confused..what do i do next

Viewing 4 posts - 1 through 4 (of 4 total)

roba72
Participant
@roba72
Join Date: 2008
Post Count: 12
January 1, 2009 - 6:14 am
Hi all
Im a confused home owner that doesnt know what step he should take next and would love to here some opinons from people here as to what they think I should do in, particular Steve McKnight if your listening.
I own a house in normanhurst valued at $600,000 with a mortagee of $210,000 left on it. I have just had the property DA approved to build a duplex on it. Id have to knock down the existing fibro house down.This duplex I have told by 3 different agents would get $600,000 each ($1,200,000 in total)in todays market. I am sure I can build them for $200,000 each being a builder myself. Each duplex could rent for $550 each and the house as is I can get $600 per week renting out each room as share accomodation for $150 per week.I put a ad in paper and had no trouble finding people interested.
Option1. Rent out the existing home and buy another property to fix up and live in with my family (wife and a newborn)
Option 2 build the duplexes sell one and live in the other meaning I will have no mortagee left freeing me up to buy another place
Option 3 build and sell them both find another place to buy.Giving me $200,000 gross profit.
I liked the idea of building them because I know alot of trades people dont have much work and I could probably build them a little cheaper than usual
but I also like the idea of buying another place as prices are down a bit and I might find a bargain in this market. I cant afford to build and buy another place at the same time.
Either way its a good move I think but Id love to hear what you guys think is the better move.
Im so addicted to this site now im on everyday reading forums
Thanks guys
Robert
crashy
Participant
@crashy
Join Date: 2003
Post Count: 736
January 1, 2009 - 9:15 pm
you left out a few options:
4. sell DA approved site
5. build duplex, live in one, rent out the other
6. build duplex, live in one, rent out the other (after revalue both & borrowing more) then buy another site & repeat
IP Freely
Member
@ip-freely
Join Date: 2008
Post Count: 353
January 2, 2009 - 12:39 am
Just a couple of things that you have left out and may need to consider:
– Cost of alternative accommodation whilst building (ie rent for 8-10 months)
– Will you be doing any other (paid) work whilst undertaking this project?/Impact on this work and the project
– Cost of subdivision & sales costs (agent/legals)
– S94 Contribution to council
– Demolition costs
Selling only one property will not leave you debt free – it will come close to covering construction/xtg mortgage however you will still be exposed to the above costs and CGT, selling both will obviously release alot more cash back into your hands for the next venture (but you will still be homeless).
there_is_always_a_way
Member
@there_is_always_a_way
Join Date: 2004
Post Count: 2
January 19, 2009 - 4:42 am
Hmm this is all based on the assumption of interest rates being 7%
You could hmmm you have 600k property with 390k of equity and no residual income… probably forking out 15k a year..
if you build the duplex it'll cost you 400k and you'll have a 1200k property…
then you'll have a 1200k property with 590k equity(1200k-210k-400k)… renting out at approx 550 each per week, you'd probably looking at a neutral to positive gear property… roughly speaking if you use the excess money solely to re-invest, you'd rent somewhere else at $550, you'd be $270 worse off each week… if you use the excess money to pay for part of your rent, you'd be 80 worse off each week…
if you rent somewhere else at around 280/w then you'd be in the same position but with more capital to work with…
really you've only increased your net self by approx 200k
Me persoanally what i would do…. if i was in your position… i'd do the following
1) look at what i want to have in 5-10-15-20 years….
2) look at what i have to work with….
3) take steps towards what i want to have in step 1….
for example… in the years to come if i wanted to have many properties funding themselves and funding me, i'd build the houses rent them out and rent somewhere cheap whilst i build/nuy my empire of houses
if however i wanted lots of cash in the bank right now i'd determine if me selling the duplexes after all the stress of building it would be significantly higher than just selling the house and land untouched with DA…
or… if i was simple and just wanted a new car… i'd see if i had enough cash to buy the car… then i wouldn't have to go through the stress of building a house and realising after it all i just wanted a car…..
i hope that helps….