G'day everyone,
I have found a property that is on sale in an area I have been looking to invest in that is 30% complete.
The price it is for sale is about the landvalue, it is 30% complete, has all the approved plans (obviously) just apparently the bloke doing the development ran out of coin. it has been on the market for about 6 months.
I have NEVER done development work but am looking at getting into development. I don't really have an idea what I am doing and am just stumbling at the moment trying to learn.
How do loans work in this sort of development? is this the type of development you'd run from? what are the costs left in this type of investment? just the building?
anything else I have not thought of please feel free to throw in there
Cheers
MattHi Matt,
Under the circumstances outlined I wouldn't touch it irrespective of potential for a good buy.
1. By your own admission you 'have no idea' about developing.
2. Picking up someone else's half built project is problematic. Theonly saving grace would be if the first builder was prepared to finish the job – without this definately don't touch.
3. Finance would be challenging at best.
4. Are there any debts remaining on the property? Bills outstanding with caveat in place.
5. Start small and work upwards.Hi Matt, I agree with Derek, it sounds like your experience says tread with care on this one. Given that you would first be able to only borrow against the land value you would need to make sure you were buying at that value only. You would then need to get full costings and fixed price building contract to borrow against that next stage. If the construction completed so far is not up to scratch it could see the development costing you more than it would if you just bought the vacant block in the first place.
Given that it has been on the market 6 months might be an indication that it is not such a bargain after all???
Tread carefully.
Hi W0mbat,
agree with the above comments, however it could be a good opportunity to negotiate the price further down, as the seller obviously needs to sell desperately. Before you can even consider it though, I would suggest getting a very trustworthy builder in (a family friend, relative, or somebody that has worked with a family member etc), to assess the work that has been done. They would have to give you an estimate to complete the project and asses whether there are any issues with it.
If you don't have such a trusted builder, then the risk probably outweighs the upside in my opinion.
Assuming that the builder was totally incompetent, put an offer in at land value less demolition cost. If any of the work to date is reusable, it is a bonus.
Used to design, build and develop many years ago. I didn’t know my ar$e from my elbow when I started but I had spent several off seasons as a teenager on construction sites.
In saying that though there’s no way I’d take on someone else’s failed project.
When you do your own development from the ground up you learn a lot and are thoroughly conversant with the project that often takes months if not years during the planning stages.
Dropping into someone else’s half finished project would be a nightmare in my book. Not the way I would suggest one learns the ropes.
Jack
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