Duplex Addict - Rockstar No.4

I hope this project proceeds as there is plenty of cream in it. Here is the deal.

Sales Advice

PURCHASE PRICE: $240,000

DEPOSIT: 5% ($12,000.00) payable on exchange of contracts

CONDITIONS:

1. Subject to finance approval by 10 Sept. 2010

2. Subject to Registration of Strata Plan of Lot 1, No. 2
current project

3. Settlement Sept 30, 2010 or 7 days from registration
of Strata Plan of Lot 1, No. 2 ..........., whichever is the later.

4. If settlement delayed beyond Sept. 30, 2010 then:-

(a) Deposit released to vendor’s solicitor trust account,
to be invested with interest to vendor;

(b) Penalty interest @ 8.0% p.a. payable on outstanding
balance ($228,000) to vendor.

5. If Strata Plan Lot 1, No. 2 current proj. not registered by 30 June 2011, then either
Party may rescind, in which case the deposit is
refunded to the purchaser, but interest thereon together
with penalty interest paid on outstanding balance,
retained by vendor;

6. Vendor to promptly sign all documents required by
purchaser in pursuit of development consent for
Duplex development.

7. Permission to access the site for all development purposes.

Please advise when contracts have exchanged.
Yours faithfully
………………….
Partner

With the contract of sale for the 1st Unit of my current project going unconditional today I felt ready to secure this site. I have already drawn up preliminary siting of 2 kit homes (2 bed, 1 bath, 1 carport) Council planners have looked at the plans and don't see any problems with consent to the development despite there being some variation to the DCP.

At the moment it all hinges on finance so will be finalising my application with Bankwest tomorrow via my broker. Will post more details in due course.
 
One month on and we are ready to sign contracts. The block is a battleaxe - 1053 sqm. Nice and flat - and sandy (no mud :D) Still awaiting formal approval on finance so will try to hold back exchange even though STF. Have attached rough plan of house set out and photo of bushland nature reserve looking east. There is a duplex under construction next door (as seen in the plan as Proposed dwelling 2) They are 3bed 2 bath 2 gar and around 170 sqm. I know the guy who is developing them so it will be an interesting exercise to see who profits the most. He has his listed one at 428k OTP and will hold the other at around 420/wk rent. I will get a fairly accurate assessment as he is a professional valuer and a friendly acquaintance of mine. ;)

Planning to build and hold these two.

Expected costs - 530k
Rental return - $700/wk
End value - 750k
 

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Expected costs - 530k
Rental return - $700/wk
End value - 750k

Sounds like your getting quite proficient at this duplex development thing.

Will it be slightly negative geared (assuming 7% interest + 2% costs ~ $45k vs $35k income) ?

How long will it take? less than a year, if so thats a great way to make $220k equity.

What part of Aus is it in?
 
Will it be slightly negative geared (assuming 7% interest + 2% costs ~ $45k vs $35k income) ?

Stand alone I guess it will be if all the money is borrowed. I always look at my whole portfolio so individual gearing is not crucial especially when you are adding so much value and your cashflow situation and buffers are rosy.

How long will it take?

Should take around 9 months.

What part of Aus is it in?

North East Corner of NSW - Byron Shire
 
Have just exchanged contracts unconditionally on the block. Finance was rejected at 80% (LMI rejection) so we had to settle for 60%. 20% will come from me as planned and the other 20% from a family loan. All just waiting on settlement of our last duplex which is a few weeks away.
 
Have just exchanged contracts unconditionally on the block. Finance was rejected at 80% (LMI rejection) so we had to settle for 60%. 20% will come from me as planned and the other 20% from a family loan. All just waiting on settlement of our last duplex which is a few weeks away.

Rockstar,

What infrastructure costs do you have to pay the government / water authorities?

I was told about $35k and this has got nothing to do with the actual physical work involved in connecting services.

F
 
Hi Fudge,

We are putting 2 x 2 bedroom houses on the block. As in most cases, the original developer of the raw land would have paid council contributions to cover a standard single residence. As we are placing an extra residence on the land (and we get the credit for a 3 bed home from contributions already paid) we only have to pay for contributions for an extra bedroom. ie: 2+2 = 4beds. Have a look in the attached document on the last 2 pages and you will see the breakdown of charges as provided in the development consent for my previous duplex.

If we had put two 3 bedders on the land these contributions would go up to around 35k.

And as you will see, it has nothing to do with connecting services but is more about charging funds to providing and maintaining services and community infrastructure.
 

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Hi Fudge,

we only have to pay for contributions for an extra bedroom. ie: 2+2 = 4beds. Have a look in the attached document on the last 2 pages and you will see the breakdown of charges as provided in the development consent for my previous duplex.

Thanks Rockstar
 
Just a quick update. I am submitting my DA today for the dual occ.

