For the MB out there - Triplex finance @ 90% for expat

You are bang on here imo. I think you will need a lot of cash for this project and then some to cater for unexpected issues.

How is your current project going?

This is my current project :eek::D

I have the duplex contract sitting on my desk and finance ready to go, but I don't like the numbers. How I got here is a long story and not very different from what you hear from other inexperienced investors. The numbers looked reasonable, though not fantastic when I decided to build. The builder went broke and, fast forward 1 year, with holding costs, plus legal costs, the profit margin has eroded quite a bit. Couple that with a softening rental market, I am reluctant to go ahead and build the duplex.

I am doing a feaso for a triplex and also for 2 duplexes on the block. The profit margin there is much better, but with financing challenges described, I am not in a good position to move forward with it just yet.

I am considering my options...

  • build the duplex as is and accept the low margin as a risk
  • Wait for my return to Australia in 1 or 2 years to get proper finance and do the project then.

I am tempted to go with the second option. I could pay down (or off) the block of land in the meantime and borrow against it for the project to minimise holding costs. That would also allow me to save more cash for contingency. Overall, I would be better prepared to tackle a bigger project...

The issue here is the opportunity cost of doing nothing for up to 2 years...

Option 1 frees up capital after 6 to 10 months, but the risk of doing a project like this for a loss (albeit small) is not very tempting...

What do you think?
 
This is my current project :eek::D

I have the duplex contract sitting on my desk and finance ready to go, but I don't like the numbers. How I got here is a long story and not very different from what you hear from other inexperienced investors. The numbers looked reasonable, though not fantastic when I decided to build. The builder went broke and, fast forward 1 year, with holding costs, plus legal costs, the profit margin has eroded quite a bit. Couple that with a softening rental market, I am reluctant to go ahead and build the duplex.

I am doing a feaso for a triplex and also for 2 duplexes on the block. The profit margin there is much better, but with financing challenges described, I am not in a good position to move forward with it just yet.

I am considering my options...

  • build the duplex as is and accept the low margin as a risk
  • Wait for my return to Australia in 1 or 2 years to get proper finance and do the project then.

I am tempted to go with the second option. I could pay down (or off) the block of land in the meantime and borrow against it for the project to minimise holding costs. That would also allow me to save more cash for contingency. Overall, I would be better prepared to tackle a bigger project...

The issue here is the opportunity cost of doing nothing for up to 2 years...

Option 1 frees up capital after 6 to 10 months, but the risk of doing a project like this for a loss (albeit small) is not very tempting...

What do you think?

You could stage the development. Design it for three but finance and build 2 of them. On completion or when you can sort your finances out build the third dwelling? Could do the same for the two duplexes option.
 
You could stage the development. Design it for three but finance and build 2 of them. On completion or when you can sort your finances out build the third dwelling? Could do the same for the two duplexes option.

Yep, that is a good option. Worth exploring.
Thanks for that.
 
You could stage the development. Design it for three but finance and build 2 of them. On completion or when you can sort your finances out build the third dwelling? Could do the same for the two duplexes option.

I think this is quite common in WA but staged developments like this is very unlikely in Sydney metro councils. They like you to build everything and then DA for subdivision. Exceptions would be subdividing a land into 2 lots.
 
This is my current project :eek::D

I have the duplex contract sitting on my desk and finance ready to go, but I don't like the numbers. How I got here is a long story and not very different from what you hear from other inexperienced investors. The numbers looked reasonable, though not fantastic when I decided to build. The builder went broke and, fast forward 1 year, with holding costs, plus legal costs, the profit margin has eroded quite a bit. Couple that with a softening rental market, I am reluctant to go ahead and build the duplex.

I am doing a feaso for a triplex and also for 2 duplexes on the block. The profit margin there is much better, but with financing challenges described, I am not in a good position to move forward with it just yet.

I am considering my options...

  • build the duplex as is and accept the low margin as a risk
  • Wait for my return to Australia in 1 or 2 years to get proper finance and do the project then.

I am tempted to go with the second option. I could pay down (or off) the block of land in the meantime and borrow against it for the project to minimise holding costs. That would also allow me to save more cash for contingency. Overall, I would be better prepared to tackle a bigger project...

The issue here is the opportunity cost of doing nothing for up to 2 years...

Option 1 frees up capital after 6 to 10 months, but the risk of doing a project like this for a loss (albeit small) is not very tempting...

What do you think?

Hahaha ok I thought gee he is moving on pretty quick.

I have said it before but it very unlikely to make a deal work on duplex construction in Sydney unless its high end stuff (paddington, clovelly, etc).

Have you done the high level numbers? Do you want to put it up?

A lot of people don't factor in selling costs because they want to hold them which is fine but you need to factor in the fact that its worth a premium because its new and over time the CG will not as high as an established dwelling if that makes sense.
 
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