Hello everyone,
I am looking to build units/Duplex/ Townhouses on a large block can anyone advise where to start ,what i need to do and any benifts in doing so. I am in queensland and new to this.
Thanks Dom[biggrin]
Hi Dom
I can’t help you too much, but to give you something to look at straight away is to do a search here on the forum as this is a popular topic and there has been a lot of very good advice.
Cheers
Leigh K[biggrin]I’d use a JV to start with.
Hey Dom,
I think you’re on the right track with development, if done correctly. Personally, I’m a fan of dual occupancy where you divide the block for two dwellings – the key here is that they are not strata titled which means they can not be sold separately which is fine if you are looking for rental returns as it keeps the costs down (it’s a lot me expensive to subdivide a block). I’m doing a couple now and working on rental returns of about 7.3% (working on one that’s coming in at over 10%). That’s a lot lower than people are talking about on here but I’m also talking about large blocks in the middle of a major city.
The biggest thing to look out for is local zoning. I’d suggest to work in an area you know and get to know it even better. Start with the local councils to work out what’s allowed.
Drop me a line if you want ask anything
Peace.
Lee
Hi Dom,
I am not sure how things are different from Qld than NSW, but on this side of the border, this is what I would do.
First thing is to check with council, check out the zoning, whether you are allow to put anything but single-dwelling on your pot of land. Some may allow you to have duplex, some even villas or units. You also need to know the size and dimension of your land, because you may be able to sub-divide the land which is the cheapest way of developeing a piece of land with the smallest outlay. Because sub-dividing allow you to sell the lands as is without buiding anything on it. With dual-occupancy, villa etc, you have to actually bulid something on it.
Getting back on track, after you check with council what you can do. Make sure you grab a copy of the planning control for the relavant development you want to put on, it would tell you about floor space ratio, building set back, density control, landscape area, maximum height, building envelope etc etc. From there you should be able to work out the numbers, how many units you can put on the land. If it get too complicated for you to work out the number, hire an architect who’s experienced in doing that, they would either charge a small fee or even do it for free as feasibility study. If you need a good architect in res development, drop me an e-mail, I know one that’s good at maximising the site.
After that, you’ll need an architect to draw up some plans for you to be submitted into council. Wait a few months and arm with your approval, (depending the size of the development) you can either got to the bank and borrow money yourself or you may need to go into joint venture with someone who has the finance to build the whole thing. The other alternative is to sell the approved development as is, so that someone else carry the risk of building and selling. Of course you don’t make as much money from selling the approval, but it reduces the risk many times at a slowing market.
If you do decide to build, I think your architect or builder should be able to advise you on where to proceed from there.
Couple of things you’ll need to be aware of, construction cost and your target market. How much it would cost to build the development, I’ve seen many development fall over because the construction cost being blown out of budget. Or when the block of unit doesn’t achieve the pre-sale because what was designed and approved by council isn’t suitable for what the market is after.
I’m sure there are other things that I’ve left out, someone else can fill in the gaps for you.
My 2.2 cents (GST incl.)
Joseph
Josephfok,
Thanks for the great advice i am looking at two parcels of land one has a house on it and the other does not.Waiting for councils answer on what i can build.This would not be for re-sale for a few years it would be more for + cash flow from rent as i will put in large dposit.And i believe it will be a great investment when times are better.One question i do have is that if i build is it a general opinion that you could sell for more then what you have built for.I would think that this would be the general the reason why most people would go to the trouble in building.
Dom[biggrin]Dom,
Try working backwards…ie start from the final market value of the completed development, and deduct all the various costs including, completion, construction, subdivision and finally, initial purchase price. This will give you an idea if it going to be a profitable exercise and also an idea of what you must pay for the property initially.
There are many benefits doing duplex developments to keep for rentals..ie new property, max depreciation, better rent, acquiring property at cost and not market value, built in equity on completion.
