Browse Forums Building A New House 1 Sep 15, 2019 2:15 pm Long post sorry about that.
Some background first to better understand the situation. My mother owns a block of land which is 2 lots under 1 title, a splitter block. I've done some basic ground work to figure out the cost for her. About 22k for demo of the house, clearing of the block, including capping of sewer lines, power disconnected, demo approval, Surveying about $1800. Service connections (water/sewer) $9400. Splitting the titles about $400. Conveyancing $500 for 1 lot. Estimated about $34,605 all up. The lot we would sell is 445m2 which in our area are generally going for $435,000-$450,000. Our plan is to use the money from the sale of 1 lot to build on the other lot. A home from Ownit homes, Clarendon, McCarthyhomes and the like. Budgeting that build at around $300,000-$330,000. With the hope of coming out on the other side with $90,000-$100,000 left over. Now here's the issue. My mother doesn't have the estimated $34,605 needed to clear the block and demo the house. So we approached an acquaintance who has a background in property development. He suggested we enter an arrangement where the builder would take on the estimated $34,605 cost (my estimated cost). Build the house and use the 445m2 lot as a house and land package from their company. This seemed like a great idea to us at the time. We hoped to still come out on the other side with some money after selling the first lot. Skip ahead, we have another meeting with our acquaintance where this proposal was put forward. A couple of plans we given to us for a 250.72m2, 8.1m wide 18m double story house. It has the requirements we needed. Downstairs bedroom and ensuite for mum. That was our only necessary requirement for the build. . We ask the inevitable question. How much money does mum get at the end of this. His answer was NONE. This shocked us completely. It seems the arrangement they propose, is for us to give them the 445m2 lot without them buying it at a reduced cost to cover the $34,605. Which I had thought would be the arrangement. Build us a small double storey house costing significantly less than the value of the 445m2 lot. Estimating the house proposed would cost the $280,000-$300,000 or so to build with the 445m2 lot being $435,000-$450,000. I asked our acquaintance to send me a costing of the house that would be built for us. I was told the builder isn't comfortable discussing numbers without a commitment from us. The commitment btw is $10,000 into a solicitors trust which is returned to us at the completion of the project. Which we are told will be 10-12 months. Then I was told what a significant risk all this was to the builder and we should be grateful they are willing to take this on. And the builder had already spent $1500 of his own money. Guessing this was for the drafts but was never told. Which seems odd to me. Wouldn't the builder have plans on hand and draftsmen in house? So my question is - What is going on here? Someone is making a significant amount of money considering houses in my area are going for around $850,000-$920,000. Am I being naive about this? Is there a significant risk to the builder? Should we just walk away? Need some advice about building proposal 2Sep 15, 2019 6:14 pm Walk away, someone is taking you for a ride! Get a personal loan, if you or your family cant help out, do the subdivision, pay off the personal loan walk way with around 400K, then demolish and build. I’m not sure what the benefit is, if you go with the current situation. Except someone other than your mother is making the profit.... Re: Need some advice about building proposal 3Sep 15, 2019 7:03 pm gogo65 Walk away, someone is taking you for a ride! Get a personal loan, if you or your family cant help out, do the subdivision, pay off the personal loan walk way with around 400K, then demolish and build. I’m not sure what the benefit is, if you go with the current situation. Except someone other than your mother is making the profit.... Thank you. Pretty much what I'm thinking myself. Guess I just needed to hear it from someone else. Re: Need some advice about building proposal 4Sep 15, 2019 7:53 pm I disagree, the builder is talking all the risk and is the developer, he should expect to make 15-20% profit for that risk. As stated, you should be able to source the money somewhere else. cheers Pulse Re: Need some advice about building proposal 5Sep 15, 2019 8:15 pm Pulse I disagree, the builder is talking all the risk and is the developer, he should expect to make 15-20% profit for that risk. As stated, you should be able to source the money somewhere else. cheers Pulse Can you list the risk they would be taking? I honestly have no idea what risks the builder would face. From my perspective they've already shown a lack of transparency before the project has even been started. Failing to provide a costing of the house. That was a huge red flag for me. You don't purchase something without know how much it costs, Edit: They would be making a significant profit from the