Browse Forums Building A New House 1 Jan 03, 2014 3:02 pm Hi Guys Has anyone thought about doing knock down rebuild in sought after suburbs, subdivide and building two town houses to sell for a quick profit? I have done some research and found a few burbs where 3 BR 25sq townhouses command a handsome $950k+ price where a handsome profit of $100k on each townhouse can be achieved. The following is my calculations: COST: 700sqm land cost: $1,000,000 Stamp duty: $55,000 Cost of construction including subdivision: $600,000 ($300,000 for each 27sq townhouse) Holding cost (interest) over 12 months: $100,000 Cost per townhouse including land: $877,500 each. For my chosen suburb, the current market is paying $950k up to a mill for large townhouses. To be conservative if I sell each townhouse for $950k, then I would make approx $60,000 per townhouse after agent commission. If I am lucky to sell both quickly for 1 mill each then it's an easy $245,000 profit. That's a handsome 14% return on investment over 12 months. Like any business venture it's not without risks though. If the economy goes to sht during the period and I can't sell at that price, I could also rent them out at $700pw as a fallback and sell when the market improves. I will always have the townhouses as assets and it beats shares by a mile in terms of safety (a friend recently lost $60k when the company he invested in went belly up). Thus I am very shares adverse. Any thoughts on this? Is this doable? Re: Subdivision Townhouse development - Good Money to be Mad 2Jan 03, 2014 4:23 pm I am not sure your analysis stacks up and you have not included cgt. If you do not get principle residence exemptions you would need to pay cgt. If you are building a town house for only 300k are you sure they have the finishes that command the asking price. I think that the profit may be quickly eroded when the fit out comes into the calcs, you may be able to command more though. If you are getting 700 per week that equates to a rental yield of 4.5% before funding and allowances such and agent fees and rates and taxes. You would get depreciation. Still it does not positive gear and you would definitely pay cgt if you then sold for a profit. To me it does not seem to have enough meat in the bone. I also think the build estimates seem low compared to the land cost. You are only investing 50-60% of the land cost in the building. I am definitely no expert but that seems light. Your money though and if you can get funding and you are happy with the choices, go for it. Cheers Mark Re: Subdivision Townhouse development - Good Money to be Mad 3Jan 03, 2014 4:59 pm Couple of Thing that come to mind from a previous project Survey Fees DPI Application Fees Termite Inspection Power Meter Lawyers Stamp Duty Bank Fees on set up of Investment Loan Water Corporation Fees for Sewer Plumber Fees for Sewer Verge Fund during Demo Demolition Conveyancing new titles Verge Inspection Fee Water Rates Council Rates Soakwells Bobcat driver and Kerb Removal Insurance Mailboxs Clothes Lines TV Aerials Fencing Reticulation Supplies Phone Connections Plants Soil etc Landscaping and Retic Real Estate Selling Fees CGT If it was easy, everyone would be doing it - Good Luck Timeline Aug 08-Land Mar 09-Demo/Titles Sept 10-Handover No1 Sept 11-Handover No2 April 12-Sold No2 Aug 14-Land/Demo Jan 15-Slabs viewtopic.php?f=31&t=25736 Re: Subdivision Townhouse development - Good Money to be Mad 4Jan 03, 2014 5:15 pm Investing 1.7 million for a minimum return of $120,000 in 12 months? There are better ways to invest money out there Have you factored in driveways,site costs and landscaping? A house of 27 square at $300,000 is $11,000 a square. What level of finish are you going to achieve? Personally i dont think people would pay $950,000-$1 million for a town house of that standard finish, even if the landscaping was 10/10. A house is only worth what someone is prepared to pay Re: Subdivision Townhouse development - Good Money to be Mad 5Jan 03, 2014 5:55 pm Also unless I am wrong 50% of the gain would be assessable income if it's not principle residence. Good luck ...... Re: Subdivision Townhouse development - Good Money to be Mad 6Jan 03, 2014 6:34 pm Nope Aussie you are correct CGT applies to just about all property other than your primary residence and to be eligible for the 50% discount you need to hold the property for longer than 12 months and if you are going to become a property developer I suggest you also read up on Gst and the margin scheme and the CGT exemptions will no longer apply Edited to clarify CGT discounts Re: Subdivision Townhouse development - Good Money to be Mad 7Jan 03, 2014 6:47 pm Yep, for the amount of risk involved there is not enough meat on the bone. I would also expect somewhere 80-100+% of the land value to be spent on development Re: Subdivision Townhouse development - Good Money to be Mad 8Jan 03, 2014 7:01 pm Thanks guys for your replies and cautions. With the amount of $$ at stake it makes sense to be cautious. Somehow townhouse developments keep popping out in the suburbs I looked into, and they usually sell for a good price ($900k+) not long after completion. Surely there is $$ to be made then why else would so many new townhouse developments keep popping up and put on the market. They do sell fast at that price though and if the developers are losing money then why would they do it... Re: Subdivision Townhouse development - Good Money to be Mad 9Jan 03, 2014 7:08 pm What area are you talking about? Re: Subdivision Townhouse development - Good Money to be Mad 10Jan 03, 2014 7:17 pm Sunshine2013 Investing 1.7 million for a minimum return of $120,000 in 12 months? There are better ways to invest money out there Have you factored in driveways,site costs and landscaping? A house of 27 square at $300,000 is $11,000 a square. What level of finish are you going to achieve? Personally i dont think people would pay $950,000-$1 million for a town house of that standard finish, even