Have been organising the following necessities.

Bushfire Report - I am submitting this but used a consultant to help. $330
Stormwater On Site Detention Engineering - Outsourced $1000
BASIX Certificate for each house - did this online myself
Landscape Plan - did myself
Contour Plan and Survey - Surveyor cost $660
Driveway details with crossover section - did myself
Statement of Environmental Effects - did myself
House Plans - Kit Home Company drew up floor plan, elevations and cross section - $350
Site Plan with house positions, driveways, private open space, etc. - did myself
DA fees - $1100

Financing has changed somewhat. I am now taking out a mortgage with a friend for 200k. He has agreed to increase this by 100k when the construction is complete.

We still haven't settled on the land so I had to get the vendor to sign the DA paperwork. Due to the delay we have scored at least one bonus. The land will not settle till next year which clears me from being liable for land tax - about 2k. :)
 
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Settled on the land yesterday as well as taking out the 200k loan through my friend. The total cost to set this mortgage up was 1.5k.

Spoke to my DA assessor this morning - she hasn't even looked at my application but has received all inter council reports back apart from RFS. She will look over it all early next week and let me know if there are any major issues. If not, I will prepare for the Construction Cert. Need to organise engineering design for the slabs and pay a deposit on the house kits in order for them to draw up structural plans. Expecting each lock up kit to be around 30k.
 
hi rockstar, I see you're up to another one!!

awesome.
I have a question tho, you showed your Stage 2 cost development plan, showing $35K going to infrastructure etc, I'm a little green here, what is this fee? I've never seen something like this before? is it just a NSW thing? I'm in Melb.
 
Hi Annie,

These are Developer Contributions charged by council. Normally, a vacant block of land will have a development credit to construct one house on it. This fee was originally paid by the land developer. If you then apply to council to construct further dwellings on that land you must pay Developer contributions for the additional dwelling/s. These costs apparently go toward paying for community facilities and their maintenance and other costs such as providing extra water and sewer services to the additional dwelling.

The amount of contributions depends on how many bedrooms the new dwellings have. ie: an extra 2 bedroom home would be charged less than an extra 3 bedder.

I would be checking with your local council to see what charges apply in your area. I would be shocked if you don't have to pay anything for an additional dwelling - though many councils seem to be waiving the fee for granny flats since they cannot be subdivided and sold off seperately. :)
 
Our DA was approved a few weeks ago :D and I am awaiting engineering plans for the slab. CC will soon be submitted and I hope to be pouring the slabs within the next few weeks.

The biggest news is that I am now sourcing my own materials for the 2 houses. I have received quotes and was pleased to find that I can save a considerable sum by doing this.

Being actively involved in the construction and project management process of recent builds has quickly given me the confidence to manage the whole process.

Have attached an early budget(for 1 house)
 

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Just fascinating Rockstar! Look forward to doing this sort of thing myself one day. What are your holding costs like? Will you try to minimize it from the sales from no. 3?
 
Hi Murph,

Sales from the current build will definitely reduce our total current borrowings by 375k and go toward funding our build of the next project.

Basically, all the money for this project is borrowed from somewhere so my holding costs are around 8% of any outstanding loan which is currently around 245k = $377/wk. This will increase with every time I spend more money.
I estimate to be finished by August at which time my holding costs will be 8% of 530k = $815/wk (estimated total holding costs for the entire project = 15-20k)
The 2 houses could be rented out for $700/wk bringing back the ongoing holding costs to $115/wk. (815 - 700)
Or one could be sold off for, say, 350k net, bringing the loan down to 180k @ 8% = $277/wk with rental of $350/wk to become cashflow+ve. Once you have a few properties to play with it opens up the playing field a bit more and provides more options for moving forward. One has to consider the whole portfolio when choosing the next move. As the market conditions are always changing I will be making the decision on what to do with the finished product when we are nearer to completion. We are actually considering moving into one of these new duplexes and renting out our current PPOR (after converting downstairs into an approved granny flat to increase the rental return). ;)

The likely strategy is to sell off one property to help fund the next development which will continue to boost our portfolio value and net worth. The more property we can accumulate whilst maintaining adequate cashflow buffers the more we will prosper from the next spurt in capital growth. This is the crux of becoming wealthy from owning property. We are enhancing this by adding value through development - not easy, but lucrative if you play your cards right and have the drive to succeed.

Hope this all helps. :)

All will be revealed over the coming months.
 
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Lodged the CC with council yesterday. Hoping to begin building within the next 3 weeks. My current duplex is settling at the end of this month so the cash can begin flowing out again.
Will be getting quotes for the slabs in the next week. Had an educated guess at around 20k for the two slabs. On track for an August completion for this project. :)
 
can't wait to see this one all done' n dusted soon too!

(and no we don't pay any of that infrastructure fee here, that I know of!)
 
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