Ok so this is my first post but long time reader
I have bank approval for about 320k, which i would do my best to buy something in perths northern suburbs that is cash flow nutrual by building and holding. (not allot to chose from)
or
I can buy into say balga with a friend to keep existing house and sub-divide rear, build on rear and sell both houses. we take the profits and walk away, rinse and repeat if it goes well. Neither of us would be able to do this alone (just an example)
We have been best mates since school and wouldnt want this to stuff it up
What do you guys think?
Welcome to the forum.
If you are intending to buy and subdivide, I would caution that you do the sums carefully. Subdivision can be lucrative, buy the costs can be prohibitive. As a general rule, it is more profitable to subdivide valuable land.
While this may sound obvious, what I mean is that it essentially costs the same amount to subdivide a $300,000 allotment as it does to subdivide a $600,000 allotment, but the costs as a percentage are much different.
option 2 can be profitable and, at the same time stressful. Such a business venture should not be entered into without extensive discussion. Make sure you have a good broker and accountant onside to outline the pitfalls of such a venture.
How stress proof is your friendship? It will be tested – moreso is the case if neither of you have development experience. If this is the case you may want to consider using one of the many companies who do this stuff in Perth. While you give up some of your profits you do gain their experience. Whole swag of adverts in Saturdays paper with companies doing small lot developments.
Option 1 is the safer and slower option. Good luck finding something cashflow neutral in Perth.
the stress, is the part I'm worried about, if we did do a sub-division i would be using a company and from my research it can take awhile for approvals.
i have done the numbers on some builds for myself that come up neutral once depreciation is calculated.
i might be missing something does anyone have a calulator or formula ?
Hi RJJK,
Approval delays can be minimised a little by working with people who know what they are doing, buying property with long due diligence clauses so a lot of the work can be done before you pay anything and thereby reducing your costs, talking at length to the relevant planning departments and so on.
Developing is very much a risk V reward scenario.
Make sure you have a good chat to a broker first – getting finance for developing is 'interesting' at the moment and given you are a rookie developer this may also work against you.
Certainly not trying to rain on your parade just making sure you go into this (if you do) with your eyes wide open so there are no surprises.
thanks for the tips derek
im trying to learn as much as i can
Always mitigate risk … money in these times are hard to come by … and mistakes you make in Property can be very costly!
If experience is lacking, I’d suggest not to bight off too much and learn from other people’s mistakes not your own.It’s always very important to have a good plan … and naturally get good advice from professionals who have already done what you want to do. Focus in those that have done it and succeeded, not those that have failed and will tell you every reason why you shouldn’t do it.
Most importantly, work out what you really want to do … and put your focus on achieving it …. be sure to take the advice that is given by those that you trust and respect!
Good luck! J
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