Forum Replies Created
Oops- didnt mean to offend anyone, and it seems that I may need to explain-
Pisces- Your point is taken on board Re architects. I have misquoted a good source. In the SMH a week or two ago, the 2-3k sq m was quoted in the domain section. On rereading it, it was regarding renos/extensions in the city by very well known architects. I got my wires crossed up and apologies for that. If an architect would effectively be on a cost plus basis of 7-10%, this to me sound very fair and reasonable, particularly as they have the indepth knowledge of local tradies, council whims, and realistic project times. Plus, on any dual occ, one could assume that you would not be able to plonk a couple of mastertons on and they fit perfectly. Councils really want to see an integrated project (ie shadowing, privacy issues). YOur other comment regarding having an overseer on a project home sound like very sage advice.
You are spot on regarding my practical experience (basically zero, I am still in my information gathering stage, and quickly filling in the (still large) gaps in my knowledge).
With regards to site requirements, can we meet each other in the middle somewhere? I was not saying that site selection was easy, but that site elimination (unsuitable for many reasons) is easy and quick. My comments were not meant to be set in stone as for what I would run out and buy, but really to act as a sieve for what I DONT want to buy. Thus, if I wish to do a dual occ, detached, I would need the above mentioned site as a minimum. Obviously, further investigation is still warranted after finding a potentially suitable site. Eg a corner block will always be better because of dual street acess, and a rectangular E-W block will be better than a N-S block, as it will allow larger living areas and courtyards to be north facing.Pisces and Elves, I understand and accept the fact that sites can be easily bought after das have been passed. But, when an owner has gone to the time and trouble to pass a da, they will want more cash for their place. I would personally prefer to buy the house next door or across the street (with very similar site specs) from a motivated vendor who may be unaware or unprepared to go through council. As another example, I recently was doing my dd on a three block set, which I was told had had the survey, plans drawn up all ready for council on a sepp5 dev. Talked to a consultant Re developments, who told me that the plans “all ready to give to council” had been knocked back for a variety of reasons (primarily bad road access for the elderly which was insurmountable!). THus, the vendor was trying to charge me a premium on a failed da!
My comment regarding the cost of the land, is that I think that the knockdown and dual occ idea is better suited to expensive land (closer to private schools, shops, services) than on the same dimensions on cheaper land (out in the sticks). If the land is more expensive (ie sydney harbour) then it would be better to build a stack of units.
Elves, I think the two blocks is a great idea, as long as you could put more than 4 townhouses on it.
My personal feeling is that in the years to come, units will get a very bad name (due to sydneys future oversupply, and hk), townhouses with concrete backyards will be a dime a dozen, but people will still want a bit of a backyard to throw a footy to the kids. Thus, dual occ dev. would seem to be a better idea than some other developments.
Question for pisces- What other subtleties should we be aware of when looking for sites? Any hints/pitfalls to avoid that you could share with us.
Might be interested myself. What area and $ are we talking about?
Oops, my mistake, when I said block of land, I really meant block of land with a crappy just rentable house till the da is passed and the bulldozer flattens it. Would I still be needing a construction loan, or just a normal loan now?
Once again, I have had to reread the posts multiple times to fully understand the width, breadth and knowledge contained within. The indepth wisdom of minutii and esoterics of the property game is both infinite and indispensible!
Looking down the road a few years, I would prefer to be retaining most (if not all) the duplexes, and using revaluations to be a good source of cheap finance, no tax paid (prior to selling) Thus, I am more inclined to try to set up systems to minimise OTP sales, even if I wind up with less profit (ie shared with JV, etc).
Terry, what sort of interest rate would I be paying on 70% of end value? What about 60% (any cheaper?)
