Hey im 22 years old and my friend and I want to get ahead of the game. My friend and I both have around $6000 each totalling $12000 (as deposit) to obtain a 95% loan. We are looking at investing in Davoren Park SA. Currently we are looking at a property which is approx $198000 which has a tenant living in the house paying $220 p/w rent. The block is big enough to sub-divide 853sqm so it is possible to build a house at the back. Anyway… our idea is to purchase the property and straight away sub-divide the block and sell off the land behind the house. Possibly keep the original house and use some of the money from the block (say sell it for $80,000) and put back into the current loan (as the house would now be valued less). With any money then we have made, do similiar investment but as we will have more money in our pocket, this time possibly build on the subdivision.
How much do you think we could make off of this? How much do you think the house would be valued at now? IE how much does sub-dividing de-value your property? Do you know the costs of sub-dividing?
Or does anyone else have any other suggestions on how to invest as we are young, don't have much experience or have much money to play with?
Thankyou so much for your ideas and help. We wana get into the game!!!
When you sub divide you will have to talk with the lender as your 95% LVR will change to a higher amount and they may not be happy with the value of the property decreasing while the loan stays the same. (Yes you may be putting the sale amount off the loan but there will be a time lag of 3 to 6 months before this happens and the lender may kick up about this temporary situation)
thanks duckster, I'll keep that in mind
Sorry I didn't explain how it devalues the primary property.
Due to the loan being secured over the primary property which will eventually end up with half the land value.
You may be able to discuss with the lender about securing the loan over the two new land blocks.@ Duckster – After reading your first post I was going to mention getting the loan secured over the two blocks of land….which will now have gone UP in value due to the subdivision. BUt you mentioned it yourself…
@a1159890 – Firstly….interesting username. Secondly, make sure you know all the fees associated with subdividing. If you think it is free you may find yourself in for a rude shock. If you combined only have 12k for a deposit how do you plan to pay for the subdivision?
Also, if you only have 12k and you want to establish the 95% LVR you will need to put down around $10k…leaving you only 2k. How do you plan to pay stamp duty, building and pest inspection, solicitor fees and other closing costs. It is unlikely that at a 95% LVR the bank will lend you the money for the closing costs because it would increase your LVR to more than 95%. Just something to be aware of.
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Hi a1159890,
Everything said before is sound advice. I am looking at that area myself. I assume you'd get some first home owner grant? I don't think its totally removed, just reduced to $7,000, but you probably know more about that than me. If so, it might cover purchasing costs, and is your first purchase stamp duty exempt? (this assumes you live there)
Another possibility to get you $20,000 or so could be to renovate one of the semis out there on non-subdividable blocks. They are going around $150,000 it seems, but with $10,000 and some scrounging and hard work they could be worth upper $1's. If you lived there for a year, as a first home for one of you, you wouldn't have to pay capital gains tax. This equity/money might get you onto your next project. As with all things there are risks (i.e. prices don't move) but I don't think you'd lose money. I know there is a lot of future growth and employment projected for that area, but from my discussions with local property managers, as part of my research, I think you might be well advised to use one as historically it has been a rougher area. That is a generalization I realize but a quick drive around reveals that things vary a lot street to street.
Regarding the house with a subdividable rear, these seem to be around the $200,000. Check with council re. the amount of space to allow for a driveway to the new block (3.5 m?) and the required distance remaining from the new boundary to the original house. Also check you have space for off-street parking for 2 cars, I believe. Factor in the costs of subdividing and the demand for hammer-head blocks (less than for regular courtyard, but fine if you want to keep and rent) as well as the reduced value of your now smaller blocked property. (Probably now about $170,000 but just an estimate). Sometimes it hardly seems worth it for all the time and effort unless the housing market is in a growth phase e.g prices rising. Hence my suggestion of the do-er-upper.
Good luck,
G
Oh, forgot to say,
The reason we like that area is that the housing trust stock is around the same price as in Port Lincoln, Wallaroo and Mount Gambier and at the moment the housing trust are selling some of them off at reasonable prices. As D.Park and Elizabeth are in/near Adelaide with a greater pool of tenants, I think these areas are good value and likely to experience some growth. As with Mitchell Park, Kilburn, Seacombe Gardens etc. these housing trust areas eventually get beautified as surrounding housing becomes nicer and more expensive. They will remain bottom of the market type properties however.
In Elizabeth and D.Park these semis/houses are selling at land value too, as small courtyard blocks i.e. 300 squ.m. are over $100,000 and these places are on 5-600 squ.m. blocks usually.
G
Thanks for all of your feedback ahve taken all on board!
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