Builders Term ?
- Thread starter rexilla99
- Start date
Not always the case that builders can get terms off a developer.
It depends on the developer and the subdivision and the developers requirement to get presales or else some activity on the ground ( eg.. buildings underway) to create confidence in the buying public to buy into the subdivision.
Terms can include delayed settlement, vendor terms or incentives such as discounts on blocks for builders.
So effectively, nothing you can't ask for directly from the developer yourself.
Just that you would have to make it attrqactive to the developer, so offer to purchase multiple blocks plus agree to commence building in a short timeframe etc.
Builders terms only apply to registered builders.
What you are after is favourable terms direct from the developers, if you can find a developer who is interested in offering them.
kp
It depends on the developer and the subdivision and the developers requirement to get presales or else some activity on the ground ( eg.. buildings underway) to create confidence in the buying public to buy into the subdivision.
Terms can include delayed settlement, vendor terms or incentives such as discounts on blocks for builders.
So effectively, nothing you can't ask for directly from the developer yourself.
Just that you would have to make it attrqactive to the developer, so offer to purchase multiple blocks plus agree to commence building in a short timeframe etc.
Builders terms only apply to registered builders.
What you are after is favourable terms direct from the developers, if you can find a developer who is interested in offering them.
kp
Ummmm.... NO.
It takes more than a short course to qualify as a registered builder.
Ring teh QBSA and get some feedback from them about what it will take to get a builders ticket. They are helpful.
I would recommend your best course of action is to approach the developer direct and sound them out.
Seems to me you are looking at any short cut to get around the system to qualify for blocks on favourable terms.
Nothing wrong with trying to get the best price of terms, but you won't qualify for 'builders' terms if youare not a builder.
Does not mean that the developer can't offer yousomething similar, but you have to ASK first.
kp
It takes more than a short course to qualify as a registered builder.
Ring teh QBSA and get some feedback from them about what it will take to get a builders ticket. They are helpful.
I would recommend your best course of action is to approach the developer direct and sound them out.
Seems to me you are looking at any short cut to get around the system to qualify for blocks on favourable terms.
Nothing wrong with trying to get the best price of terms, but you won't qualify for 'builders' terms if youare not a builder.
Does not mean that the developer can't offer yousomething similar, but you have to ASK first.
kp
A way to get around this without having a builders license is to ask the developer to add an annexure to the contact for early access. This is essentially the same as builder’s terms. The annexure would state that you could have access to construct a dwelling prior to settling on the block, the contract would specify a settlement date which you would need to meet regardless of what stage the house construction is at. If you secured a sale on the house prior to this date you would still need to settle before on-selling the "Spec" as a package (which includes paying the required stamp duty). Your solicitor can arrange for this to happen simultaneously to avoid holding interest. One thing to note is that in my experience it can be very difficult to obtain finance for this type of purchase arrangement as you are literally building (investing a lot of money) on someone else’s land.
PM me if you would like an example of an annexure I have used.
cheers Nat
PM me if you would like an example of an annexure I have used.
cheers Nat
I recently met an r/e agent down our way who does this as a side business to his r/e business. I'm hoping to hook up with him and another mutual friend to do them in the future. It appears to be a very private little club, and I think the members are vetted very closely before they are let in.
I had a game of golf with these two boys and the r/e's wife (who is also a member of their "club") a coupla weeks ago, and I got the very strong feeling I was being "screened". It was a very interesting day and it was a bit of an eye-opener.
Of course; the r/e has been in the area for a very long time (he's mid 50's-ish), and knows every builder and developer this side of Melb.
Apparently, they do new house and land projects, keep it simple and use lower end price-points, flip them and pull out a nice profit without being greedy and make it so that everyone has a win - builder, developer, agent, investors. Sounds like my kind of set-up!
So, the contacts and the relationships you can develop are probably what contributes a lot to the success.
I guess this would be part of "your team" that we all keep hearing about from the gurus.
No; they are only in very south eastern suburbs of Melb - growth corridors and in new estates.
No specific margins were discussed, but my mate (who knows the r/e) likes to work on around $20k profit, and they are basically no money down flips, or sell on completion. Not a huge win, but 2 or 3 of those each year is very handy. My kinda income - no or very little work, very little cash outlay.