If VF is treated the same as cash , surely this is the easiest and cheapest way to get finance, (even if it was only 5-20% of the purchase price)
What do you think of the basic premise of buying the asset in a company, and then allowing other investors to invest in the company? Is this way preferable to mezzanine finance? How would they differ? If no one was interested, I could still proceed as before, (but would probably delay plans for 2-3years)
Why shell out any cash. Assuming you are on the internet [biggrin] check out the councils web site and download all their dcp’s with regard to subdivision, duplex (attached and detached rules). You may be able to build 2×2 attached duplexes, or subdivide in to three blocks, etc.
Elves, I would like to disagree with your two ways to purchase.
i) Buying 2 blocks? Why bother? the whole idea is to squeeze 2 houses on the one block. But, if the 2 blocks could be joined and subdivided into three then I would be inquiring further!
ii) DA approved sites seem to be incredibly overpriced. Owners seem to look at the (inflated) price of a house down the road, take a minimum spec home off, and then say look youll make a fortune!. I think I will search for a site that is suitable (that the owner may not know/care about) and crunch my own numbers
Many thanks for your kind comments nathan, let us know how you are going. What areas are you looking at?
Always good to see a bit of discussion going!
My theory is that the majority of OTP buyers are investors who wish to buy on figures (cheaply), wheras the majority of home buyers (ppor) will make an emotional “value” judgement.
Thus, the completion price would usually be higher than OTP
If he should be paying $170, then perhaps you could explain why
Firstly, he is paying $150
and secondly, your guilt and angst at charging him $160My 2c worth:-
When the supply of something is limited (beachfront developable land/ shortage of lifesaving medicine) the price will be bid up by rich people, not bid down by poor people.
With huge population increases to sydney and qld, their re can continue to increase, and once it gets to a certain value, the old gets smashed down, duplexes will be built, or townhouses or multistory apartments.
(btw I was nearly born filthy rich- one of my distant relies owned 1100 acres (yes, 1100 acres) at blacktown- wouldnt have minded a slice of that pie!- but apparently his son lost the lot[confused2][glum][thumbsdownanim)
Thus, when I hear that rental yields are at an all time low, surely this just means that sydney is about to be developed more, by building up, not out?
But as for states that have static populations, this low rental yield could have much more dire problems if the bubble (or overvaluation) is burst. Any comments?
Many thanks[biggrin], my learned[grad] colleague on your wonderful [strum][hair2] find.
Boy oh boy oh boy is this your lucky day. After months of research, thinking, looking, I have come up with a strategy for exactly this scenario, because I am about to do exactly that.
Building wise- Architects charge a fortune 2-3K a square metre, your mastertons etc are under a grand. I think a designed house would need to be done, at a much smaller cost than an architect.
Lastly, why build one house “much bigger than the other”? Personally, I would build them of similar size, two story, and the biggest allowable on the land. (In wyong shire, only the front can be two story, the back must be one)
You really must be taking your father in laws neighbour out for lunch (personally, I would shout the both of you)
Btw, what area are you looking at?
My brother in law had often made the comment that the best way of making big $$$ in the prop game was by being a brain dead moron, buying a house in Sydney, knocking it down, and building a duplex (two houses), which can be either attached (together) or apart. Obviously, add some common sense, and ignore the moronic comment.Firstly, check out the your councils web site and surrounding councils web sites of DCP’s to find out block sizes, frontages, attached/detached DCPs’ AND ASK THEM IF YOU CAN STRATA TITLE THEM- ie sell the two houses to two different people. Example, I live in the Gosford area, where a duplex( be it attached or detached) can only be sold to the one person, whereas 20 min north in Wyong, they can be sold to two different people. So that is where I am looking.
