Hi there,
So having finally bought my first property I'm now looking to subdivide and build on the back lot. I am faced with two options and am having a bit of trouble working out the best way to go. (note I am in WA, so i'm not sure if the jargon will differ for other states):
Option 1 - Subdivide THEN Build:
The standard 'survey strata' development process: Subdivide lots, gain new titles, construct second dwelling.
PROS: *Bank will allow you to access capital generated (hopefully) from subdivision, therefore funding the construction deposit.
CONS: *Subdivision/siteworks costs can't be included in loan.
Option 2 - Construct THEN apply for titles (subdivide)
This is know as 'Build Strata' in WA, but note the outcome is still a survey strata title, same as option 1.
PROS: *Can be 3-4 months quicker, due to not having to wait for council to approve subdivision.
*All subdivision/siteworks and construction costs can be included in the loan;
CONS: *Possible bank will want lower LVR due to increased risk;
*Full deposit due at project initiation = higher holding costs;
I have crunched the numbers and it seems to me that the increased holding cost of option 2 (due to higher deposit, due sooner, and not being able to use equity from subdivision) is about the same as the rental income produced by the faster project completion. Meaning: I'm not sure which is the better option!
My question therefore is: am I missing something? Is there a reason why someone would favor one option over the other? Have people decided between the two themselves?
Cheers guys
So having finally bought my first property I'm now looking to subdivide and build on the back lot. I am faced with two options and am having a bit of trouble working out the best way to go. (note I am in WA, so i'm not sure if the jargon will differ for other states):
Option 1 - Subdivide THEN Build:
The standard 'survey strata' development process: Subdivide lots, gain new titles, construct second dwelling.
PROS: *Bank will allow you to access capital generated (hopefully) from subdivision, therefore funding the construction deposit.
CONS: *Subdivision/siteworks costs can't be included in loan.
Option 2 - Construct THEN apply for titles (subdivide)
This is know as 'Build Strata' in WA, but note the outcome is still a survey strata title, same as option 1.
PROS: *Can be 3-4 months quicker, due to not having to wait for council to approve subdivision.
*All subdivision/siteworks and construction costs can be included in the loan;
CONS: *Possible bank will want lower LVR due to increased risk;
*Full deposit due at project initiation = higher holding costs;
I have crunched the numbers and it seems to me that the increased holding cost of option 2 (due to higher deposit, due sooner, and not being able to use equity from subdivision) is about the same as the rental income produced by the faster project completion. Meaning: I'm not sure which is the better option!
My question therefore is: am I missing something? Is there a reason why someone would favor one option over the other? Have people decided between the two themselves?
Cheers guys