Duplex Development

Guys and gals

I have several long term hold IPs, but have not previously undertaken any resi-development.

I am considering a proposal as follows and would welcome any feedback. (the figures are my own estimates).

Buy IP with House #A for $210k. (ie. Borrow ~$220k to cover all costs)
Rent out house #A (approx $170pw) whilst developing block and building property #B at rear within first 12 months. (Probably top up borrowings by additional $120k to cover building + 3rd party costs)
After building house #B, house #A on smaller block is probably only worth $180k, but at least this reduction has subsidised the land costs for property #B. (Property #B expected to be worth ~$220k on completion.)
Maintain property #A for at least 12 months (to at least perform any value added improvements whilst additionally allowing for 50% CGT reduction ) and sell if good market value, otherwise retain, at least in short term until market okay.
Retain & lease newly built property #B (and maximise depreciation and special building write-offs, with intention of long term hold (>>>5 years, ie no GST applicable to property #B).

What I am unsure of is, when House #A is sold , what would be the original cost basis for CGT calculation? Should I get an independent valuation of the property immediately after subdivision of the block or what would form the basis for the original value?

BTW all this would be done thru family trust ….

For me the numbers are not as high as I would like as I know any developer would normally expect a 20-25% return before they would look at any such deal, however I am keen to “cut my teeth”and if necessary learn a little more along the way, so I would welcome any suggestions or shortcomings anyone would like to offer?

My feeling is that even if I stuff up a little and blow any potential profit (or equity gain), at least that would stand me in good stead for the next one.

Thanks in advance.

Joe D