Secondly, the land has to be relatively expensive. It would be no use to try this in the country on dirt cheap land or a cheap farm, but as soon as the land is of a certain value, it will support more than one occupant. (my theory- the more expensive the land, the more people need to live on it- eg sydney harbour skyscrapers vs outback towns- which is more densly populated?) Not sure what $ figure a duplex is needed- but probably anywhere in Syd at the moment. Thus, if you could buy a cheap house for 500k, or a better positioned piece for 650k, go for the more expensive, and delay your construction plans for a year or two. (the bank will revalue it higher in 6 or 12 months, giving you the equity you need)
Get a designer to check the block and designs before you sign on the bottom line, even if you lose a grand or three in the process. You must fit into block sizes, frontage, drainage, street character, and then physically fit your 2 (sellable or rentable) houses on the block (easier said than done, just try it!), This is like a jigsaw puzzle with no correct answer.
Personally, I am looking at doing detached houses for a number of reasons.
i) some people want to live in flats, and there is about to be massive bad publicity over the ensuing years courtesy of HK. Do you want to sell a flat in that market?
ii) People can live in sterile villages.
iii) People can live in their own home.
If they cant afford their own home, a duplex is the affordable option.
Thus, for all intensive purposes, it is their own home, just one is a “battleax” block. (incidentally, in the council regions mentioned, doing duplexes is infinately easier and cheaper than actually doing subdivisions for battleax blocks)
I will try to shoot some holes in some arguments presented above-
i) tax man breathing down your neck- yes, he will grab his share, BUT ONLY IF YOU SELL. Why not do what the reno kings suggest, and try to never sell? THat is, build two houses, then REVALUE to unlock equity, rather than to sell (and pay tax in the process). Do one a year or two, and in twenty years you will have a motza.
ii) sell your IP to raise finance- no, no, no. This will occur cgt tax (full if owned <12months) or half if owned>12months. Rather, revalue (with a valuer assigning to the particular bank you will loan from), and pay no agents fees.
iii) “Thirdly, finding the right property at the right kind of price is a fulltime job.” Rubbish. it is simply a matter of knowing if the property is suitable (eg I personally need a 700m of block with a 15+m frontage on a flat <20% site, in a nice area) That cuts my wasted time with REA to an absolute minimum). When I say that I am not interested, they are sad for a second, and very grateful when I give them my home number and fax, and the specific details I need. They know I am not wasting their time. As for price, then compare it to local recent sales figures. Turn up to auctions, and put in low bids. It is not a full time job, one just needs to know when not to act (most of the time), and when to think about doing more research (maybe an in office exchange to buy a week or two of research?)
iv) finance it like this. find the site, and buy it (preferably long term settlement or an option- you may be able to get the bank to revalue it in six months, rather than use the contract value). You can revalue your ppor and your ip, and will probably have enough equity (even though you will probably need to xcollateralise). Wait a year or three, to allow the prices to increase, da’s to go through, etc. Then, revalue the three props (your ip, ppor, and the development site) and only proceed when a worst case scenario means you can survive all of the pitfalls-cost overruns, delays, etc.)Or, just checked out a web development site. It basically said that banks will happily lend 70% of the total costs of a project. THus, you need to come up with 30+%.
What about VF for a few years?
Or a JV with a builder?
Or an equity partner? Apparently, the going rate is if a silent partner puts up the 30% (allowing you to go hell for leather NOW), they get 50% of the profit, which should work out good for both of you.Personally, I am going to be setting up a company, throw in some cash, then find a property, and get a number of investors into the project. This will allow things to proceed quicker than if I had to have the whole thing done by myself.
Ah, if there is only one profession lower than politicians around election time, it would have to be the insurance companies, particularly after the listing of NRMA (that $1500 dollars we got was a bribe, not a present, but I digress)
Most IC are hopeless. Eg I was going to get a tree lopped down, which was overhanging the house, rang up for house insurance, was told no problem, we have an impact clause, sign here press hard (I exaggerate, it was over the phone, but you get the idea). Got the book, which said impact damage was only through an accident, and specifically excluded any and all tree lopping!
