Intro/Subdivision questions...

[redchair]

Hello everyone.

I just found this forum and simply had to join. I've many questions that I would like to ask but when ever I ask about property I am directed to financial advisers... who inevitably try to sell me a share portfolio.

Don't get me wrong. I am in no way, shape or form asking for financial advice. I only wish to introduce myself and give you an idea of my situation and direction. I definitely encourage all feedback, comments and ideas. I value all opinions and comments (even the negative trolly type ones). I'll sift through any overly positive or negative comments and take out the gem's of information which hopefully will give me more avenue's to explore and research.

I had a MASSIVE post written up but just deleted it all and thought I would post some simple data below, and then follow it with a description of my plan's for the future (and open questions) in the hope that someone with experience or know how might be able to suggest options that I have not considered. As always, the standard applies. "I will consider if any suggestions or advice are suitable for my own financial situation and conduct further research and seek professional financial and tax advice before making any changes to my financial direction".

Currently, I am 35yrs old. My wife (35) who is currently doing a doctorate is a dependent. We also have a 2yr old son, and another child on the way. Cudo's to my incredible wife by the way who managed to raise a 2yr old while I fifo, while completing her masters of pharmacy and working part time as a research assistant for the university.

I've managed to obtain 3 properties so far. PPOR, then an IP, then after meeting my wife accessed some equity to purchase a 3rd property which became our PPOR, turning the original one into an IP. My main questions relate to the original property. Here are some rounded stats on my situation.

Primary income: Just over $200,000 including super

1st Property
Purchase Price: $175,000
Mortgage: $295,000
House: 3x1
Land: 904sqm
Location: High Wycome, W.A.
Rent: $370/week

2nd Property
Purchase price: $350,000
Mortgage: $360,000
House: 3x1
Land: 750sqm
Location: High Wycome, W.A.
Rent: $440/week

3rd Property
Purchase price: $710,000
Mortgage: $615,000
House: 6x2
Land: 2500sqm
Location: Wellard, W.A.

So, I feel I am probably a little debt heavy and most of it is in my PPOR which is not ideal for tax but it was the best I could do and this place is definitely our forever home!!

The interesting turn of events is Property number 1. It is scheduled to be rezoned soon (fingers crossed) into R25/R60. So if I can satisfy the requirements for R60 by my calculations I could fit a maximum of 5.4 dwellings on the block. Of course, there is the street frontage etc that needs to be satisfied but even if I could split into 4 I think I would be going great guns.

Having NO IDEA about the process (yeah, I am reading through these forums and researching but got excited and needed to spill my beans) my thinking is if I could build say 4 dwellings at $130,000 each I would need $520,000.

I'm neglecting the administrative costs and the demolition costs I know. (been told about $15,000 by a local demo mob... I was going to rebuild at one stage).

So if I say, $600,000 plus existing mortgage of $295,000 then that is $895,000 worth of debt. Using my bank's poor online calculator I can only borrow $850,000 and it tells me repayments would be somewhere around $3,392/month.

Now nothing in the area is sub $300/week rent. Median asking is $450. A reiwa search just then found cheapest to be $365. My location also has the advantage of bus stops within 30m and a shopping complex within about 150m. So if I use $300/week x 4 dwellings = $4,800/month. I think this means I would be paying tax which is always a good thing. However, I could also claim the depreciation of 4 dwellings to offset this plus my own wage provided the government don't move the goal posts on that. Is that correct?

My maths is pretty bloody loose I know, but do you think I am looking in the right ball court? If the re-zoning goes ahead would I be wise to follow this dream? I can't find any information on what it would cost to build 4 townhouses or units so I am taking a guesstimate. Am I way off?

Also, do you guys use unit development companies? The ones that specialize in subdivision and cramming as many dwellings on as possible? One comes to mind but I don't want to be paying a premium for any kind of service if its not needed.

I'm looking forward to stalking these forums quite heavily but unfortunately I still feel like a novice so I won't be able to give any advice or opinions with any kind of conviction so for the most part I will be keeping my trap shut.

Thanks for reading my very long intro/question/thing.

Cheers. Red.
P.S. I had no idea what subforum to post this intro/questions/thing!

 

[redchair]

Man,

Apologies. That looks way longer than what I intended! Thank you if you read it all. No hard feelings if you didn't haha.

 

[HD_ACE]

Hello Red, Welcome to the forum, You have arrived at the right stop.

High Wycome looks set for a bit of growth if/when the rezoning comes through and it experiences a bit of development.

Is the 2nd property in the rezoning areas?

What you need to research further is the requirements to be able to develop at the bonus density of R60. This in turn will tell you exactly what you can and can't do as determined by council. Maybe you need a certain frontage, or need to build 2 story or need to combine lots to meet minimum land.