sale of the property on lot 1. By my estimate they're laying out about $680,000 at the high end. 20% of that is $136,000. They should make a profit of between $250,000-$300,000 off the sale of their house and land package. Remember their proposal has us giving them the 445m2 lot ($430,000-$450,000) for a house worth at best $280,000-$300,000. Re: Need some advice about building proposal 6Sep 15, 2019 8:21 pm I just bought a block of land. 399k. Of that, - 28k tax - 1k fees for registering. - 2k solicitor fees for selling. - 500$ put aside for potential rates that need to be paid. Also real estate fees. So they lost 33-40k from the headline sale price. So dont forget to factor that in. Unless you can get the tax back. I suspect there would be additional costs in splitting that you aren't aware of as well. Acoustic reports. Drainage reports. Having to build fences for neighbours before selling. etc etc Re: Need some advice about building proposal 7Sep 15, 2019 8:31 pm Neatep I just bought a block of land. 399k. Of that, - 28k tax - 1k fees for registering. - 2k solicitor fees for selling. - 500$ put aside for potential rates that need to be paid. Also real estate fees. So they lost 33-40k from the headline sale price. So dont forget to factor that in. Unless you can get the tax back. I suspect there would be additional costs in splitting that you aren't aware of as well. Acoustic reports. Drainage reports. Having to build fences for neighbours before selling. etc etc The 28k tax was the capital gains tax? Re: Need some advice about building proposal 8Sep 15, 2019 8:39 pm V002 The 28k tax was the capital gains tax? Sorry. I do not know. I saw it when i was emailed a list of costs, of what money was paid to who, and that largest cheque was for the commissioner of the tax office or something. (i was originally confused - as i thought i had to pay it. I think they had inadvertantly combined both the sellers and buyers costs together.) Although i doubt it would be CGT. Wouldn't CGT only count on the income tax statement at EOFY? Re: Need some advice about building proposal 9Sep 15, 2019 8:46 pm the risks are the usual risks, finance, interest rates, cost blowouts, falling market. It looks easy but isn’t always. If there is no risk, the bank should be happy to lend you the money to develop it yourself. I don’t think the builder needs to share his financials as the developer, that would be like mirvac telling you what profit they made off your apartment purchase. I think you just need to decide whether you are getting what you want at the price you want to pay. If not then don’t do the deal. Re: Need some advice about building proposal 10Sep 15, 2019 8:48 pm Neatep V002 The 28k tax was the capital gains tax? Sorry. I do not know. I saw it when i was emailed a list of costs, of what money was paid to who, and that largest cheque was for the commissioner of the tax office or something. (i was originally confused - as i thought i had to pay it. I think they had inadvertantly combined both the sellers and buyers costs together.) Although i doubt it would be CGT. Wouldn't CGT only count on the income tax statement at EOFY? It applies to assets that were purchased on or after 20 September 1985. As I understand it you don't pay CGT on property if it was bought before September 20th 1985.Which my mother property was bought in July of 1985. The proposal before us has us signing the title for lot 1 over to them I guess; they aren't buying it from us. I honestly don't know if that would incur tax. Probably something I'd need a solicitor to work out. Just realizing this thanks to your post. Its made me even more wary of this proposal. Re: Need some advice about building proposal 11Sep 16, 2019 11:51 am V002 The proposal before us has us signing the title for lot 1 over to them I guess; they aren't buying it from us. So they will get half of your block and you fund part of their development from your build cost...? Seriously, How can that be a great deal for you OT, Those days in property development are Long Gone Land costs are high, Build costs are low,it is not visa versa Do your own plans, costings and get 3 Builders to quote and have them sharpen their pencil Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Need some advice about building proposal 12Sep 16, 2019 12:48 pm StructuralBIMGuy V002 The proposal before us has us signing the title for lot 1 over to them I guess; they aren't buying it from us. So they will get half of your block and you fund part of their development from your build cost...? Seriously, How can that be a great deal for you OT, Those days in property development are Long Gone Land costs are high, Build costs are low,it is not visa versa Do your own plans, costings and get 3 Builders to quote and have them sharpen their pencil That does seem to be the proposal presented to us. We give them the 445m2 lot ($430,000-$450,000), they build our house on lot 2 over 10-12 months. They sell their house land package and keep the profits from lot 2 and the balance of lot 1 construction cost. Based