Well, not the amazing 20% ROI developers look for but better than a poke in the eye, for a first try anyway...
Project: Retain front house and subdivide off the back yard then build a new house on the hammerhead style block, long term holds.
Timeline: 3 years to completion (thought it'd only take 2yrs)
Lesson 1- it will take longer than you imagine!
Costs:
Purchace price 3 bed brick house on 820m block $290,000 Morphett Vale, SA.
Stamp duty & closing costs $15,000
Subdivision costs all up $40,000 (budget was $30,000, but with a sewer main extension which was not forseen, cost blow out)
Lesson 2. have a nice big line of credit available if you plan to undertake subdivisions.
Construction $170,000 full turn key, low level project home with SA builder, 3 bed, 1 bath, 1 carport
Holding costs $5,000 cash flow negative (front house tennanted the whole time, 5% interest rates, some good depreciation on the front house)
Total spent all up: $520,000
Bank valuations : $565,000
NET capital gain: $45,000 (8.65% ROI)
Lesson number 3. do not count on market gains during the time you take to subdivide and build, this suburb had a slide backwards in prices over the past 3 yrs, from my initial ROI projections much less.
Both properties tennanted for combined rent of $680 per week, which makes them $100pw cash flow positive.
OK, I've shared, over to you guys for a critique of my strategy.....