Hi all
I would like feedback on an idea with subdivision that I think would have merit
The idea is to but a house on a triplex block here in perth for about $230,000. It is in a good area close to the city and has great capital growth percentages.
I would then sell off the front and back blocks, leaving the house in the middle. I would expect to sell these blocks for $100,000 each if subdivided, and perhaps about $75,000-$85,000 if subject to the new owner paying for the subdivision cost ( HE would save money though )
Once both blocks were sold, I would then proceed to sell off the middle dwelling and then I would have my profit
hypothetical examples:-
Front block $75,000
Back block $75,000
Middle house $150,000SO far : $300,000
approx Costs $5,000
Orig cost $235,000So my profit before tax is roughly $60,000
I am thinking it would be better to start a company to be able to pay tax only on profit remaining at end of financial year, but does anyone have any ideas if this would work, and any tips to make it work better?
Cheers
Pete
What the mainstream media don’t cover
http://www.prisonplanet.tvCould work, but make sure you’ve included all relevant costs ie: buying costs such as stamp duty, subdivision costs, selling costs ie: the agent etc. What about mortgage repayments while holding to do the subdiviosn and while selling.
If after allowing for all the costs you still come out in front then check out the council criteria for subdivision where you are and make sure the house is situated in teh right part of the block to do what you wnat, it’s amazing how many ad’s say “subdivision potential” but when you speak to council the only thing that gives it the potential is teh size of teh block. Ofter there are requirements for the minimum size each subdivided block can be, how much room from the front street to the first house (will a house actually fit once subdivided), some coucils even hav ea “minimum” that the street frontage must be ie: 20m across or soemthing liek that. These things vary depending upon council so check it out in the are you’re thinking of doing this.
Regards
JudyYuo have the same problem I do PK
Every time I type ‘the’ it comes out ‘teh’Anyway, thats a rough rule of thumb stating that your profit may be $60k.
Your costs and timeframe can blow out very easily and eat away at your profit margin.There are lots of costs that have not been included, in your example.
Have you worked out how the three blocks will have access to the street ?
Are you talking about a green title subdivision or a strata title, or a survey strata ?It will be difficult for the purchasers to buy the blocks if you do not complete the subdivision process, as they have no acces to a title.
So they will have take considerable risk and have to make their offers….subject to…etc.
Not a very attractive proposition for a purchaser.Buying in a company only has the advantage of maintaining the tax rate at 30% for any profits due.
All profit whether in a company or in another entity, is tax due at the end of the financial year (??)
The tips I would give you would be to follow up with the council to confirm that the property is suitable for subdivision, and then consult a good surveyor to get a run down on the costs and timeframe required to complete the subdivision..
kp
How about Capital Gains Tax, Drainage, Sewer, Survey costs?
It all add’s up and certainely not my field..though I’d love to do a couple..
But, hey, if after everything the numbers work for you..go for it..
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow Calculatorhi winwinbusinessdeals
couple of things to look at when doing subdivision
1. sizing check with council
2. don’t know perth but the resale value of this land, do not go below a 30% profit because you will not get a normal lend.
3. do your projection on a spread sheet and ask the bank would they lend you on it,if not send it to person like me.
And if again no walk away.
sub division sounds great but the difference between making money and losing money is great its the highest risk of all sectors and from my group we do not do them unless we have a 40% profit margin.
we would look at a high rise in sydney before a sub divid in penrith I have currently $42 million dollars in penrith(cbd) subdivision if you want it and I leave it to the venture capitalists who can lose on it.
My suggestions is bite the bullett and get a couple of guys together and develop it you will make the most money and us it to leverage to the next level.
This information is not free when you start to develop to the next level email me and let me look at your next sitehere to help
Hi wwbd,
The other Forumites here have great suggestions. I agree this Sub div idea sounds (in theory) like a walk up profit machine.But your approx. amount of $5000 you state seems very low.
Having done this myself several times (Victoria) I know that there are a lot of costs that will crop up and can be solved with some quick phone calls. Especially if it is in a built up residential suburb.
This is a bit rushed. But If you haven’t already done it, here’s a few:
•Contact a qualified land surveyor. To map out exact measurements and boundaries. (Find out their costs to act on your behalf)
•Contact a qualified Draftsman (I prefer one that has done subdiv in that council zone) and pay them to advise you what and where you can fit on the land, based on your stated intentions with the block.
•They will advise on height, length, free & open space restrictions etc…. for each block, before drawing up the plans (Find out their costs).
•Don’t discount a two storey building in you plans. Again Draftsman will advise if it’s viable.
•The relevant Power, Water Boards and Council will have their application and/or Statement of Compliance charges for power, drainage, sewerage, for each subdivision (find out their costs).
•Bank will have their fees to submit Plan of Sub to Titles Office.
•As the others have offered…. Please double/triple check your all your setup, legal/closing costs.
•Sometimes this process has taken us 8-12months from settlement date to be fully compliant and register it with the T.O.
•Also, ask yourself can you afford to hold onto it for 12 months (without income) so you benefit from the 50% CGT discount etc…(If you want to sell off block/s)The reason you are doing this is to a make a decent profit for your time, effort and risk. So the more you know what’s around the corner the better. Professional advise cannot be understated.
Good luck with it! [biggrin]
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