Project Homes vs Individual Designs

From: Jamieson .

Dear Forum

I would appreciate any thoughts/advice on whether it is more economical to build through a project home company or to get an individual design prepared (at a cost) and then getting competitive prices from builders. I am currently arranging for subdivision of part of our existing property. The plan is to build a new home on the new lot and move in ourselves. Our lot is fairly small and won't suit most project home designs which is why I am considering an individual design.

Our strategy is to also renovate our current house and then sell it. My original plan was to build an IP ie rent out the new property, but by selling the old one and living in the new we will be able to clear (or almost clear) our personal mortgage leaving us with the full value of the new property to use as equity for IPs. The numbers seem to stack up very well and the idea of being able to clear the personal mortgage is very appealing. Any thoughts on our strategy would be appreciated.


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Reply: 1
From: Jeanette .

I have done both. The first time, when I built a house I got quotes for an individual design by an architect and then put it out to tender to builders. The cost to build this way was way above that which a project home builder could build a similar sized house for. So I went for the project home.
The second time I went with the architect's design and it cost me more (but I thought the house would be worth more). When it came time to sell, it didn't add any extra value. Agents told me that purchasers don't care whether it is architect designed or project home built. You can actually get more for your money with a project home and that is what buyers want. I will always go with a project home builder now.
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Reply: 1.1
From: Manny B

Hi Jamieson,

I will have to agree with Jeanette on the prices, as the spec homes are much cheaper to build (most are pre-fabbed in factories & assembled on site)... Although, if you did engage a well known architect & build something special, it can attract buyers that understand quality & you can get a good return (especially if it in an up-market suburb), but in most cases it won't be the case...

Well in terms of what you are doing, I personally think that you should renovate the house as you mentioned & build the IP in the back (note: some builders may not be able to build a spec home if the back/allotment of land left over is not a reasonable size, which may mean you will have to custom design something that fits that lot)... BUT I would keep both, as the new IP wouldn't cost you much to build & the return on investment would be excellent (also due to it being new you will get a nice Depreciation Schedule to work for you)...

Then the equity you gain by revaluing both your renovated home & IP can be used to assist you expanding your IP portfolio...

I would suggest though that you speak to a mortgage broker OR your accountant to ensure you structure your loans correctly, basically taking out 100% loan on the IP & separating that loan from your PPOR (it is more manageable when it comes to tax)...


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Reply: 1.1.1
From: See Change

One thing to be aware of is that some of the "project builders" will also vary their designs.

We did this with one of the smaller project builders in sydney . Because I did most of the re designing myself they didn't charge an up front fee, however under normal circumstances they charged an up front fee of 1K to guarantee you bonafidi's before they start doing the draughting to get it up to quoting level. They already had a folder of variations on their standard designs to browse through.

I'd guess that there would be other project builders who would be prepared to do this but they will have certain restrictions on dimensions in order to get you design to comply with of the shelf components

see change

it's better to be guided by your dreams than your fears
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From: Jamieson .

Thanks all for your thoughts. It all helps when considering the options as we are approaching decision time!
Time saved seems to be another advantage with project designs - pre-prepared and in most cases hopefully tried and tested!


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Homes vs Individual Designs

From: Ross Sondergeld

Hi Everyone...

Subject: Project Homes vs Individual Designs

A few of my clients are doing luxury spec homes. And we essentially use a
boutique type project builder and customise the design to suit the area...
then fit out the property to suit the end user. (i.e. a few wow features...
high ceilings... boutique style... etc.)

I beleive it's cheaper and quicker...

For example - A spec investor bought quite a few blocks of land in a very
up-market area north of Surfers Paradise and is going to build aeven (7)
"?????????????" homes in a neighbourhood where some people spend $100,000+
on the design.

And he'll make an absolute fortune.... $$$$$$$$$$$$$$$$$$$$$$$$.

P.S. But all the neighbours are "pissed off" because they paid a premium to
build and he's going to build a 7 different fascade homes with the same
design as spec homes...

Ross Sondergeld ~ Buyer Agent

" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Buyerside Real Estate Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
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