Subdividing in Hamilton Hill

[Altrincham]

I have a 780m2 R30 block in Hamilton Hill.

The existing house can be retained and is currently rented.

I am going to battleaxe the back block. It will be approximately 340m2 + the common driveway.

I am not sure which way to go:

1. Subdivide, then sell the block. How much do you guys think this would cost and how long would it take?

2. Subdivide then build, then sell the house. I would probably put a smallish 4 x2 on there as these seem quite rare in Hammy Hill, and seem to get good prices. what are the pros and cons of this, scenario and how long would it take.

3. Build and then apply for strata after the building approval has been issued.

The problem i have is that if you talk to a builder, they say build first then apply.

Talk to a project manager/subdivider consultant and they say subdivide then build. but seem to want a lot of money to assist.

How difficult is it to go through the subdivision process yourself, and if you do go through someone else what are the likely fees.

Sorry it's all a bit convoluted, but my brain is spinning with the options.

I paid $530k for the block and house, The house would be worth $450k and the back house if a $ 4x2 $520-550K. if a calved off the back block and sold it it would probably fetch $260-280k.

Thoughts please!!

 

[thatbum]

Is it currently R30?

 

[Altrincham]

Yes it is already Zoned R30

 

[thatbum]

Well on your figures, it doesn't seem worth building on the back lot unless you are looking for cashflow?

Whats been your investment strategy so far?

 

[perthguy]

There is a difference between a freehold subdivision, survey strata subdivision and strata subdivision. You would need to find out the differences and find out which is best for your situation. You can build first and subdivide after. There are no issues with that.

On the other hand, you are entering in a complex world of tax issues. Depending on your circumstances, you may be up for Capital Gains Tax or additional income tax, GST, stamp duty and probably others. You might need to register for GST and if you do you may be able to claim GST credits for the construction of the second house (if you decide to build). If you sell a vacant block you may have to pay GST on the sale and all your profits might be treated as additional income.

As I said, it's complex and you will need professional advice. A tax accountant specialising in property should be able to help. This is something that is not for you to do yourself or figure out on a forum.

 

[Rolf Latham]

You can build first and subdivide after. There are no issues with that.

many a funder wont touch R30 if subdiv hasnt been granted at or after effective completion.

The valuation imposts are such that an average R30 development will me marked down 20 to 30 % if valued as "in one line" or OOT ( on one title)

ta
rolf

 

[perthguy]

many a funder wont touch R30 if subdiv hasnt been granted at or after effective completion.

The valuation imposts are such that an average R30 development will me marked down 20 to 30 % if valued as "in one line" or OOT ( on one title)

ta
rolf

Interesting. I will thinking more from the process point of view. No issues with council and WAPC approvals. I was not aware of potential funding issues. Add that one to the list!

 

[Altrincham]

Thanks guys

I think you may be right about not building.

What would it cost to subdivide and roughly how long would it take?

Is it straightforward enough to do yourself?

If not would you guys have any reccomendations as to who can help and the approximate cost

 

[chibs]

I'm in a similar situation as you. We're planning to go with your option no.2, except that we plan to rent it out for the cashflow.

 

[Altrincham]

Chibs, what do you reckon your subdivision costs are?

Are you doing it all yourself?

 

[chibs]

I will set aside $35k for subdivision cost. From reading and asking around builder, this $30k-$35k seems to be the cost.

http://somersoft.com/forums/showthread.php?t=95714

We plan to just sign up with a builder, who will also help with the subdivision. It just seems less complicated this way as this is our first go at battleaxe development.

 

[perthguy]

I think you may be right about not building.

Building might be ok. You just need to firm up your costs and see it is it worthwhile. Also consider building to rent and holding for a while before maybe selling in the future.

What would it cost to subdivide and roughly how long would it take?

If it is an easy site then $30k to $50k as a ballpark and 3 to 6 months. Complications will add cost and time. You still need to find out the taxes you will pay on selling because it might make it not worthwhile.

Is it straightforward enough to do yourself?

It depends. You can have a surveyor draw up a plan and lodge it yourself. Then manage all the site works, western power, water corporation, electrician, plumber etc. You will have to do some homework first because some of the process is technical. If it all seems a bit daunting, call some surveyors in your area for quotes.

 

[MTR]

Thanks guys

I think you may be right about not building.