I have found that banks will lend 100%+ for construction & subdivision based on end market value as lomg as LVR stays below 80%
Last one I did: purchase the initial property on 80% LVR and with all additional construction completion costs borrowed, the LVR came down to 56% based on final value. Only pain is you have to fund the borrowings during approval and construction process, without rental income coming in.KP
Hi I.m new to this forum and would like to share my experience with developing (1x 2 & 2×3). I bought a rundown old house on a good corner block of approx 730 sq m in an outer Melbourne suburb about a year ago.I bought it with the view of developing it but was guessing thaT i would be able to get council approval. I bought at auction and during the post-auction activities the real estate guys recommended an architeck (sorry about the spelling). This person has taken most of the headaches out of the planning process. He has had several meetings with council and my self to come up with a design that satisfys council requirements and my thoughts. The notices are im the ground for the 14 day required period. Costs approx $8K. Suggest you seek a good architek in the local area. Hope this is of some help.
Regards,
Herb.
hrm
KP,
Only pain is you have to fund the borrowings during approval and construction process, without rental income coming in.
Unless their are already 3 old houses on block and you can remove one as you build while other two are ernted.
Dom[biggrin]Yep, you’re right Sal,
Sounds like a good arrangement to me…do it in stages, such that you still have some cashflow from the other rentals.By a pain, I mean you have to budget for the borrowing expense (interest) and holding costs. If you can manage this, it is no problem.
In fact you can still claim the interest cost as a tax deduction during planning and construction ( before rental income is derived ) which is a huge advantage, and goes some way to minimising the cashflow pain. Worth looking into…
As far as using an architect, and waiting for planning approval, I have found that if a property is zoned for duplex or subdivision ( the RE agent or council can tell you straight away) then all you need a a builder to come up with some sketches, and then plans (once you agree to the concept)and this gets submitted to council for approval.( by the builder)
Any reputable builder will be knowledgable on each councils requirements, regarding setbacks, open space to built up space, etc. And the cost of plans, submission, is usually included in the builders contract price.
It may be different in Vic or Qld, but in WA its a simple process and takes no more than 3 months from concept, to approval (usually !!)
The only problem is getting a builder to start on site ( currenty 12 month wait from contract signing to commencement on site due to backlog of contracts..)KP
After reading your posts and the various feedback, I would suggest [as an experienced developer] first finding out your rights under the zoning regulations – as recommended.
The key to a successful development, small or large, is to not cut corners – from a cost perspective – and employ qualified and experienced people as needed.
Your posts indicate you are new to the development game. If so, I recommend seeking an experienced architect [conduct due diligence, i.e. visit several of their projects and speak with property owners] who will discuss your idea in detail, translate the zoning laws, and advise the “best use” for this particular site.
If familiar with the location, the architect will also provide an indicative cost to build, on a square meter basis, plus fees, etc. This information can be used for your preliminary feasibility study, although you should employ the services of a quantity surveyor prior to discussing finance with a lender – the bank/lender is generally far more leniant.
I do not recommend using a builder to design the building, or advise on costs, unless you have worked with them in the past, or they have a very good and honest reputation.
If the project gets underway, it is also advisable to offer the architect a project management role – if they are qualified in this capacity and you are not.
I have always found the end result is a much higher standard when this approach is taken – and the budget will generally remain in line or under the expected cost.
From a cost [fee] perspective, there is generally not much difference employing the architect working on the project versus an independent project manager, or assigning this role to the general contractor.
Real estate development can be very rewarding, but it can also be very risky when inexperienced or without the right team in place to assist you.
Finally, do not start the project unless you have sufficient cash reserves [and then some] for the preliminary phase, i.e. planning, design, contingencies, etc – as noted, if you cut corners from a cost perspective, this will more than likely impact the quality or standard you require to achieve the target market value.
— Michael
Be aware that if you do not separate the titles on the subdivision and you intend to revalue the properties that the new valuation will be substantially lower as 2 houses on one block compared to houses with seperate titles.
Another thing to consider is that costs will be higher if and when you do split the titles due to capital growth which means increased land value.Be aware that zoning regulations are diffeernt from Council to Council in NSW. Medium density development has an environmental impact such as additional noise and car parking. Expect potential resistance from neighbours. I recommend getting them involved before they are notified by Council of a MDH proposal. Our Council does not generally permit a MDH next to an existing block of flats/MDH because of possible future urban blight and increased street car parking usage. The exception is if it is within 400m of a weekly shopping facility or public transport.
