how to make $110k 12mths without quitting my day job

Thats the plan Stan!

This is development project number 2, my aim is for 20% ROI in 12 mths. My first project wasn't so crash hot so this one I have better hopes for, you can check out my other thread here: http://somersoft.com/forums/showthread.php?t=96564

STRATEGY:
Purchace corner allotment within 10km of Adelaide CBD
Subdivide off back yard
Retain the front house and renovate
Sell off the vacant lot and renovated house ASAP to realise quick cash gains
Rinse and repeat.

COST/PROFIT:
$445,000 purchace price
$25,000 stamp duty/ title transfer/ conveyance/ sundries
$30,000 renovation
$30,000 subdivision
$8,000 MLI for 90% loan
$12,000 holding cash flow neg over 12 mths (only vacant 2 mths for reno) rent@ $350pw)
$550,000 TOTAL SPEND OVER 12MTHS

$270,000 end value of vacant land
$390,000 end value of renovated 3 bedroom house on courtyard block
$660,000 COMBINED END VALUES

$110,000 CAPITAL GAIN = 20% RETURN ON ALL MONEY INVESTED

I will continue to update this thread over the coming 12 mths to show you all step by step the process I undertake to achieve this outcome and to share the inevitable challenges that will pop up along the way.
 
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why not build on vacant lot?

The last property I subdivided I did actually build on the vacant lot- what I learnt from that experience is that unless you are a builder yourself, you do not increase your profit margin. The main profit making excercise is the subdivision. Ok I'll try to explain this in numbers:
End vacant lot value $270,000 now you build on it- paying full retail to a project home builder +$200,000 you now have an end value product that is just the land +build =:$470,000 so you have not actually created any more capital gain so why invest the extra $200k....

How do I know the end value will only=land+build? I have contacted a couple of realestate agents in the area and shown them designs of a house that has been drawn to fit the propsed vacant lot, and asked for expected resale appraisal. Plus I have the added knowledge of all the unexpected costs that crop up when building- trust me that the advertised 'house & land package' price never equals what you actually have to spend to complete a build.

Plus, in the 12 mths it takes to build I could find another subdividable site, and do it all over again.
 
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Sorry. Not trying to rain on your parade but what about other costs that will substantially erode your profit. Doesn't seem like there is a lot of fat in your initial figures to make it a successful 20% ROI.
ie: sellers agent fees ($10k), GST, tax. Your holding costs seem way too low. Should be nearly double this in my books.
 
Also assuming you rent it out quickly with tenants not minding the empty lot behind them, the disruption of ongoing construction etc.
 
why not buy and hold?

That is rather more of a personal circumstance issue than anything. I think buy and hold long term is a great strategy and any property within 10km of CBD will have continued demand long into the future.

I would love to collect lots of IP's but hubby is freaking a bit over our level of exposure to the Adelaide property marked. We have 3 IP's our PPOR and currently in the process of purchacing a 1 mil commercial site.

So we will take the cash gains and plug them into the share market to balance our portfolio.
 
Fantastic, good work.
I like these stories.

What if you could do 2 or 3 pa, increase your profits, give up your day job, as one of these becomes your income, more time to find the deals;)

All the best with your future projects:)


Cheers
MTR:)
 
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In some councils in WA at least:

"Preliminary Subdivision Approval
If the WAPC supports the application, the applicant will receive a preliminary approval with conditions that are required to be met prior to the issue of final approval.

Common conditions placed on applications include:
- Preparation of the lot for development (e.g. clearing of land, construction of fences etc); and
- Connection to services.

Lots abutting a laneway will often also be required to upgrade the laneway or to contribute to its future upgrade."
 
$110k capital gain does NOT = $110k profit

When the project is all sold off the $110,00 capital gain will be approximately HALVED by Capital Gains Tax and agents fees/advertising.

I work full time in a completelly unrelated industry, I have a 4 year old son and a hubby who runs his own company and is very very busy, so I'm doing this all myself and I'm not a reno guru by any means, any even though I'd love to be. I am using 4 weeks of long sevice leave to do some painting and easy cosmetic upgrading to the existing house, but will be organisng tradies to do all of the renovation.

So $55,000 cash return for 4 weeks of my labour and 12 months of waiting patiently isn't so bad (others might have loftier expectations but I'll be happy) All of the subdivision can be done using phone, email, fax while I'm on my tea breaks at work. I still have never met the surveyor that did my last subdivision face to face, but he has a nice voice...
 
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This sounds very exciting and well thought out. Also love reading about this stuff, fantastic way to learn about how to make $$$ from different strategies.

Goodluck!
 
hi MTR

What if you could do 2 or 3 pa, increase your profits, give up your day job, as one of these becomes your income, more time to find the deals;)

MTR:)
That is totally my DREAM!

This is my first step in my 10 year plan to achieve exactly that!
 
Will be a good learning experience.
Good luck working around your day job, when things go wrong and not to plan, and they will, this is when you get the most out of dealing with pressure and finding creative solutions with the resources you have available.
Sometimes it's just simplest to give up the day job, usually much more financially rewarding too.
 
hi Blixsem

Also assuming you rent it out quickly with tenants not minding the empty lot behind them, the disruption of ongoing construction etc.
The last subdivision I did- I had no problem tennanting the existing house, I offered reduced market rent, was up front with them about what was being built next door, and at the end of construction I gave them a big gift basket with wine and chocolates thanking them for putting up with it, and they just resigned with me for another 12 mths.
 
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I too am doing this in a roundabout way. Have the house renovated and empty rear block ready to go.

Just waiting patiently for R40 which could be 12 months or 12 years, who knows.
 
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