New start advice needed and appreciated

[Lucky88]

Hi all again

So hubby and I sold our PPOR as it was too close to an ugly development that was about to happen We moved into our IP at Christmas. Now we are ready to invest again and have found what looks like the perfect springboard for our strategy, which is to make an income that will fund the build of our dream home where our PPOR is. Whew! Here is our situation:

1. Found a block of land 'on the market'for $395 000.
2. With a house on it the property would be worth a conservative $720 000
3. I am going to make an offer on the land of $380 000
4. We figure to buy land and build we would need to complete the whole transaction for $600 000 to make the 20 per cent profit the developers here seem to think is reasonable for the pain.
5. This means finding a builder who can put a house on the land for about $150 000 then add in other costs such as nasty council contributions to make a $200 000 effort.

Is this possible in Sydney do you think? Are my figures sounding ok?
All advice appreciated.

 

[Aaron_C]

Sounds like a massive undercapitalisation. A $150,000 house doesn't get you anything more than a box with 4 walls and maybe a ceiling.

 

[Lucky88]

We should spend more?

Sounds like a massive undercapitalisation. A $150,000 house doesn't get you anything more than a box with 4 walls and maybe a ceiling.

Thanks for your ahem refreshing reply Aaron. I do respect your learned opinion.

So you're saying it's worth paying the extra $50 000 or so to get a quality product. And hopefully, a much, much, better resale value?

 

[Rixter]

If you are buying into a well located area that consists of good quality homes it only makes sense to put the same quality product on your block also...otherwise as Aaron state's you will be massively under capitalised which will make your place far inferior quality compared to everything else in its surrounds.

When resale time comes along guess what the potential buyer demand will be like for your property compared to the rest in the vicinity? They will walk through the others in the area then compare those to yours. Guess where their benchmark on quality will be.

 

[Lucky88]

over capitalisation

Hi Rixter

We don't want to undercapitalise, certainly, but also not the reverse either. Thanks for the advice. I guess if we can't make the given 20 per cent without spending more it may not be the great deal we thought it was. Grr.

Cheers

Vanessa

 

[Brady]

Hi all again

So hubby and I sold our PPOR as it was too close to an ugly development that was about to happen We moved into our IP at Christmas. Now we are ready to invest again and have found what looks like the perfect springboard for our strategy, which is to make an income that will fund the build of our dream home where our PPOR is. Whew! Here is our situation:

1. Found a block of land 'on the market'for $395 000.
2. With a house on it the property would be worth a conservative $720 000
3. I am going to make an offer on the land of $380 000
4. We figure to buy land and build we would need to complete the whole transaction for $600 000 to make the 20 per cent profit the developers here seem to think is reasonable for the pain.
5. This means finding a builder who can put a house on the land for about $150 000 then add in other costs such as nasty council contributions to make a $200 000 effort.

Is this possible in Sydney do you think? Are my figures sounding ok?
All advice appreciated.

Figures sound a fair bit off.

But if you can still...

Buy land $380,000
Purchase costs $20,000
Construction costs $250,000

Makes it upto $650,000...

Without knowing the area to know the compareable its bit hard to comment.

Make sure you take into account all the other costs aswell, holding costs (paying interest on the funds borrowed for land and during construction), paying rent or not receiving rent as you are living in the investment property, completing the property to an actual compareable level with landscaping etc...

 

[Truly Exotic]

how big is the house, if its a small 2bdr, you can easily do $150k, or even a 3bdr, in fact, you can do $1000 per sqm, but thats with economies of scale of say 5-10,

but as mentioned, for $150k or below, it will be new but pretty flimsy

 

[Lucky88]

Figures sound a fair bit off.

But if you can still...

Buy land $380,000
Purchase costs $20,000
Construction costs $250,000

Makes it upto $650,000...

Without knowing the area to know the compareable its bit hard to comment.

Make sure you take into account all the other costs aswell, holding costs (paying interest on the funds borrowed for land and during construction), paying rent or not receiving rent as you are living in the investment property, completing the property to an actual compareable level with landscaping etc...

Thanks Rixter, Exotic and Brady,

Prices in this area range from $550000 for a weatherboard three bedder to $90000 for near new things in a new estate which is way at the other end of the suburb which I hate but out of towners seem to like.and there is not much new in this part of the suburb to compare with. We've always been pretty much overlooked in Sydney. People feel we are too far away and head west. But prices are on the move. I think we are being discovered.

We sold our 17 year old PPOR here in the high sixes last October. It was brick,4 beds in great cond, new bathrooms, paint,carpet, but had lovely view to mountains. Walk to shops and transport. It sold in two weeks, to people fro the eastern suburbs who fell in love with it. The agent couldn't believe we got $30000 more than asking. Only sold due to three massive developments in the culdesac about to make it a very busy street. Wish we had bought other houses there before the developer!! Sigh.. Looking at recent sales prices are still all over the joint, but I am thinking high sevens would be likely now for a new house, near shops, but In a relatively quiet battle axe...I am just being very conservative in my estimated because that is how I am...