Seems like a fair deal but can't seem to make it work....help please!

Our Agent has a vendor who loves some of the work we do. He's got a 700m2 cnr block that he's currently subdividing.

He works in Country SA most of the time and is only here in Adelaide every 3-4 weeks so what he's asked our Agent is to see if we would be willing to build his house for him and in exchange he would offer the 2nd allotment he's creating out of the subdivision, for free. Initially the offer sounds really good but after 5mins punching numbers in the spreadsheet it soon becomes clear it doesn't really work - well not that easily anyway.

He wants a house around 200m2...that'll cost us around about $200K to build (includes extra footing costs, stormwater, fencing, retaining, etc). Our new allotment of 350m2 (worth $200K) would have an end value with a house around 180m2 with double garage on it around $500K.

We'd be making literally nothing because we have to spend $200K building his house.....

Any suggestions as to how we could take advantage of this offer and make it work for the both of us (i.e he gets his house and we get a profitable development site)?
 
that $1000 (actually its just over $1000) is actually what it has cost us to build the last 7 homes....actually includes pretty well everything you see and don't see (such as extra footing costs, engineers report, council fees, upgrades of fixtures and fittings to well above average standard, a/c etc). What that doesn't inlcude is demolition and subdivision costs or if its a group dwelling or hammerhead situation the paving of the common driveway but everything else is pretty well covered with covered in that square metre rate.

not sure how much it varies from state to state but i know even from builder to builder in SA here the costs can vary drastically. We have a house plan including footings report etc which we sent out to about 30 diff builders and the quotes we got back varied between $180K right through to $390K...yep for the same house :eek:. Obviously there were minor differences such as finishing standard but surely with the upgrades that wouldn't cost $210K?
 
He wants a house around 200m2...that'll cost us around about $200K to build (includes extra footing costs, stormwater, fencing, retaining, etc). Our new allotment of 350m2 (worth $200K) would have an end value with a house around 180m2 with double garage on it around $500K.

We'd be making literally nothing because we have to spend $200K building his house.....

I must be missing something. You build two houses at $200k each (Total $400k) and you end up with a house worth $500k from it. Doesn't that mean you have made $100k from the deal?

It sounds good that you don't have the holding costs of the land during the whole building process.

Gools
 
Gools, yes it would seem to be that but by the time you take into account the interest, site clearing, agents fees and gst, we'd pretty well be in the negative.
 
Any suggestions as to how we could take advantage of this offer and make it work for the both of us (i.e he gets his house and we get a profitable development site)?

You need to work out what you would pay for the site if it were on the open market. Then make sure you add your project management costs to the price of the house you would build for him.

You will find a bottom line to negotiate with. Obviously he will need to pay you an amount of money to make it worth your while. :)
 
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