Most IC’d have some landlord cover, but (first read about this in geoff doiges wonderful books) DO NOT cover arson, and malicious damage by tenants. How much damage can a junkie deadshit[}
] do to a place prior to eviction? a hell of a lot. THerefore, ring up a whole stack of IC’s and specifically ask for cover that covers malicious damage and arson by tenants. Most of the call centre girls will think you have grown two heads and have NFI, and will inform you that their company does not cover that. Ring the second company and progress from there. Might be better to see a broker.Repeat to yourself six or eight times “I will have to pay more for this cover than the cheapie one”, just to give it time to sink in
The only time I would not insure in this fashion is if I was intending on doing a knockdown, and didnt care if the house was trashed.
[^] Loved the pics and the commentary rags [^]
Yes, we all had a good laugh at your expense (come on, guys and girls, we all did, didnt we?), and its great to see that you can also have a laugh at your own expense. Come to think of it, if you got it cheap, it wasnt really at your expense now, was it[]Couple of quick questions-
Where is the house located?
What do you think costs (time, $) in reno, and final value be?
Ever considered carting the crap out, doing the bathroom and kitchen, polish the boards, then living in the slum and doing it room by room?
An IP of mine is empty-Ill pay you a weeks rent birddog fee if you send me the ex tenant[]A much easier way (if possible)
i) Stay at home with the oldies
ii) Buy investment property in a place which you would like to live in down the track
iii) IP will probably be neg geared- thus, you will lose a bit of cash, and get a proportion of it back at the end of the fin year
iv) living at home will reduce your expenses significantly.
v) Equity will build up in the IP, can always access it.
vi) Leave when you cant put up with the oldies anymore, or they kick your arse out the door.If only I knew about this a decade or two ago, but, no, unfortunately not!
Ah, the joys of REA! Such love and warmth exudes from them (similar to used car salesman, politicians, journalists, and American CEO’s)
My 1c worth.
If an agent appraises a house for say 300k sales price, 10k commission, and you agree, then how does this sound? If the agent can get you an unconditional offer of 300+K, then you owe them their commission of 10k, regardless of if the house is sold (ie you accept their offer or not). If the house sells for 299.99k then they are not paid their commission, and refund any of your advertising expenses
I know, I know, this is airy fairy stuff that the vast majority of both vendors and agents would never even contemplate to agreeing to.
If it was done, agents would really have to appraise houses at their selling price, not their “I need your listing” inflated price.
Vendors would get a fair deal, if a 66w comes along above the quoted price, the agent still gets paid if you knock it back.
Agents would have less time wasters – Ill just wait another few weeks for another offer people
Good to hear of some replies!
Carlon, sounds like you have done a beauty! May I be so rude as to ask with regards to your 230 blocks, how big was the original land, approximate location, and approx. costs and approx time in getting through council?
Resid. wealth- would be v interested in reading the manual- I could even proof read it for you!
A bit of advice, I would have case study after case study after case study after case study after case study (Okay, you get the general idea!) The more details, maps, figures, the better!An option wasnt an option, but after reading some of your replies, (espec. the one about walking away, and the numbers game), I got to thinking, what if it was the only offer that I made.
But then,
Met with an intelligent lady who consults regarding IPs, developments, etc, and was very pleased with her knowledge and intelligence. She was aware of the property in question, and showed me why the sepp5 got knocked back by council.
Although I could conceivably do a townhouse dev, have decided against- I could be nine months down, close to 60grand down and in court- safer to :-
Threw around a number of ideas with her, and will probably wind up-
i) buying a house on a big block, and subdividing off a battleaxe
ii) buy a house, rent it out for a while, then put a duplex through council. Found out in my council, cant strata title them, but drive 20 min north and I can! This alone has saved me a heap of time, and will prob. be the way to go.But if a few of these work out, will then try a project of the scale mentioned previously.
Couple of very, very scary thoughts.
Hate to mention this, but will anyway.
“as we have only been together approx 10 mths and I hate the thought of a messy problem with my IP’s if we splitsky and he wants his share…… not worth it.”
