Investing in a vacant block of land then building
I am considering this as an option. How difficult is this approach ? I would like to buy a block of land and build at least two town houses on it with landscaped garden.
I know it can take up to 20 weeks to build a house according to Jennings. I mean I guess there are many other things that need doing like getting council approval to subdivide and build etc… then the plan goes to approval process etc..
I mean what are the steps involved here ?
1. look at land
2. get council pre-approval ?
3. buy land ?
4. get builder to build though I guess you need to set this up early in the piece by a contract builder that may already have a fixed design.
5. Building starts
6. Make Progress Payments to builder ?
7. Get an agent involved
8 settle property and advertise for tenant ?
just wondering if I have missed any steps here.
Hi hwd007,
As a side note, as long as your intent is to purchase the vacant block of land and build a rental property on it, you can claim the interest paid as a tax deduction from the start. If your intention changes, then you can no longer claim the deduction. You should also be able to claim the public liability insurance that you take out on the block while it is still vacant.
Cheers,
StephenSteve Thanks ! That was on my mind !
Now another question. Do you or does anyone know of a good developer of Units or Town Houses on a very small scale. Say two at a time ? I had a look on the net but only found one or two possibles.
thanx
hwd007
You can make some good money doing this. One of my clients is doing it now and I managed to get him 100% finance for the whole thing. He has purchased some blocks of land off the plan (ie before subdivision) and is going to build duplexes on the blocks. We could get him finance based on the end value of the townhouses and there was enough profit in it for him to capitalise the interest until completion.
What you need to do is get the DA application in as soon as possible as this is what slows you down (maybe before settlement?). It could take a month to get through and cost up to $10,000. You will also need a fixed price contract for construction so the price doesn’t blow out, and arrange finance. You could even sell off the plan to minimise your risk, or go for it. if their is enough profit in it, you could keep the lot as the LVR at the end should be around 70% or less (otherwise there is no enough profit in it!).
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry thanks for your input and others. Yes it seems the next logical step for me, to get better returns on the investment. i.e. cashflow my way. I would rather be the developer myself.
hehe
Are there any designers and builders you can suggest for this small scale type development. They all seem hard to find, so busy I guess and have bigger projects to work on.
cheers
007
It is probably a good idea to check out big places like Masterton initially and then to get some quotes from local builders. Which area are you lokking at?
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, I’m looking North East or South East Brisbane 10 km to 20 km from the CBD. Most likely South East towards Manly. If I do this on my own then I’m looking at around $150K for the land for about 300 to 400 sqm and then another $150K for the two level townhouse. I’m thinking two bed plus ensuites and study with balcony or courtyard.
Hmm thats optimistic as Masterton look more pricey, but good quality ! But these are full houses of good size, i.e. 387 sqm not sure if this is per unit or for the whole building.
I’m thinking smaller scale of around the 120 sqm internal size per unit. I will find out what they can do for me.
If I partner then looking at $250K say for 600 – 700 sqm for land. These are just guestimates. I’ve seen a few companies like Red Door and others, but as I said they seem so busy and don’t get back to me in a hurry.
Basically I’m looking for a small projects management group from go to finish, including – planning, design, building, and legals, council liaison etc.. I know it adds to the cost, but being in Melbourne and inexperienced make any other way difficult. I would rather pay another $10K to have it professionally managed.
I’m thinking of designing the floor plan myself so I hold copyright over it. Thus if they like it and want to re-use it I can negotiate a commission. Not that I have any experience in all of this, but I’ve seen some pretty average floor plans around and recon I could do better, given my limited market knowledge.
cheers.
David
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