Money to be made

[Michael Croft]

Hi all,

This week a friend exchanged on a property 780 acres 30 mins to Canberra. The property has 8 titles ie. can be subdivided into 8 individual blocks. The estimate of the sale price of the individual blocks is to average at $350k. So a gross realisation of $2.8m.

What would you pay for the block given the following?
- the subdivision is approved
- $200k of roads are to go in
- $300k of fences and dams to go in
plus legals and stampduty on aquisition and legals on disposal.

A = <$1000 per acre

Total aquisition and development costs excluding own time and allowing for misc =$1.4m

So how does $1.4m profit for approx 6 months work sound?

regards, MC

ps. the guy is an average earner, wife and 3 kids, and will be selling his ppor to be able to do this. It's not a no brainer but pretty straight forward just the same and he had a little help

 

[asy]

Gee, I wonder who helped him??

WOOOO HOOOO... CROFTY'S BACK!!!

Absolutely fantastic to see you back on the forum!!!

asy

 

[Rolf Latham]

Hi Michael

Welcome back.

we have missed you !

ta

rolf

 

[Michael Croft]

Ta Rolf and Asy,

Hey Rolf, the reason he is selling his ppor is because the land is zone rural residential but each block will be greater than 20 to 25 acres on completion, so only the 9% int and 60% LVR people would touch it. Lenders have no vision.

regards, MC

 

[johnnyb]

Where can I get some of that action!!

 

[abcdiamond]

Thats the sort of deal I would like to find

 

[johnnyb]

When I hear about deals like this I find it hard to understand one thing - why don't the current owners go through with the development/subdivision (or whatever) themselves? Do they lack the funds, the knowledge, are they scared, all of the above?

Please explain

 

[Michael Croft]

Hi johnnyb,

The owner is a well known public figure who doesn't need the money and he has been poorly advised by an agent who is obviously not pro-active.

I have often wondered why people don't value add before selling. I recently sent my old car to the detailer before I sold it and got an extra $1500 for it for an $250 outlay. My friends couldn't see the point in spending the money on it! OK so I don't need the money, but it took me 30 minutes and 2 phone calls to make $1250 - I just couldn't pass that up. And it sold within 3 hours of being at an 'auto fair'.

Ever been into a property for sale where with a coat of paint and a few trips to the tip it would obviously (to you) be worth another $20k?

Go figure,

MC

 

[Glenn]

Hi Michael,

It's funny you mention the small things that can save big bucks and end up giving you a good hourly rate for your time.

One of my mates just settled on a 1 bed flat last week and wanted to get the carpet re-done. He went to a few places and was finally ready to obtain the carpet and have it layed for $1200. I mentioned the name of a place that had sold me cheap carpet previously but my friend hesitated....my reply to him was that if he could make a phone call and save $100, what would the hourly rate be for his time???

He ended up calling them and has subsequently had the carpet installed from this company for $700.....it's "hassle money" but once it's in the bank, the statement doesn't care where the money came from!

Glenn

 

[Gill Bates]

Re :

why don't the current owners go through with the development/subdivision (or whatever)

Often they have owned it for a lifetime. The idea never occurs to them. Or they may be aware of the situation , but not feel comfortable or have the knowdlege to outlay $ for the needed improvements. Or they may simpley not be bothered , ie in this case they are getting 1.4m and all they have to do is sell it. I m purely guessing , but the use of this land is probably changing from agricultural to a lifestyle (agricultural) blocks.

Another reason is that for most people, u need to be innotitive to raise the capital for purchase and improvements as mentioned by M.Y.

 

[Jakk]

Originally posted by Michael Croft


The owner is a well known public figure who doesn't need the money and he has been poorly advised by an agent who is obviously not pro-active.

This is quite common actually, poor advice from an agent that isn't familiar with the type of property they are advising on can have a huge negative impact on the price achieved for a property.

Another way of finding gems is from private vendors who think they don't need advice and self sell their property without ever realising what the real potential of the property is.

I recently (5 weeks ago) purchased a property from one such self seller, paid full asking price but did negotiate a long settlement.
He is currently thinking how well he did by not paying an agents commission and getting the full wack for his property.

I am pretty confidant he'll be calling me names in 6 months when he sees what I will be doing with that property.

regards

 

[Aceyducey]

Ditto - our last buy was a private sale. A six bedroom house, excellent price (instant $50K profit), lots of development potential (in progress).

In future can be turned easily into two dwellings (3 bedder & 2 bedder) for extra cashflow (once we've finished living in it).

Cheers,

Aceyducey

 

[Gill Bates]

I make the observation that a person can not rely on a re agent to give a person, what could be said to be development advice.

Yes, some of them would be aware , but i suspect a significant number would not . I also observe , that the agent will have established a relationship with the vendor , so is probably on the short list to sell the allready [ or newly ] sub-divided blocks individually. [ A person could also argue the other way , that re agent is working for the vender to get highest price , and should be aware of the subdisivion potential and advise accordingly ]

However, i know of another specific situation , where the agent actually advised the vendor , that since their land was in a number of titles, they could sell the blocks individually - but still the vendor decided to sell it as one parcel ,[ at a discount on the price achievable for blocks sold individually]. Situation was elderley vendor had lots of land and just did not want the fuss.