on what houses are going for in my area. They'll be selling for at minimum $850,000 and max $920,000. While our build cost wouldn't exceed $280,000-$330,000. If they had offered to purchase lot 1 for a decreased price to cover clearing the block say $400,000 I probably would be on board with it. IF that balance from our construction ended up in our pocket not theirs. I honestly saw this proposal as a non-starter from the get go. However with a real lack of experience in this area. I thought it best to see what other say first. From the responses given here and other forums. Walking away seems to be the overwhelming opinion given. Re: Need some advice about building proposal 13Sep 17, 2019 12:14 pm So you want to demolish your block, split the block, sell one half, and build a house on the other half, and hope to have $90,000 profit at the end? That sounds like a sensible idea, but it is also quite a bit of work and stress involved. The builder is basically saying that they will do it all for you whilst you sit back - i.e. project manage this whole plan. Clearly, they are not altruistic, and will expect to be paid for project management; whether you think paying someone $90,000 to do this is good value or not depends on many personal circumstances (and at the end of the day, it may not even be $90,000 profit you get at the end if your costs blow out). I know of several people that would willingly give that amount to the builder to project manage it all, but I feel that if you ask people on this forum (myself included), many of whom have project managed or even built their houses themselves, they would say put in the hard graft yourself and pocket the potential profit in the end. I don't like the fact that your builder won't even discuss numbers with you. I'd much rather have a builder say here are the figures, here's what I'll do for you, and here's the profit I make from doing it - because any sensible person will recognize that they need to make a profit for their business to exist too. My build with Inspired/ Como Homes: https://forum.homeone.com.au/viewtopic.php?f=31&t=93656 Re: Need some advice about building proposal 14Sep 18, 2019 9:20 am ben888 So you want to demolish your block, split the block, sell one half, and build a house on the other half, and hope to have $90,000 profit at the end? That sounds like a sensible idea, but it is also quite a bit of work and stress involved. The builder is basically saying that they will do it all for you whilst you sit back - i.e. project manage this whole plan. Clearly, they are not altruistic, and will expect to be paid for project management; whether you think paying someone $90,000 to do this is good value or not depends on many personal circumstances (and at the end of the day, it may not even be $90,000 profit you get at the end if your costs blow out). I know of several people that would willingly give that amount to the builder to project manage it all, but I feel that if you ask people on this forum (myself included), many of whom have project managed or even built their houses themselves, they would say put in the hard graft yourself and pocket the potential profit in the end. I don't like the fact that your builder won't even discuss numbers with you. I'd much rather have a builder say here are the figures, here's what I'll do for you, and here's the profit I make from doing it - because any sensible person will recognize that they need to make a profit for their business to exist too. You're 100% right about the builder not wanting to share info. That was a huge red flag for me. Since posting I've spoken to a friend in Melbourne who works in the construction. He found it highly unusual for the builder to be withholding numbers. So for me the trust between us and the developer/builder is shattered before the project started. Going to try for a loan to clear the block ourselves. IF the sale of the 2nd lot goes smoothly, the bank gets its money back in no time. Re: Need some advice about building proposal 15Sep 18, 2019 9:44 am V002 Going to try for a loan to clear the block ourselves. IF the sale of the 2nd lot goes smoothly, the bank gets its money back in no time. The smart money is to "test the water" and try to market the block beforehand using preliminary costs and a design...forecast your Sales- costs = profit The feed back will help with the final decision making just remember "demolition is final" meaning you can't pitch a tent on a vacant lot Cheers Chris Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Need some advice about building proposal 16Sep 18, 2019 4:33 pm StructuralBIMGuy V002 Going to try for a loan to clear the block ourselves. IF the sale of the 2nd lot goes smoothly, the bank gets its money back in no time. The smart money is to "test the water" and try to market the block beforehand using preliminary costs and a design...forecast your Sales- costs = profit The feed back will help with the final decision making just remember "demolition is final" meaning you can't pitch a tent on a vacant lot Cheers Chris Thanks. I