Our council does not generally suport battle axe subdivision allotments. I have seem some really poor urban blight examples creating lower property values as a result. Not so good.Send a friendly letter or book an appointment with the local town planner way, way way before the sale/auction to get a free indication of whether Council might support the proposal. Some people submit a Planning/Development Apllication at this stage and make the purchase subject ot Council approval. Doesn’t work for auctions though because Councils generally take four weeks to make an official determination.
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I have recently embarked on my first development project (buy land with permits and build 2X2 bdrm units). Construction is in progress & is expected to be complete in 6 – 8 weeks. I plan to rent them out (hold strategy).
I am planning to attend Peter Comben’s Property development seminar (came across on the Net) before I start my next project (sell strategy).Has any one had any experience with Peter Comben & his seminars? would like some info before I plonk my $.
Hi Kattan – just wondering how long the process took you, from finding the land to the expected completion date? Will it be CF+ or at least neutral upon completion?
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
I was looking around for land with permit for dual occupancy since late last year. identified this property and made an offer (90days settlement) in Jan. Settled in April (after lining up finances, building contract, etc). Started construction in May. expected completion in Mid September.Hopefully start the next Project on completion of this one.
The property is in a area of reasonably good cap growth in Melbourne. with development and negative gearing I plan to be cashflow neutral. It is under a Trust structure hence no worries re Cap Gains.
while the process sounds simple and straight forward I believe that a lot of mental preparation, potential project assessments, cash flow projections, etc that I went through for about a year prior to starting this projec were instrumental in the relatively “hiccup” free process to date.
Hence I want to learn more about property development; better to benefit from someone else’s mistake (for my mistakes cost me an arm and a leg[biggrin])Hi Kattan,
I have just ordered Trust Magic, so I’m sure I’ll learn more from that, but if you can explain, then I’d really appreciate it as I’ve set up a trust and want to use it to it’s full advantage. When you say:
“It is under a Trust structure hence no worries re Cap Gains.”
What do you mean ‘no worries’? Is it possible to buy in the name of a Trust and still not pay CGT??
The possibility excites me[hair2]
Hi Kattan,
I have just ordered Trust Magic, so I’m sure I’ll learn more from that, but if you can explain, then I’d really appreciate it as I’ve set up a trust and want to use it to it’s full advantage. When you say:
“It is under a Trust structure hence no worries re Cap Gains.”
What do you mean ‘no worries’? Is it possible to buy in the name of a Trust and still not pay CGT??
The possibility excites me[hair2]
Regards,
KirstenKirsten,
Dale GG in Melbourne (accountant, author; Trust Magic) with Ann Gambetta (Solicitio) set up the structure for me.Talk to Dale Gatherum Goss and let him set up your IP Structure before you do anything
http://www.gatherumgoss.comThe following is my limited understanding of what can be done with Trusts ( and there is lots more[biggrin]
In essence any gain (profit/ operating/ Capital) under a Trust is distributed to beneficiaries by the trustee (in my case my Company). The trustee can assign the monies in the most tax effective mannerto beneficiaries who have minimal income.monies can also be distributed to beneficiaries overseas with nominal tax paid (about 10%). the best thing is that the monies dont have to be physically transferred; they can still be retained in the Trust with the transfer being shown as a book entry.
Believe me, Trust is magic & your eyes will be wide open when u have finished the book & had a chat with DaleRegards
kattanOriginally posted by SuccessPlanner:Is it possible to buy in the name of a Trust and still not pay CGT??
By my understanding, any capital gain will always be assessed for CGT, but how much you pay depends on who theoretically has to pay it.
With a trust you have the flexibility of distributing the gain to the beneficiary who can pay the minimum amount of tax on it. That would very rarely be no tax though, unless perhaps the amount was very small.
As well as Trust Magic, Nick Renton’s book “Family Trusts” is also very good. You’ll find it in most bookshops for around $20.
GP
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