Knock down house to build 3 units: Adelaide

[Martin Vdb]

I know someone who would like to do the above, and was wondering if anyone could offer any advice on where to start.

They are thinking of DIY-ing it, so I guess we need a starting point whether that be a builder, architect, council etc.

Next door is a similar size block with 3 units on it also.

The property is worth approx. 300k, land probably about 200k.

Units are to be retained as an investment.

Would banks see this as a commercial deal, or could it be done like a normal residential loan? What LVR is likely, can land be security until units built?

Thanks in advance for any feedback,

Regards,

Martin

 

[Adrian N]

Hi Martin,

Start with your council, give them a call and ask what you can and cant develop on that piece of land - this info is free.

Before you invest any time or money get a contract on the land with a 30 day escape clause (this is common in the devloper industry). Then start your hard research (Architects, town planners, hydro engineers) BUT do a realistic feasibility study FIRST to make such the dollars add up.

The Loan can either be Residential or Commercial - see a GOOD mortgage broker to find out the best deal (less than 6 or 7 units can also be residential). Don't be afraid to use GR and/or Mezz funders - they can make finance much easier - you will need a minimum 20% nett profit to get finance.

Good Luck and Get Rich

Adrian.

 

[Rolf Latham]

Hi Adrian

oooh part favourite subject:

How does one tell a GOOD mortgage broker from an average One?

ta

rolf

 

[Adrian N]

Hi there,

Ok here goes - lol

1. when you start using jargon they understand.
2. you get a good gut feeling that they want to get the deal done for you.
3. they return your calls prompty and are interested in dealing with you.
4. Pure guess work - my last broker stuffed up a deal for me with big consequences - but I recovered - lol.

You may think this silly - but god with intuition - do you think you will do their best for you???

Cheers,

Adrian

 

[Adrian N]

go with intuition - not god with intuition - sorry - lol

Cheers,

Adrian

 

[Martin Vdb]

The land is freehold, they've owned it for a while, and the block next door is of similar size and contains 3 units.

What sort of LVR could be expected? The units won't be sold, so how will banks perceive profits in the form of ongoing rental income?

Cheers,

Martin

 

[Peter 14.7]

Mortagee Broker v Bank

Hi Martin,

definently get a lawyer to secure the property for you or all your owkr could be in vain. The Dev Approval is with the property not the applicant.

Set aside money$$$ Lots. Recently did similar deal for 4 villas in Sydney and fee cost $22k Council $2k. Good Architect or Building Designer worth a lot as good design increases psace + increased yield and saves Time with COuncil. PS time will take 3 to 6 months in Sydney all going well.

Mortagage Brokers. Never used them. have a fundamental problem with conflict of interest however obviously they work for some. However I recommend considering a bank. Couple of reasons:

1. Banking Ombudsman (NSW) can go into bat for you if you are getting screwed which they cannot for non banks (learn't this from experience)

2. Assuming you have equity and income most banks for $300 or so offer a professional package. Lower rates, no fees, lower insurance deals etc.. and best of all , one on one, personal adviser ( at least with CBA who I use) which makes all the paperwork easier. banks with do deals provided fundamentals are strong and if they aren't deal should be reconsidered anyhow!

PS I dont work for the banks

Peter