I hate to tell you this, but in the eyes of the law YOU ARE ALREADY MARRIED.! (i think defacto is only 3-4 months of living together is tantamount to marriage, and any property (not just RE, but businesses, tools, etc) will be deemed as being earnt in the “marriage”. Thus, if you do splitsky, he will get half of the increase in the value of the property! (Probably at his increased valuation)
Okay, now that you have had your first heart attack, now for the second. Whose name does it go in? Name on the title horror story one- happened to my ex landlord. His girlfriend of a few months got her name on the title, but not on the loan documents. How convenient. She was not liable for the debt, but able to claim half the gains on an inflated valuation. She threatened to sue, etc. Eventually, he got rid of the cow, but it cost him over 20 grand (and this is tasmanian prices of the mid 90’s). Remember blondie, you are already married.
Thirdly, this freeloader/husband/boyfriend. Sounds like hes on a good wicket, stay at home, good looking blond at work, can I hazard a guess to say that you usually cook for him, cause he says “your dinner tastes so much better than when I cook”. Hmmmmm, what to do? Why not have a rule that says that he works eight hours a day like (I assume) you do. He can do it flipping burgers, or voluntarily caring for the incontinent elderly at the local old folks home. Forget his crap about waiting for his real job, ANY job will do him (and you) the world of good.
Got to go now, my spleens leaking all over the puter.
BTW, can anyone think of how blondie could set up assets (maybe in a trust?), then personally guarrantour the loan, so in case of a splitsky, she wouldnt get screwed.
I aint read the books, but hate to see an intelligent thread getting murdered unnecesarily.
Few ideas-
i) buy with a long term settlement, then market moves up, revalued, easy finance.
ii) 100% vendor finance. If the vendor will lend you the money, you may not need a deposit
iii) 30% vendor finance. Bank lends 70%, vendor 30
iv) buy and renovate during settlement (allowed in contract of course!). Revalue, etc
v) buy an option
vi) deposit bond.Okay, okay, some of these are not exactly literally “nothing” down, but they are about the best that I could come up with.
Anyone got any other ideas?
I too, have been considering the attic (or loft, for the yanks). Havent checked with council yet.
Theory- build the frame in metal, with triangles, instead of trusses. (trussed roofs cant be habitated in by humans). Even if council got narky, one could quite easily just say that we use steel so we dont get termites.
Then, after it is approved, add a staircase in to reach the “storage space” in the roof. Of course, if they will let me put a 3 way bathroom in all the better!
And as for shirleys friends’ comment “our friends were very annoyed and at first wanted to sue the vendors or real estate agents for misleading advertising”. I am shocked. REA mislead? Surely not! Next you will be trying to tell me that politicians are only self serving!
ps – I stuffed the original posting up. Maximum height is eight metres (from ground level), and I was after 3 stories. Sorry for the confusion!
Personally, I too had the same feeling Re the M7, but I went on the tack that if it is joining 2 parts, go for the middle-problem is, all those houses in that area are 800k plus, minimum of 2.5acres. Yes, they will be subdivided in the next decade or two, but now? would be massively neg geared. Also, nothing (okay, almost nothing) is for sale cause everyone knows it will be worth much more in three years time after the m7 opens.
Shit, I wish I had thought about that just after it was in the planning stage.
Checked out one property down there- looked brilliant, but was an absolute dog
Tony, I would be very interested to hear of your plan B’s and your exit strategies on your properties. Do you usually tie up the properties with an option while taking the da through council? Or just make sure that you wont drown in neg gearing if you own it?
I too came across yourproject, and bought the toolbox and ebook (brilliant). Did you find the subscription worthwhile? What extra stuff does it cover?
] do to a place prior to eviction? a hell of a lot. THerefore, ring up a whole stack of IC’s and specifically ask for cover that covers malicious damage and arson by tenants. Most of the call centre girls will think you have grown two heads and have NFI, and will inform you that their company does not cover that. Ring the second company and progress from there. Might be better to see a broker.
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