Demolition and sub division costs

[Robbiep]

Hi guys,

I just had a question regarding demolition and sub division costs..

Lets say you find a piece of land with and building that needs to be knocked down, and possibly sub dividing the land.

Can these costs be covered by the bank when you decide to build on the land? I.e. can they be included with the contract with your builder?

Also, i know these costs can vary, but costs would be involved in knocking down a small home and sub dividing? Just a thumb suck as i have no idea.

Cheers,
Robbie

 

[Robbiep]

A thumb suck value i got from an agent is $10-12k for demolition and $15-20k for sub division.

 

[Aaron_C]

Demolition/construction costs can be funded. Soft subdivision costs (the paperwork and actual survey) is not fundable. Putting in essential services like water, power, sewage etc can be funded if part of a building contract.

 

[Robbiep]

Thanks Aaron,

If there is already an existing property on the land, i assume that all the services are already connected?

 

[Aaron_C]

If there is already an existing property on the land, i assume that all the services are already connected?

Yes but if you are building a second dwelling you will need additional services.

 

[Shahin_Afarin]

Re the demolition - you need to consider many things like if there is demolition of asbestos which would increase the price, the size of the current dwelling, if the dwelling can be demolished via machine or parts need to be removed by hand, etc.

You will find that you will need to do this with each cost component of your development. Its never a one size fits all case when it comes to developments.

 

[Shahin_Afarin]

Why are you funding the subdivision costs upfront? How is the DA staged? i.e. is it construction first and then subdivision or subdivision first and then construction?

 

[Robbiep]

Thanks guys..

Out of interest...

How do first home owners, who are currently renting, afford to paying their interest payments on new builds?

As you know, sometimes it could take up over 8 months before you can move in, which equates to alot of rental and interest payments.

Silly question.. but is there an option of only paying once you are able to move into the new property?

 

[tobe]

they just have to budget. I suggest they start putting away the full repayment immediatelly prior to land settlement so they build up a little bank to see them through the build.

You can negotiate 'pay on comletion' or 'spec' builds, where you only pay at the end, but this usually comes with a premium. The builder has to take on extra risk, and costs/cashflow over this period. The premium is usually well in excess of what the simple interest would be for the build time.

 

[tobe]

or they just move back to Mum and Dad's for a while.......

 

[Brady]

- Move in with family/friends
- Save the short fall as a lump sum before
- Have the ability to cover due to income