme, and when it may be implemented.
Simply dividing your size, minus roads by the allowable minimum will give you your maximum lottage, but the real amount will always be less, due to access roads, frontage required, easements, drainage problems, funny allotment shapes, etc. Also, if you can get some different sizes in, it would be good, as then purchases could have the ‘minimum’ of 6/10 000 metres, or a bit more.
You would really need 12 month settlement, as you wish to get something through council, that may not yet be implemented. Even if your da is passed, then the new draft plan is implemented after, you could probably get boundary realignments easily. After da, you would want to be marketing like mad.
Why give your financiers the land at cost? Why not at market value, and reward them by a profit sharing? My understanding is that if you put up 30% of the developments final cost, so that it can be fully financed easily by the banks, then you get half of the total profit. ie if you put up 15%,you get 1/4, put up 10%, get 1/6th, etc. You, as the brains behind it all, get 1/2, plus a percentage of money as above. An advantage of this, would be, after da is approved, you may be able to get three or four contracts drawn up, conditional upon the buying of the land, and putting services and roads in. The bank will then have a da approved site (which will value at more than the original), and the valuer will be able to give a good value, based on pre sales.
Another way of raising finance through mezzanine lenders- I have no experience of this, and know of only two companies. Co-develop are often in the papers wanting investors, and one would assume that they would want to help you too. The other is macquarie bank, but I suppose there are a heap out there. If you have a da approved, with some investors, I would assume, (if the numbers and valuations stack up) that it would be very easy to get the rest of the deposit needed through mezzanine finance. This is one reason alone why you really need to get your info on your structure yesterday. After all, the banks will want to see a certain structure that limits their problems with your development.
Unfortunatly, you cannot advertise your wares on pi, but there is a caveat emptor group on somersoft you may like to try.
Let me know how it all goes- particularly regarding the Chris battens site- he seems to say a unit trust is needed, but you need to subscribe for the specific structure!
Regarding the cost of the road, I too tried to find that out, the best info I got was to ask a civil engineer! It is the epitome of the how long is a piece of string question. Just because you dont NEED kerb and guttering, or a rolled kerb, doesn’t mean that I would not be doing it! I would find out the cost with crappy gravel sides, then the cost with a decent kerb, and compare that with the total cost of the development. I would think that the final selling price would be higher with nice black bitumin and a proper edge. When you get the quote for the road in square metres, would you please post it, along with your structure?
You can always open the yellow pages, look under ‘property development’ and see who is there. I found a lady who is helping me, and really knows her stuff regarding zoning, what is a good idea to pursue, and what to forget about, and what order to do things.
I have personally found that the best way is to read, read, and read the stuff I have suggested, then, if you have ten questions, to break them up into five lots of two questions and direct them to the appropriate forum. This seems to have had good results for me. Also, spend a few days and 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), but it will repay you tenfold, and save you heaps by needing less (but not none) proffessional information while the clock is ticking.
If you want everything answered, a quick way would be to do Peter Combens course- about 8-900 if I remember correctly. This includes 1 hour of one on one. I personally intend to do it, but I have found that books, and the net can be a huge source of information, then I will use Peter to fill in the gaps, before proceeding
The last bit of information that I would suggest is something that I have heard from a number of people in the game, and that it will ALWAYS take longer than you planned for, cost more, and NEVER GO INTO A PROJECT UNDERFUNDED. Contingencies, remember.
I personally look for sites, then take them apart , studying the council dcp’s and how they may apply- setbacks, min sizes, max slopes, etc. Of course they are all sold to someone else, but I find that it is much easier to learn about a specific site, as the info seems to stick longer, easier than just trying to remember the dcps. Then onto the next site, the next, and you will be amazed at your encyclopaedic knowledge.
That is one reason why you shouldnt think that this is your one killer deal, and must be done at all costs. There will be plenty around the corner, and sometimes the best deal is the one in which you walk away from, or cannot partake in. Get your knowledge, structure, legals right, and then get your contractual rights to buy the land (option or subject to da approval within a time frame)
All the best, and let me know about Chris’s structure, and the cost of the road when you find out please.
Hope this is of help to you.
Have only recently joined somersoft. I think both forums are fantastic, but the devils advocate tends to rear its head much more often than on somersoft. I think this is a shame, as we always should be thinking about potential negative consequences of a deal. After all, sometimes the best deal is the one which is not done. Somersoft seems to be more upbeat, more ‘you can do it’ in a Tony Robbins-Amway style.
Certainly for trusts, I would be heading to somersoft!
Have recently read the book in question, it was pretty good, but not astounding. It talks too broadly (residential, commercial, even tourist resorts), while failing to nail the specifics needed. ie How do I go ahead? How do I tie up the land with options/subject to da approval? How do I get finance? No mention of equity/cash, and none of mezzanine lending.
I am still looking for a book which talks about theory, and then outlines, step by step, the processes taken, from the legal structure, planning, through council meetings, architects, building problems (eg sandy soil- check out somersoft.com regarding a doozy!) finance, then building, holding , and renting/selling
Unfortunately, this is a huge list, and the market for a property development book is not huge compared to say, an entry level book on shares, or property buying and holding.
There is a sticky in the resources section about some books, but I will add one or two.
Reno kings “10 golden rules” and “secrets of prop investment”- dirt cheap, fantastic info, packed with finding, buying, managing info. Have found much info in here worth a mint that is not mentioned anywhere else. Talks well about using equity to expand borrowings.
Got a couple of beauty free/ cheap downloads that will keep you busy for quite a while!
Firstly, peter combdens free download at
http://www.smartpropertydevelopment.com.au/downloads.htm Brilliant, simply brilliant!