do have some questions. To split the lots I would have to remove the house, correct? It can't be done with the house still on the property? A site survey should only be done once the house is removed? Re: Need some advice about building proposal 17Sep 18, 2019 6:53 pm V002 To split the lots I would have to remove the house, correct? It depends on where the house is positioned? If its in the middle of the block then yes If its at the front try to salvage some portion of the existing house also allow for a driveways in the redesign V002 It can't be done with the house still on the property? Check the residential design Codes in your state for Zoning for min size lot, set backs, open areas,etc, there should be examples to follow V002 A site survey should only be done once the house is removed? No you can do a site survey with house on the block Also research the different Green & Strata Titles,etc Best to consult a land surveyor Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: Need some advice about building proposal 18Sep 19, 2019 9:00 am StructuralBIMGuy V002 To split the lots I would have to remove the house, correct? It depends on where the house is positioned? If its in the middle of the block then yes If its at the front try to salvage some portion of the existing house also allow for a driveways in the redesign V002 It can't be done with the house still on the property? Check the residential design Codes in your state for Zoning for min size lot, set backs, open areas,etc, there should be examples to follow V002 A site survey should only be done once the house is removed? No you can do a site survey with house on the block Also research the different Green & Strata Titles,etc Best to consult a land surveyor Thank you this has been so helpful Re: Need some advice about building proposal 19Sep 19, 2019 1:47 pm V002 Long post sorry about that. Some background first to better understand the situation. My mother owns a block of land which is 2 lots under 1 title, a splitter block. I've done some basic ground work to figure out the cost for her. About 22k for demo of the house, clearing of the block, including capping of sewer lines, power disconnected, demo approval, Surveying about $1800. Service connections (water/sewer) $9400. Splitting the titles about $400. Conveyancing $500 for 1 lot. Estimated about $34,605 all up. The lot we would sell is 445m2 which in our area are generally going for $435,000-$450,000. Our plan is to use the money from the sale of 1 lot to build on the other lot. A home from Ownit homes, Clarendon, McCarthyhomes and the like. Budgeting that build at around $300,000-$330,000. With the hope of coming out on the other side with $90,000-$100,000 left over. Now here's the issue. My mother doesn't have the estimated $34,605 needed to clear the block and demo the house. So we approached an acquaintance who has a background in property development. He suggested we enter an arrangement where the builder would take on the estimated $34,605 cost (my estimated cost). Build the house and use the 445m2 lot as a house and land package from their company. This seemed like a great idea to us at the time. We hoped to still come out on the other side with some money after selling the first lot. Skip ahead, we have another meeting with our acquaintance where this proposal was put forward. A company called Broadacre house and land would coordinate the project with FRD as the builder. A couple of plans we given to us for a 250.72m2, 8.1m wide 18m double story house. It has the requirements we needed. Downstairs bedroom and ensuite for mum. That was our only necessary requirement for the build. . We ask the inevitable question. How much money does mum get at the end of this. His answer was NONE. This shocked us completely. It seems the arrangement they propose, is for us to give them the 445m2 lot without them buying it at a reduced cost to cover the $34,605. Which I had thought would be the arrangement. Build us a small double storey house costing significantly less than the value of the 445m2 lot. Estimating the house proposed would cost the $280,000-$300,000 or so to build with the 445m2 lot being $435,000-$450,000. I asked our acquaintance to send me a costing of the house that would be built for us. I was told the builder isn't comfortable discussing numbers without a commitment from us. The commitment btw is $10,000 into a solicitors trust which is returned to us at the completion of the project. Which we are told will be 10-12 months. Then I was told what a significant risk all this was to the builder and we should be grateful they are willing to take this on. And the builder had already spent $1500 of his own money. Guessing this was for the drafts but was never told. Which seems odd to me. Wouldn't the builder have plans on hand and draftsmen in house? So my question is - What is going on here? Someone is making a significant amount of money considering houses in my area are going for around $850,000-$920,000. Am I being naive about this? Is there a significant risk to the