Yes kp, you’re right!
The price incl. stamp duty was 144,500 + conveyancing 1000.Have held the original house for 12 mths. Should impact tax. Has been a rental for this time
New dwelling will require final fitout – as an interior designer I can keep this to $4000 floors, $3000 paint, $1200 window treatments + $1500 mimimal garden (small lot + fantastic garden guy).
cheers J
Good stuff!
Technically, once you subdivide ( strata in this case) you need to apportion the land value to each property to use as a cost base for working out the cgt due when you sell.
Either way, you’re definitely on a winner when you can resell the original house for the same or more than the original purchase price of the whole property.This is exactly what I started doing in the 90s’ till it became more and more difficult to find such properties.
Effectively, you were getting the subdivided block for free.
If you can still find them, then you’re onto a winner…
Excellent stuff !!kp
G’day all,
I’m in a similar boat to julie and thomas as a real estate agent friend has sugested that i should be able to sell the front one for the same as what i paid (not including buying and selling cost though) anywho I’ve got the land for free to build my new family home
KP I’m not sure if i understand your method, is there some way to declare the new subdivided land below market price?
GrossR,
I was hoping you could send me the property development spreadsheet you mentioned. I’d like to review a potential property development site in Melbourne.
This thread is quite old now, so I hope you get this meesage soon!
Thanks very much in advance.
We find comfort among those who agree with us – growth among those who don’t. Frank A. Clark.
LIke Giddo, the original poster, I have a block of 680 sq.m and have a builder quoting me $10000 per square to build 3 townhouses of 18 squares each. The numbers I have tell me to pass over this deal. Is it the builder’s quote that is breaking this deal? Can anyone assist here? I see others building similar townhouses on similar blocks, so it must be profitable. Where am I going wrong?
Land $260,000
stamp duty $11,260
building cost 160000×3 $480,000
GST on building cost 10% $48,000
Plans and Town planning $20,000
Local govt contribution $13,000
Drive way and landscape $20,000
Sub division $5,000
demolition $8,000
Legals $2,000
Agent’s selling fees 3% $29,700
Interest 7.20% $64,581
Contingency 2.00% $19,230.82
TOTAL $980,772Sell 330000×3 $990,000
Profit $9,228We find comfort among those who agree with us – growth among those who don’t. Frank A. Clark.
I have just read through this post and it occurs to me that the eventual accepted margin would be impacted on by the amount allocated for “contingency”. What is the average amount that you have allowed for this?
I am looking at a deal at the moment
Land $120K
Stamp Duty $7K
Demolish $12K
Subdivide $15K
Build $150K each
Sell $250 each
Can deffinitely build 4, researching if I can get 5.Would appreciate anyones thoughts.
TOriginally posted by Chief Wigam:LIke Giddo, the original poster, I have a block of 680 sq.m and have a builder quoting me $10000 per square to build 3 townhouses of 18 squares each. The numbers I have tell me to pass over this deal. Is it the builder’s quote that is breaking this deal? Can anyone assist here? I see others building similar townhouses on similar blocks, so it must be profitable. Where am I going wrong?
Land $260,000
stamp duty $11,260
building cost 160000×3 $480,000
GST on building cost 10% $48,000
Plans and Town planning $20,000
Local govt contribution $13,000
Drive way and landscape $20,000
Sub division $5,000
demolition $8,000
Legals $2,000
Agent’s selling fees 3% $29,700
Interest 7.20% $64,581
Contingency 2.00% $19,230.82
TOTAL $980,772Sell 330000×3 $990,000
Profit $9,228Don’t forget your GST on your sales prices and finance application fees (usually $5k or so) and developers interest rates are closer to 8 to 10%.
The other ones going up may be being developed by the builders themselves, hence they take the building profit as well. they may also be hoping on some cap gains during construction. Certainly if you can only get $330k for the end product then you are wasting your time… seems very low for a home that has a construction price alone of $180k ?
AUSPROP, thanks for your comments. You’re probably right about the others in the area being done by builders themselves. I don’t really understand what you are saying with respect to GST. The price I would get for each townhouse is $330,000 each as this is around what other townhouses are selling for in the area. So no extra there. How about the 5k you refer to? To apply for a loan I thought it would cost about $1000 or less? Can you tell me how you got the 5k?
With the interest, I am told I qualify for standard residential rates by a mortgage broker. But I will check it out.
Anyway, if I can get the builder to come down in price to $8500 per square, remove contingency etc, the numbers look better – what do you think?
Land $260,000
Stamp duty $11,260
Building cost per square 8500 $408,000
GST 10% $40,800
Plans and Town planning $18,000
Contribution fee 4% $10,400
Driveway and landscape $10,000
Subdivision $4,000
Demolition $5,000
Legals $2,500
Loan application $1,000
Agent selling fees 3% $29,700
Interest 7.20% $57,648
Total $858,308Townhouse – each 330000 $990,000
Profit $131,692
Margin 15.3%Hi, I know this thread is old but I hope you consider this.
My project has almost the same numbers as yours: purchase price = $260000
Demolition cost – $10550 incl GST
Building cost = fixed price quote in 2005 = $420000 approx
Here is the catch. The “variations” [the builder got the engineers to do the footings cost – $42000 above first run estimates]
I threw a fit but it was a bit too late to back out.
The final costs are not in yet but the slabs are done & building will progress to completion.
The final projected cost is around $920000. The bank has valued the 4 houses at 1.08M
Your project is in dire danger if you proceed on only $330000 sale price.
Footings for 2storey structures are much higher than single storey ones. Therefore, don’t count on getting the building cost lower than quoted. $160000 per town house is about right, may even be higher. I have plans drawn for 2 attached double storey ‘small’ houses & I’m budgetting $250000 each.
Material cost, GST & labour costs are about the same no matter where you are in Australia [give or take]
The margin you described is almost -ve & very scary.
Obviously, what I’ve said is based on info that is given & may not be valid if there’re other circumstances.
Incidentally, the median price in my suburb went up 28% in the past year so my targetted sale price has gone up to 1.12M. If I don’t get that price, I keep them for rental.
Good luck & all the best to you,
Kum YinOriginally posted by investToSurf:Hi all, I’m a virgin poster and just read this thread and sounds like i could be half way through an investment that might not stack up. I’ve listed the details below and can provide more if needed. In a nutshell, I’ve just bough a big block 900sqm with a 3 br house on the front, community title hammerhead devision (small costs), 3br, double carport 141sqm house on the back.
Cost of land 280k + 15K in buying costs
Build Cost 130k + 15K landscaping of both
renovate on existing = 10K
Value on completion 270K front
350K on back = 620K
Int rate 6.8%
To Build 12 months
current retun of $8800 from existing house’s tennents.Inially I wanted to buy and hold but after reading steves book and some posts I’m not so sure.
My loan broker and i have done the sums and, with tax benefits, it’ll cost 5K to hold each year
Grossrealiastion, it sounds like your the man, can you work these figures?
Though this deal is marginally CF-ve why would you want to sell?
assume the property goes up by 5% [conservative] each year . that equates to 31k added equity in the first year. refinance to new value [80% of 31k = 24k approx]. take your 5k out of this 24k.
sure your loan increases but the available equity outperforms your increased loan amount and you end up holding the prop and being CF neutral as a minimum. .
In subsequent years your loan as % of value [LVR] drops.
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