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Would it be cheaper to buy the land and then engage in a builder. Or buy the cheapest house with around 600sqm (so sub-dividable - around 150k after negotiation) and then build another house?
http://www.realestate.com.au/property-house-sa-elizabeth+north-107889951
That's 175k - do you think you could get the builders to build a house for 100k on your land instead of the land you are buying for them?
Total cost in my arrangement is 150k (+ purchasing costs of 5k) + 100k + subdivision costs = 2 houses (and you've probably made 50k in the process)
This seems a better option than buying 1 house for 210-220 (although the 2 houses are basic)
Since in the example above I am buying a house with land - the land would cost $0 to hold (since the initial purchase would be neutrally geared).
And since it costs 100k for houses to be built from the ad I put up, it should cost the same amount for this one too (assuming there are no cost blowouts of course).
Am I missing something here?
Always assume blowout costs .
Once you knock down the house it won't be neutrally geared.
There's interest on 150K + 10K (purchase costs) = 160K - 12K to 15K
Knocking down and dumping - 15K
Subdivision costs - 20K
Houses x 2 - 200K
Interest on houses - 10K
Extra footings?
Landscaping?
Fencing?
Flooring?
Window treatments?
Variation extras on building?
Letter box, clothes line, Air con, etc.?
It really does add up.
Not trying to put you off, but it's really important you price things correctly to avoid costly mistakes.
I don't really agree with the strategy of buying (small) properties in many different states just to save a bit of land tax.
Agreed
You can invest in say one $10m+ commercial buildings with even higher yields than 7% with potential to capitalize and value add another $5-10m eg by developing or subdividing etc and reselling for say $30m. That's our preferred strategy. As long as it's prime site in good locations like Swanston Or George you'll always have plenty of demand and plenty of potential. If you want you just bring a big developer like Grocon in in return for a small stake and build say 30 stories
Great stuff Sash. I, along with 99% of the population am envious of your position.
If you have the time to answer. In hindsight, what would you have done differently? Did you make any errors or miss any opportunities? What advice would you give the average punter?
4. Don't listen to the BS...about location, location, location...it is more like cash flow, infrastructure, and location.
I don't agree with this. It is always about location, location, location. Always has been, always will be.