builder? Should we just walk away? Don't just walk away - RUN! The reason why "they're no comfortable discussing costs" is that everything is marked up to the hilt. There is no way known a company is going to do a deal like that and come out with low profit. It's all $ to them. You mentioned a couple of times, an "acquaintance". I'm not comfortable with this, and don't think you or mum should be either. Is there an option for you (and potentially another sibling) to take out a loan or add to your mortgage for the abolition, demolition and title splitting costs? Would be so much better value keeping it all "in house". https://thomasarcherbuild.blogspot.com/p/blog-page.html - Thomas Archer Homes - Custom Nouveau 41 Re: Need some advice about building proposal 20Sep 19, 2019 4:12 pm Blacktea2sugars V002 Long post sorry about that. Some background first to better understand the situation. My mother owns a block of land which is 2 lots under 1 title, a splitter block. I've done some basic ground work to figure out the cost for her. About 22k for demo of the house, clearing of the block, including capping of sewer lines, power disconnected, demo approval, Surveying about $1800. Service connections (water/sewer) $9400. Splitting the titles about $400. Conveyancing $500 for 1 lot. Estimated about $34,605 all up. The lot we would sell is 445m2 which in our area are generally going for $435,000-$450,000. Our plan is to use the money from the sale of 1 lot to build on the other lot. A home from Ownit homes, Clarendon, McCarthyhomes and the like. Budgeting that build at around $300,000-$330,000. With the hope of coming out on the other side with $90,000-$100,000 left over. Now here's the issue. My mother doesn't have the estimated $34,605 needed to clear the block and demo the house. So we approached an acquaintance who has a background in property development. He suggested we enter an arrangement where the builder would take on the estimated $34,605 cost (my estimated cost). Build the house and use the 445m2 lot as a house and land package from their company. This seemed like a great idea to us at the time. We hoped to still come out on the other side with some money after selling the first lot. Skip ahead, we have another meeting with our acquaintance where this proposal was put forward. A company called Broadacre house and land would coordinate the project with FRD as the builder. A couple of plans we given to us for a 250.72m2, 8.1m wide 18m double story house. It has the requirements we needed. Downstairs bedroom and ensuite for mum. That was our only necessary requirement for the build. . We ask the inevitable question. How much money does mum get at the end of this. His answer was NONE. This shocked us completely. It seems the arrangement they propose, is for us to give them the 445m2 lot without them buying it at a reduced cost to cover the $34,605. Which I had thought would be the arrangement. Build us a small double storey house costing significantly less than the value of the 445m2 lot. Estimating the house proposed would cost the $280,000-$300,000 or so to build with the 445m2 lot being $435,000-$450,000. I asked our acquaintance to send me a costing of the house that would be built for us. I was told the builder isn't comfortable discussing numbers without a commitment from us. The commitment btw is $10,000 into a solicitors trust which is returned to us at the completion of the project. Which we are told will be 10-12 months. Then I was told what a significant risk all this was to the builder and we should be grateful they are willing to take this on. And the builder had already spent $1500 of his own money. Guessing this was for the drafts but was never told. Which seems odd to me. Wouldn't the builder have plans on hand and draftsmen in house? So my question is - What is going on here? Someone is making a significant amount of money considering houses in my area are going for around $850,000-$920,000. Am I being naive about this? Is there a significant risk to the builder? Should we just walk away? Don't just walk away - RUN! The reason why "they're no comfortable discussing costs" is that everything is marked up to the hilt. There is no way known a company is going to do a deal like that and come out with low profit. It's all $ to them. You mentioned a couple of times, an "acquaintance". I'm not comfortable with this, and don't think you or mum should be either. Is there an option for you (and potentially another sibling) to take out a loan or add to your mortgage for the abolition, demolition and title splitting costs? Would be so much better value keeping it all "in house". Yes, I'm exploring the other options now. It will be tough, but this 'proposal' put to us stinks the more I look into it. It will take time to do it all myself but as you said 'better value keeping it all in house' Hi VK, Think it's worth investing time in an Owner Builder course to equip you with basic knowledge on Australian Building Industry and its regulations. 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