R60@ 150sqm average is 6 lots for your 904sqm block. Maybe the site and area is suitable for a small apartment complex so in that case a plot ratio of 0.7 is 633sqm of building area which is 9 2 bedroom apartments at an average of 70sqm depending on design etc. Can mix or match this for 1,2 and 3 bedrooms

Your costs are slim. You will probably find some or all will need to be 2 story to get the R60 and to make best use of the small lots so you would be looking at 150-200k for single story and 200-250k for 2 story depending on size and spec and no surprises with site works.

Demo 15-20k depending on asbestos
Holding costs
Site works
Subdivision costs, council contributions, head works, western power, surveyor etc.
DA costs

Lots to think about and to take into consideration.
Hope this helped.

 

[Aaron Sice]

welcome to the Dark Side.

R60 on 900sqm would also yield eight 2x2s or ten 1x1s as apartments...which is kinda the point on the R60 zoning.

Have a look at Table 4 in the R Codes here > http://planning.wa.gov.au/dop_pub_pdf/State_Planning_Policy_3.1-Residential_Design_Codes.pdf

you will see the "plot ratio" is 0.7.

So the ratio of land to dwelling size is 0.7.

904 x 0.7 = 633m?

a two bed unit would be about 70sqm plus another 10% for external walls, which goes into 633 almost exactly eight times - so eight apartments.

a one bed unit would be about 50-55sqm, plus another 10% for your external walls - which goes into 633 pretty much ten times - so ten apartments.

simples?

R60 would also yield five townhouses - and I say townhouses because the likelihood of getting any single storey product on 120-150sqm would be pretty negligible without under-development.

I say five townhouses - even though the average lot size (the qualifier) is 150sqm (R60 in Table 1) - which goes into 903 a total of 6.02. The issue is you will probably have a very long driveway servicing the other lots, which chews away at your useable lot area. You generally end up dropping a lot to do this unless it's a corner lot - in which case you could have six street front lots at 150sqm each no problem.

You could also apply for a one-third size reduction in your minimum and average lot areas if you're doing solely single bed / dependent persons / over55s - in which case you could probably get eight on the site - okay for the single bed villas but you may have a restricted security (from banks) for the others. Now you're also knocking on the door of apartment territory, which again - is the point of R60 because with 100sqm of land - I wouldn't want to be the pioneer in setting any kind of precedent in High Wycombe come sales time.

I'm happy to take your call if you'd like to know more - I design this stuff for a living but interpreting advice is always free when the original information was free to begin with....well, in my opinion, it should be. I also run an intro subdivision course at REIWA you are welcome to attend (next one is June) - it's a full day but you should have a grip on basic subdivision when you leave.

Good luck and have fun here

 

[Aaron Sice]

Hello Red, Welcome to the forum, You have arrived at the right stop.

High Wycome looks set for a bit of growth if/when the rezoning comes through and it experiences a bit of development.

Is the 2nd property in the rezoning areas?

What you need to research further is the requirements to be able to develop at the bonus density of R60. This in turn will tell you exactly what you can and can't do as determined by council. Maybe you need a certain frontage, or need to build 2 story or need to combine lots to meet minimum land.

R60@ 150sqm average is 6 lots for your 904sqm block. Maybe the site and area is suitable for a small apartment complex so in that case a plot ratio of 0.7 is 633sqm of building area which is 9 2 bedroom apartments at an average of 70sqm depending on design etc. Can mix or match this for 1,2 and 3 bedrooms

Your costs are slim. You will probably find some or all will need to be 2 story to get the R60 and to make best use of the small lots so you would be looking at 150-200k for single story and 200-250k for 2 story depending on size and spec and no surprises with site works.

Demo 15-20k depending on asbestos
Holding costs
Site works
Subdivision costs, council contributions, head works, western power, surveyor etc.
DA costs

Lots to think about and to take into consideration.
Hope this helped.

all great advice - except two storeys are getting up into the 250-300k range now.....

 

[westminster]

Or I shall muddy the waters and say just do the 4 as you don't HAVE to do the maximum that the block can do.

If you do 4 then:
- you get bigger blocks so you can go single storey
- you can still get residential lending (more than 4 needs commercial lending)
- is less risk
- is quicker

Roughly it would cost approx $900-950k turnkey to build the 4 single storey villas which are 3 x 2

Demolition has increased a lot this year and is now 25-30k

 

[redchair]

Guys I'm on my phone so sorry for the simplistic reply. I've gotta say though, thank you all for your comprehensive commentary.

It looks like I'll have quite a few options if the rezoning is given the green light.

I'll be saving my pennies until that time so I've got the maximum opportunities available to me.

Aaron Sice I'd love to attend your course. It sounds like a good starting point to get clued up. How do i go about registering? I've got 2 weeks away and 2 weeks home in June so hopefully its on my R&R.

Thanks everyone again. Amazing response. Can't wait to show the wife tomorrow!