The r/e makes a bit out of it as well, plus his buy and sell commissions, and no doubt the builder and developer win too. The r/e sources them through his network of contacts in the building trade and then contacts the investors when he's got a deal.
I guess we could bypass the r/e and go straight to the developer, but then the greed is kicking in and the whole nice little arrangement falls over. That's not needed.
They seem sensible; their goal is to make sure everyone wins, and not be too greedy.
Eligibility to the FHOG is not dependent on whether they built the house or you built it. If they are a first home owner then they should qualify for the grant. Maybe what you are querying is whether they will qualify for the $14k(established property) or the $21k ( new property)
I would say 'yes' if they bought your properrty on completion and were the first occupants.
Building in a company structure bears no relevance to the affect it has on the buyer.
It will affect you however, if you are planning to do a few a year and sell them within 12 months of purchase/settlement of the land. ( ie... tax implications)
As far as returns go, you would typically try and achieve 20% return after all costs are deducted, but this may go as low as 15%.
Anything below this at the planning or feasibility stage and it is just too risky as any erosion to your projected profit can see you doing the whole exercise for a NIL return or worse, suffering a loss!!
I understand that 20% should be the profit margin, but its seems very hard to get 90k profit after expenses if you selling the project for 400k that would mean you would have to buy the land and build at less that $320k .
Has anyone got tips on how to get maximum profit from doing spec homes? There a some companies out their that are no builders themselves but do 10 projects or more per year.
-I am curious to know how they manage to build at a discounted price when they are not the builder themselves?
- Do you have to be a owner builder or even a builder to be able to build just as cheap as the builder such as Glenwood, ausbuild, Choice homes etc?
Has anyone got tips on how to get maximum profit from doing spec homes? There a some companies out their that are no builders themselves but do 10 projects or more per year.
-I am curious to know how they manage to build at a discounted price when they are not the builder themselves?
- Do you have to be a owner builder or even a builder to be able to build just as cheap as the builder such as Glenwood, ausbuild, Choice homes etc?
BV, what Margin for error do you leave yourself if you go into a development expecting $20k profit? Surely there would be no margin for error. Very dangerous in this climate don't you think?
Or do you and your mate go into them expectnig more than $20k?
You're trying to tell a novice that that sort of margin is ok. That's crazy. You may have the resources to get your fingers burnt but I would ask the OP to carefully consider his options if he can't at least get any sort of return >15%.
You haven't read my posts very well in this thread.
I'm not trying to tell a novice that any margin is ok. Everyone has their own profit margin that they want to work with.
Some people here think a 5% rent return is ok - I think it's cr@p and would never buy a property with that yield. It is up to everyone to make up their own mind.
Read my lame disclaimer at the bottom.
Also, a novice probably shouldn't be going into development until they have a decent wealth base behind them from other IP's and some considerable r/e experience.
Besides; I wasn't talking about doing the development with my scenario - I am not planning to be the funder and developer of it - just the guy who signs the purchase contract and then re-sells it to the next guy on completion or hopefully before. It is very speculative, but we are working at the bottom end of the price range where the dollar return is smaller anyway.
We are not working in the $400k or more price range. it's more like $275 -$320k range. FHB stuff.
I haven't done one of his deals as yet; this is what he and his r/e mate are into, and hopefully I will be in on the party soon. As I said; I'm pretty sure they were "qualifying" me before hand.
But, this is all based on their analysis - more to the point - the r/e's analysis of the areas and the current market. He has 30 years experience in the area, and apparently is the guru, so we'll have to see. He has the experience to make the most informed decisions.
He makes the suggestions and then they act, based on their study and his experience. The investors put up the signatures on the contracts.
I don't expect they are looking to lose money, but this is a more speculative type of venture - more like your flips.
So, the idea is to make a quick $20k or so, and if it doesn't pan out then them's the breaks.
Now, if I was controlling the whole development on my own and looking to sell at the end and use the funds to do more, then yes, I would have to make at least 20% on the deal. My intention is to move up to smaller developments at some stage - 3 or 4 townhouse for example, but this is way more risky. You need to know your stuff.
I don't have experience in this area, so for me it is easier to piggy-back on a deal/s through someone who has done at least 100 of them like the r/e has. Much safer in my mind.
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