Building in 12 months – Perth

Marisa do you plan to sell your homes? I am getting terribly twisted up on the whole sell/hold decision. if i develop and sell i am up for 10% GST plus full tax of say 50%, leaving around 45% clear. If I hold then sell after a while the effective CGT tax rate is only 25%, leaving 75% clear, but the value will not be as much as a tenant has been there for a year or two depreciating the place – so it would work out about the same.

John Carroll

Hi MArisa, yes GST is a real kicker, the admin side of it alone is a real pain.

i have done a spec home in St James…. it has been dragging on so many years now it is almost funny. last week the kitchen cabinets went in, albeit all the wrong colour. turns out they belong to the house next door so they all need to come out again.

I am also doing a quad development in central mandurah. I will probably keep 1 of these. values down there have raced ahead so fast that I am very pleased with the result.

I have been flipping a block here and there around Baldivis and the anchorage whilst half considering building on them, but by the time you take the apprciation of the land out and weigh it up against building for 6 to 9 months (if you manage to pick the right builder) I just dont know if it is worth the headaches. It seems easier to be buying villas off the plan and watch someone else struggle to get them built and enjoy the resale rewards at the end. I have a few on the books like this and for what I paid for them I can’t see how they can construct them for that. I sold a house off the plan in Karratha and the delays on that are incredible… really eating into the profit margin (so I am on the other side of the fence on that one).

am also into a syndication developing in leederville – the project should be ok but the returns at the end of the day will be pitiful and is a big lesson in not handing control of my money to another so called expert.

I am a bit tired of all these loose ends so will spend the next 9 months wrappign them all up and tidying up the balance sheet. I guess I get concerned about trading all these properties when I read so much about the equity increases people are making… the likes of Kenneth and yourself for example, but Michael Yardney in particular who believes in keep everything. Ths contrasts greatly against this guy who makes an aweful lot of sense http://www.investinginland.com/land_myths.htm who basically says holding onto a depreciating asset like a building at a negative rate of return is a losers game. I think I will continue to develop and just accumulate ‘keepers’ ata rate of one in every 5 or so.

John Carroll

Hi All…
Another price rise for some of the builders this Thursday on 1 Sept 2005. Such as Celebration, Metrostyle and New Generation.
The price raise will be about $5000-$8000

I just signed up with New Generation as some people said they can build within 6-12months. Hopefully they can do the same on my lot.

I have just moved into one I built in Port Kennedy, now have all the fun of painting. Took 8 months from slab going down with WA housing centre. Have to decide next whether to build again or buy an IP to hold and reno. Still a bit of money to be made building again I feel just a matter of locate reasonably priced house and builder

Hi Marisa

Sorry for the delay in posting. Im building in the Anchorage in Rockingham and plan to hold long term.

Regards

Regrow

You are a fool for 5 seconds if you ask a question, but a fool for life if you don’t.

Good to see this thread back in action. I’m sure I’m not the only one around these forums thinking of building in Perth, and it’s great to hear some information about builders/prices/delays etc.

Some more questions:

1)Has anyone got a two storey builder they would recommend? Any experience developing two storey housing, and is there anything in particular I should be aware of?

2)Does building a two storey for rental make sense? Has anyone done this,or is it more normal to be building a two storey as your PPOR?

3)Is land in Perth getting too expensive to make building a new home in an estate a worthwhile investment/development? Buying an older establshed dwelling actually looks like better value to me at the present time.

4)Does anyone have any favourite equations for working out land value vs house value when developing? I was told by a friend that the old rule of thumb in Perth used to be spend twice as much building the house as on the block, but that now he goes closer to 1:1.

Thanks!

Hi KP, can’t seem to PM you. If you send me a PM, I also have a guy at Celeb which I’m pretty bullish about too. I emailed the guy Marisa was talking about – hes still a bit off yet to start that business. I’ll be in the same position early next year so we could possibly get the same tradies…?

Rob W, Any luck with the double storeys? I was doing some research into that but the cost to build a double storey (not loft) is in the mid $2s finished. The rent return in simply not there – unless you do some serious depreciations. Give me a pm and let me know how you go. Am sticking with the single storey, commoditised 4×2 products….

I try to avoid 2 storey… too expensive to build, too slow to build (an extra 2 progress stages), not appreciated by the market when finished. It’s ok when it is completely necessary, such as inner city lots or to capture a view, other than that I would leave it.

INVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT

we just sold a few packages in Baldivis central that were really cool 3×2’s with a garage at rear (single storey) – I think the block was 408sqm. They are really popular and it is encouraging that the idealogy of the McMansion is slowly fading. There was the occasional opinion that ‘hey I can get that bigger house on that bigger block for the same price’… a lot of this is persoanl opinion and preference. I subscribe to the theories of “less is more” and “you can’t buy good taste”. Interestingly – I went to get some cottage lots at the last Rivergums release and the rep told me they had all gone and were the first to sell. Also need to bear in mind that a cottage home will probably cost very similar to an off the shelf large family home… it’s all to do with the mathematics of the perimiter of the building = square homes are cheap.

Also I wouldnt necessarily avoid 2 storey at all costs – just if there is a casual choice between the 2. My first lesson in that was when I did townhouses in Vic Park… it was an R60 site near to other R30 sites. The other R30 sites were cheaper and obviously cost less to build and were built much quicker. Muggins here brings the townhouses to market well after the competition and not only has to convince the buyers that stairs are a great lifestyle choice, but that they should pay $60k extra for it too.

INVESTMENT SALES * RENTAL SOLUTIONS * STRATA MANAGEMENT

12 months seems to be the norm over here as well. I cant for the life of me work out why they take so long??