Well great responses it appears there is mixed feelings about CG and CF+ve properties neither is right or wrong probably a good idea to have a mix of both, today I put an offer to buy a house where it has the potential to subdivide and put 2 courtyard homes of approx 350m2, I've done the dd numbers all stack up, good thing about this property is while I wait for approvals it's almost neutral cf and when I build the 2 I may keep both or sell one depends on cf, I feel a lot better now I've made a decision, the idea of buying a property and hoping it will grow sort of worried me, but I suppose it's all about what you want to achieve in your investment.
Does this development sound like a goer
Purchase $260k
Stamp Duty 11k
Sub division $20-$25k
Selling costs $10k
Holding costs $12k
Demolition $10-$15k
Building turnkey $320k
Total $647k
Approx $325k per dwelling, properties in this area and street of this quality are selling and sold from $375k are these kind of returns acceptable? to make this project viable? Or is it too tight around 15% Thanks
bardon wrote:I was looking into some of those suburbs that RP Data claim are cheaper to buy than rent. Which means they are CF+. On face value it looks like a good pointer, not that I am buying though.A lot of these "claims" take the mortgage figure only (and some at 80% lend only). So this is distorted.
You also have rates, insurance etc to pay,
You can make figures say whatever you like. It depends how you look at them. So that's why it is important to do your own DD. Crunch the numbers on the total cost.
If you intend to on sell them once complete i would personally thing the returns are far too low as you havent considered any of your sale costs, GST, Tax etc
Can't comment on the cash flow as you havent given us the likely gross rent.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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