if the landscaping was 10/10. I recently built using a private builder and they finished the project in 6 months to an acceptable standard and quality. Total cost of house with driveway landscaping everything is about $11500 per sq. Interior finishes are good IMO as it includes 40mm ceasarstone bench tops thru out and tiles to all walls in wet areas and timber flooring to most of the house, also comes with data hubs, ducted vacs, evap cooling and ducted heating. Full brick house too using a "category 3" Boral brick. So I reckon I got a killer deal then? ;-p Re: Subdivision Townhouse development - Good Money to be Mad 11Jan 03, 2014 7:27 pm I guess it would depend on the type of finishes e.g. flooring, kitchen benches, heating/cooling,double glazing,ceiling height, insulation,etc. Thats sounds very cheap for a private builder, although time is the real test, be interesting to see how its looking in 5 years. Was the house 2 storey? Re: Subdivision Townhouse development - Good Money to be Mad 12Jan 03, 2014 7:29 pm Sunshine2013 What area are you talking about? 2 or 3 burbs that fit the following profile: 1. Good public school 2. Proximity to trains 3. Good size shopping centre 4. Vibrant shopping strip with cafés, restaurant and cinema 5. Low crime rate 6. Generally high calibre and mid to high income residents. Re: Subdivision Townhouse development - Good Money to be Mad 13Jan 03, 2014 7:32 pm Athelas Sunshine2013 What area are you talking about? 2 or 3 burbs that fit the following profile: 1. Good public school 2. Proximity to trains 3. Good size shopping centre 4. Vibrant shopping strip with cafés, restaurant and cinema 5. Low crime rate 6. Generally high calibre and mid to high income residents. Definitely not anywhere in Melbourne Re: Subdivision Townhouse development - Good Money to be Mad 14Jan 03, 2014 7:35 pm Sunshine2013 I guess it would depend on the type of finishes e.g. flooring, kitchen benches, heating/cooling,double glazing,ceiling height, insulation,etc. Thats sounds very cheap for a private builder, although time is the real test, be interesting to see how its looking in 5 years. Was the house 2 storey? Yes, double storey brick veneer with 2.7m ceiling height to both floors. Good point re time as the real test, my previous townhouse was built in 2001 and had a water leak that took years to pin down! Turned out the down pipe was installed at a slightly tilted angle and was feeding storm water into a small cavity between the ground and upper floor! Ruined my ceiling and timber flooring... Re: Subdivision Townhouse development - Good Money to be Mad 15Jan 03, 2014 7:45 pm Are you a builder or developer? I suspect the ones that keep pooping up are possibly done by small building companies. I doubt that they are being commissioned by non developers and finished to a high spec with in the parameters you mention. If it looks too good it could be because the risk has not been thought through. Also how much are you borrowing. If you don't flip you will have to come up with the payment and the rent yield is less than the finding cost. Provide more info on the suburbs. If the full size block is 1mio are half blocks 500k in the area or more. It could be the development potential is factored into the price. If that is the case then profit will be reduced. Re: Subdivision Townhouse development - Good Money to be Mad 16Jan 03, 2014 7:50 pm Athelas Sunshine2013 I guess it would depend on the type of finishes e.g. flooring, kitchen benches, heating/cooling,double glazing,ceiling height, insulation,etc. Thats sounds very cheap for a private builder, although time is the real test, be interesting to see how its looking in 5 years. Was the house 2 storey? Yes, double storey brick veneer with 2.7m ceiling height to both floors. Good point re time as the real test, my previous townhouse was built in 2001 and had a water leak that took years to pin down! Turned out the down pipe was installed at a slightly tilted angle and was feeding storm water into a small cavity between the ground and upper floor! Ruined my ceiling and timber flooring... Could have happened to anyone Re: Subdivision Townhouse development - Good Money to be Mad 17Jan 03, 2014 7:58 pm Have you thought what u r going to do if a resident takes you and the council to vcat. Sure you might still win about this can add 6 months plus town planner costs. Re: Subdivision Townhouse development - Good Money to be Mad 18Jan 03, 2014 8:00 pm I don't think a $300k house would fetch $950k on a block worth $500k. Most developments I see like this are done by builders, so their $300k is different from a clients $300k Recently moved to a 60's home in need of some improvement! http://s797.photobucket.com/user/leenii ... ch%20House Old house: http://s797.photobucket.com/albums/yy25 ... loo/House/ Re: Subdivision Townhouse development - Good Money to be Mad 19Jan 03, 2014 8:14 pm [quote="leni"]I don't think a $300k house would fetch $950k on a block worth $500k. Most developments I see like this are done by builders, so their $300k is different from a clients $300k[/quote] That's correct, most are small builders that buy up the land, subdivide, develop and sell. Its not hard to become a registered licensed builder though? It's only a 6 month course isn't it... Re: Subdivision Townhouse development - Good Money to be Mad 20Jan 03, 2014 8:15 pm B STAR Have you thought what u r going to do if a resident takes you and the council to vcat. Sure you might still win about this can add 6 months plus town planner costs. Good point, that's a potential risk with huge implications in your holding cost Building Standards; Getting It Right! Hi, sorry if this is the wrong place - I’m new to the property/building journey (trying to buy my first home) so not sure where/who to go with these sorts of… 0 19134 Hi, does anyone have a clue how the Brisbane Development website work in terms of how uptodate the dates on it are (developmenti.brisbane.qld.gov.au). I transfered… 0 4621 |