Building a Dual Occ and Selling the other half

Hello,

I’m new to this forum and property building/conveyancing issues in general and I was wondering if anyone could please help with some advice on a building plan that I’m thinking of and whether it is doable?

I want to build a dual occ house and live in one and sell off the other for a little profit. I don’t have the funds to build both dual occs to completion and then sell, so I’m looking at ways I can sell off the plan or ideally just sell the land that is subdivided and then get the buyer to enter in the same sort of contract I have with the builder that will build the project. I will not be building the dual occ, I'll get professionals to do it.

I plan to do the following:

1. Buy a 600m square plus property with an 18 metre frontage and knock down the existing house. cost = 500k (inc stamp duty)
2. Submit plans to the council for a duplex house and subdivide the property. (each block cost 250k each)
3. Once plans and subdivision are approved, I want to sell one block for roughly 350k (100k profit) with plans and builder ready to go. I would like the buyer of the land to have a contract with the builder for one half of the dual occ and I have the other contract with the builder for the other half. Build cost is roughly 250k each (500k for whole project)
4. The duplex is built by a pre-determined date by both parties and the buyer of the other block can get whatever they want finishes etc with the builder.
5. In the end, a duplex in the area we want to build with the same size and quality of finish is work approx 600-640k. So:
a. I will end up with a house which cost us 500k to build, but we generated 100k from the sale of the other block. This brings the cost to 400k. I should get 200k in equity from the project.
b. The buyers end up with a new house they can customise with the builder for the lower end of market value of a similar property.

I realise there would be tax and other fees involved but even if they accounted for 25% of our profit (50k), I’d still be pretty happy with the project profit.

So the particular questions we want to know are:

1. Can we sell the block and get the builder to have a contract with us and the buyer?
2. Could we make building the dual occ with the builder we have chosen by a set date a contract term in the land sale?
3. Would we need to sell off the plan direct to the buyer (land and building) and does this mean we need capital for the whole project?
4. Am I missing something here?

We will be looking to get proper legal advice (prob a bit much to ask in a forum and expect all the answers!), but if anyone has done something similar and could advise if this is possible, I would be very grateful. We don’t want to waste our time or money on legal advice if we’re delusional about this working.

Many thanks

Shebbo
 
Hi shebbo,

Your strategy can certainly work, but you just have to be wary of a few different considerations. From the financial perspective, if you are low on serviceability, you will need to go down the commercial finance route. This would involve, as you envisaged, selling the other block of land 'off-the-plan' and using this to help fund the construction. However, this means you would have to do the actual building for the purchaser and take on that development risk.

The alternative is to get council approval for subdivision, do all the capital works necessary (such as crossovers, sewerage connections etc), then lodge the subdivision with the land titles office so you have two titles. You can then sell the 2nd plot of land to a purchaser and they will build the house themselves, you will no longer be involved. This route is fine too but you will make less money because you only make a profit on the land, not on the building as well.

Something for you to consider..but need more information to advise in greater detail.
 
Thanks a lot Aaron, this info does help.

After reading your reply, I think we’d want to rule out the commercial loan and the development risk involved. I think this would be too much for us.
So if we wanted to sell the other block off after we have all the capital works done and plans approved, is it easy to get a restrictive covenant placed in the contract of sale? It would basically state that once the block is purchased, the dual occ must be built with “xx” builder from a certain date. Does anyone have any experience with this?

Our whole strategy is to make a little money of the subdivided block and then have someone who will fund the dual occupancy (separate titles, contracts with the builders). I guess thing get a little messy because we have to build at the same time with the same builder.

In general does anybody have any comments on whether they think this is a good idea?

Does anyone know a builder that would enter into two separate building contracts for a dual occ build (is it common)?
 
Shebbo,

From what you've said it seems like you want to build a duplex on your land and enter into a contract with another buyer so you both contribute and build it together.

This is a very peculiar arrangement and I think that it would be too much trouble. Best thing you can do is get a planning permit for two separate townhouses, then subdivide and sell the 2nd parcel of land to a 3rd party. That way, you don't have to use the same builder, you don't have to build at the same time and it will be much easier to sell.
 
Top