I called an agent about a house (keep front house sub divide back) it was sold. Next day agent calls and lets me know about another property not advertised yet (yeah I was pretty happy with that). It's a bit of an odd one tho.
One of the people in the office is selling a block that they have the plans in on (not approved yet) When the plans are approved the block can be sold as 2 seperate blocks. The agent said make them an offer now and get it before the planning Approval goes through.
My lot of questions are….
Why would they sell it now for 499-520 (approx prices in area) if they will flog two blocks off $269k each? Is it a huge stretch to try an develop in another state where you are unfamiliar with the rules and regs?
Am I being too much of a sceptic and looking a gift horse in the mouth?
I appreciate all comments. I've emailed the agent with a list of questions and hopefully they will be answered. THe property in question is in WA so any comments on that would be good too
Your right to not beleive an agent without proper research. Maybe they want to sell before the approval is rejected. You may be better off finding a similar sized block yourself and sub-dividing that.
Yeah I just have a niggle on this one. (Yeah, yeah no emotion, right, right lol) yeah I think for the money it's not really worth the hassle. It's good to get a few other opinions from people on the outside. The only other thing I can think of which is not being very nice to the agent is that she gets two payments, one when she sells it to me and one when she sells it for me. Ahh I'm a HUGE skeptic aren't I!
I may be missing something or maybe my elementary maths has failed me….
Assuming the subdivision is approved, the collective land value would be $269k x 2 or around $540k, if you are spending up to $520k on the purchase price, with the risk that it may not in fact get the approvals….. is that risk vs return worth it?
I guess it depends on your strategy and the location of the block.
As for purchasing from an agent, i would tread carefully. If the agent is selling his/her or a friends interest, why wouldnt they have it advertised already? doesnt seem right.
Yeah I was a bit confused as to why she offered it to me….. the numbers don't stack up unless you get it really cheap…they wont sell it really cheap, so I dunno.
Here you go gang here's a clip of the email. Look sounds good but for me being in another state unable to manage it is putting a damper on it!
1.Plans are for 3×2, single storey
2.Priced quoted for construction (early-mid 2009) $180 000 each….extras included –higher ceilings, high quality fittings to bathroom/kitchen, modern design. Not included – floorcoverings, landscaping, air conditioning. My thoughts are that you could probably do better on this with some shopping around.
3.Anticipated sale price for finished homes – $525 000 – $540 000 (depending on market and finished product)
4.Sub division is already WAPC approved with conditions. Conditions include the headworks costs, sewer/power connections and removal of all buildings from site. The approval was granted mid 2009 and is valid for 3 years.
5.Vendor would accept an offer now because the purchaser would take over where they have left off….ie they don’t have to do the work! They are prepared to do it…hence advertising as green title blocks @ $269 000 each…if they don’t sell in a timely fashion then owners will continue and build. My thought for you is get in first..work out the costs and put in an offer to take over and you profit with whichever scenario you choose.
Hey DWolfe These are one of the types of properties we're looking at now, and it seems vendors might be just rubbing their hands together selling up, can't be bothered with the process of subdividing and time it will take to get all approvals – slower than snail's pace from what I can understand. Lots of blocks available with a 3X1 house around the 300-400K mark with 750-900 sq mt block. Assuming council will approve is not worth thinking aboout if this is your strategy. If you have been quoted $499-520 that's is a lot more than we are looking at, even for 4X2 quite rentable places. And the average house price here is around $400K so it would have to be in a higher suburb than we're looking. We were looking at Steve's strategy – if you can buy one house for $500K or you can also buy 2 for $250K each – you will be better off with 2. Some areas are also being flooded by these types of subdivisions too, so take care. Even some pretty fabulous 1000-2000sqm+ blocks with rentable 3X1 or 4X2 house for 500-600K if anyone is interested. Could put up to 9 blocks/units/houses on the 2000 subdivision. Might claim a spotters fee. We'd like to be confident enough to do this kind of development but it's too soon for us, but maybe, just maybe if we can raise the finance, could purchase one and sit on it until we ARE confident enough. Not sure what the building situation is like over here, anyone know what time builders are taking on a house in Perth these days? We'd be interested in what area it is, now that you've decided to say no. cheers D
It was in Redcliffe/Kewdale near the Tonkin and the airport. They built that biggish estate a couple years ago near there. Wasn't too far away from Belmont Shopping Center. Yeah we did the maths and for us having to get a builder etc not worth it. If we were builders etc might be good pickings but having to hire in everything means more costs less profit.
The problem with being able to put heaps more units/TH's on a block is that then you are in the mess of commercial finance, which in itself is not a problem but you need 35% deposit and at least $10k to get it going. So if your building work is going to cost $1mil which maybe if you are going with 9 units etc you need to front up with 350k. You have to have presales so you can get finance so yeah I'm with you with the not ready part. I'm gonna stick with a few small devs then get some nice big ones going and eventually do some major land subdivisions (hell in 20 yrs time they will be splitting the Nullabor to fit in the population!)
It would be nice to find out the time period. Our builder here (Vic) has taken about 7 mths on our current project that was three TH's so if it is going ok over there shouldn't be longer than 9 mths.
I'm still going to shop, prob round there and a couple areas. Stuuupid prices though. When we first bought over there there was a property 1000sm block rentable house $250 now you buy a unit for 500k, ridiculous, but hey good for investors!!!
I don't think Perth is anywhere near peaking, the climate, the lifestyle, housing is still really cheap. Houses around 500k like 7 kms from the city! One girl i worked with bought her house for $68k and didn't understand why I was laughing until I explained that the same house In vic would cost at least 3 times that! Once everyone realises that it is basically Melbourne 20 yrs ago but with better weather there will be a stupid run on property and prices will be Really crazy! (My opinion) Sorry I know WA'ans don't like being compared to The East tehehe
Good luck with the search if you can get something close to CF+ maybe u can keep it until you are ready or even flog it off with plans approved (as above lol)
I think only you can tell if the deal is good or bad based on your research … it is very hard to give advise without being there on the street and feeling in your gut if there is money to be made …
Yeah, I just didn't feel it with this one. I couldn't see the shining glow of profit. May have been a different story if we'd been over there and could see the rest of the story but for me the figures just didn't work out. I couldn't see more than 50-70k best out of it and to have to manage from 3000ks away that sort of risk v return just doesn't cut it. I'd subdivide on the moon if the profit was there….It was good to get some outside opinions and it is nice to get a few comments from people who even just want to put in 2 cents.
How are you going on your hunt, Wealth, caught any tigers this week? I've got all the rental sharks circling at the moment and geez some of them are duds! Cross your fingers for me that we get some good tenants outta these RM's!
Yeah! I think all the profit was going, going, gone. But really the figures for that whole area are stuffed! Buy a block for $640k, Spend 800k building 4 TH's, 200k for holding costs, approvals & drawings etc, and contingency. sell price $520k the return is 20%. BuT…………..the land is $640+ how much do they really want? How much do builders cost in WA? Can I really sell for that price? How long are approvals taking?
BTW, current project will be done on 22nd Feb, already have one leased, have someone looking today, had 3 inquiries yesterday! Rental market just fine where we have built!