Secondly,
http://www.yourproject.com.au, buy the developers ebook, but forget about the toolbox, as most of it is not really related to development, it is more the esoterics of management. I haven’t subscribed to the $279 whole kit and kaboodle, maybe someone else can comment on this.
Also check out the reno kings website. Less of developing, but their stuff is dirt cheap, quite thought stimulating, and not really found elsewhere at all.
http://svc012.srv002.inetserver-2.com/catalogue/renos/public/home.ehtml?syspage=1
Happy reading!
Go to councils web site, download their development control plan pertaining to your site. Find out EVERYTHING about your land- dimensions, slopes, easements, setbacks, etc.
Go to council, and ask to see a planner. Run some ideas through them on what is allowable. ie in my local council, you cant sell the two duplexes to two different people, so there is no real use in doing a duplex. But, one council north, you can strata title them, and you are allowed a two story close to the street, and only one story away from the street.
Reassess your ideas, visit council again, then see an architect/draftsman etc.
Run a couple of scenarios past the bean counter.
If you flog it off now, you will pay no tax on any profit, at all, because it is your ppor.
But, if you develop it, you may still be up for some tax (albeit you will get the 50% reduction)
Also, dont forget gst on the units, and the possibility of a downturn in the market.
Personally, I would go off to council, find out regulations re setbacks, floor space ratios, etc, then get an architect/draftsman to draw up some plans, then pass them through council, and then probably sell (with the da in place), while living in it, to avoid paying any tax.
Just my 2c worth
Check out the yellow pages under “property development”, have a talk to two or three people as to what they would do if they owned it. THey will have heaps of ideas and connections, and will fully understand (or find out) Re zoning, setbacks, market niches, etc.
The 8-12k- Where does that go? Was that to buy some land off the neighbour, or legal fees?
Stopped by council today, they said all I need is a survey and a piece of paper signed by both landowners.
Time for me to answer my own question!
Well wrappack, today, wrappack was, like you, out looking for opportunities. On yapping to a next door neighbour, who had been doing a bit of subdividing, he mentioned that he had just put a road in a few years ago.
Like you, wrappack, wrappack always tries to carry his trusty 8m pink Lufkin measuring tape around. He whipped it out, and after a few calculations, and guestimates for inflation, I arrived at the magic figure of
$150 per square metre. (this is hotmix, not the ashhpalt on top)
I just made a post on another thread and realised that it had drifted way off topic so I thought I’d start another thread here.All been guilty of that at times.
Please dont quote what I say hear as gospel, but I did check out being an owner builder.
Main problem I see is that you must provide insurance to anyone if you sell your house within (I think) 6 or 7 years, and insurance for owner builders is almost impossible.
Thus, I think the first q is, can you afford to hold onto the duplex, and not sell it, esp if it is neg geared, etc.
Why not build the duplex first, and then see if it is a situation (ie building, project managing,etc) that you wish to repeat.
Until then, you dont really have a problem!
Oops, when I said that there was no land left, I meant to say there is no subdivisible land left (none that I have come across)
Many thanks for your reply Peter.
Obviously, you have developed a heap of properties in the last couple of decades.
If not options or subject to’s, how did you develop the property? Were you in a jv as a builder, as opposed to the landowner?
WOuld be very interested to hear any other alternatives.
Get on the net, find your local city council, check out their web site, and download their dcps (develop control plans)
Ps the fun begins in deciphering them!
Is it just me, or does anyone else think that tycoon should keep his day job until after he is very successful?
Many thanks for your replies.
I think the fundamental flaw in your plan is your basic assumption that there will be less developers looking for land in the near future.By saying there would be less demand, I was referring (perhaps badly), that we are not in a runaway bull market now, nor likely to be in the near future.
While I would love to somehow be involved in the type and scale of the projects you mention, I must start relatively slowly and surely.
My feeling currently is to look at getting options on acreage just north of my area (gosford), that is subdivisible. ie if I could option 50acres and subdivide into 5*10, or buy 10 acres and subdivide into 5*2, etc. Not quite the multimillion stakes, but a heap of people want to live on acreage, esp. due to the urban sprawl “It just isn’t the same since those sydneysiders moved up here!”
In doing this, I would also avoid the massive headaches of project managing duplexes/triplexes, etc. All I would need are basic services (water, power, phone, roads, etc) after council approval. This sounds like a lot less headaches than 74 subcontracters per housing job! Then, I plan to sell them myself (probably by vf deposit), saving on rea commission (but please dont get me started on them!)
Ps- unable to find the legal resource centre via telstra/google/whitepages.com.au. The only one was the womens legal resource centre! You wouldn’t happen to have their phone number?
Good idea kabung, about ringing up the ads in the paper, hadn’t thought of that one before!
Got a couple of beauty free/ cheap downloads that will keep you busy for quite a while!
Firstly, peter combdens free download at
http://www.smartpropertydevelopment.com.au/downloads.htm Brilliant, simply brilliant!
Secondly,
http://www.yourproject.com.au, buy the developers ebook, but forget about the toolbox, as most of it is not really related to development, it is more the esoterics of management. I haven’t subscribed to the $279 whole kit and kaboodle, maybe someone else can comment on this.
Also check out the reno kings website. Less of developing, but their stuff is dirt cheap, quite thought stimulating, and not really found elsewhere at all.
http://svc012.srv002.inetserver-2.com/catalogue/renos/public/home.ehtml?syspage=1
Happy reading!
Skyboy and mortgage hunter- we fellow gosfordites must get together sometime. I am thinking about getting some sort of group together where we can all live and learn from each others successes/failures.
Regarding the central coast- get in touch with a mob called Aconsult. They act as a help to developments in any/ all of the stages.
I havent personally used any of their many services, but had a consultation with a lady who was very cluey and ironed out many kinks in my thoughts.