What would it cost to subdivide and roughly how long would it take?

Is it straightforward enough to do yourself?

If not would you guys have any reccomendations as to who can help and the approximate cost

These are just some of my thoughts:

On my rough figures you would make more money by selling the rear block, less money to outlay, and minimal/no holding costs.

Have you also included costs for front house improvements if any? carport , elevation/reno?? Buyers do not like rear land or house if the front is fugly and this will potentially effect resale price of rear land/house.

If building (4x2), what are holding costs during 6 month period this needs to be considered perhaps $15000??

As mentioned by others if you build (4x2) at rear you will end up with a cash flow property and you can access equity while holding 2 properties, no GST if you hold for 5 years. Also Hammy Hill is on the rise so who knows by completion you may be pleasantly surprised and make more money.

MTR

 

[Altrincham]

Thanks everyone. Your input is invaluable!!

If I could pick your brains a little more

How much do you think it would cost to put a fairly basic 4 x 2 on the back block including the final subdividing. The block has been assessed as level and the sewer line seems OK.

If you were new at this as I am, where would you start?

 

[MTR]

Thanks everyone. Your input is invaluable!!

If I could pick your brains a little more

How much do you think it would cost to put a fairly basic 4 x 2 on the back block including the final subdividing. The block has been assessed as level and the sewer line seems OK.

If you were new at this as I am, where would you start?

Fortunately your block is level, those Hammy Hills blocks can sometimes really kill the deal. Also what you build could be dependent on the location in Hammy Hill, better pockets will achieve higher sale price and more desirable and IMO this in part could also determine what you build.

I had an agent send me something from Strata Wise, 4x2 home, very basic, retain front and build rear, I think all up it came in at $300K all up. Did not proceed as margin too tight.

At the moment I am looking at building a 4x2, high specs for around $240K (200 sqm home 36 sqm garage), however I will contract drawings and then can shop it or use my current builder.

Also, what I have noticed - buyers do not want cheap and tacky, too cheap IMO is not the way to go, its like cutting your nose despite your face. Even spec builders like Dale Alcock are now including stone bench tops and higher ceilings in living/family areas as part of their standard spec, a sign of the times and an indicator to me of what buyers expect.

Ask Real estate agents in the area, contact Jason from LJ Hooker, a very nice guy who sells lots in this area, pretty honest too. Find out what people want.

You could also contact Ventura Homes they will put together plans and give you a quote its free, but you do not own the drawings therefore can not shop it. They are a reasonable spec builder, used them many times.

Cheers

 

[perthguy]

Ask Real estate agents in the area, contact Jason from LJ Hooker, a very nice guy who sells lots in this area, pretty honest too. Find out what people want.

This is a really good idea. There is an agent in my area who sells most of the new townhouses coming onto the market. I will definitely talk to him about what buyers are expecting before I develop my block. I had a chat to him the other day about one of his listings that took a very long time to sell. It was in a great location and looked nice in the photos but they had to drop the price twice to get a sale. Apparently the level of finish did not meet buyers expectations at that price point, hence the price drops. Useful to know.

 

[Altrincham]

I actually bought the block off Jason. So once i am a little clearer on what to do, i will contact him for some valuations/advice on configuration (3x2 4x2 spec)

I am going to see someone today regarding getting a basic feasability to see what option is the best.

 

[MTR]

This is a really good idea. There is an agent in my area who sells most of the new townhouses coming onto the market. I will definitely talk to him about what buyers are expecting before I develop my block. I had a chat to him the other day about one of his listings that took a very long time to sell. It was in a great location and looked nice in the photos but they had to drop the price twice to get a sale. Apparently the level of finish did not meet buyers expectations at that price point, hence the price drops. Useful to know.

Hi PG
This happens often, I see it all the time, I have been watching villas in a specific area, large, well designed however the finish absolute sh@t, it has cost them profit of at least $20-25K per villa not to mention the additional interest in holding costs taking much longer time frame to sell, this is huge. I had a conversation with the selling agent and I basically said they look like sh@t and that is just viewing photos on the net, she agreed. She also said if the quality was higher spec she would have sold them on day 1 at much higher price, mentioned above, however this was their first development, lack of experience and lack of homework.

Again, its like cutting your nose despite your face, for the extra fruit ie stone bench tops, overhead kitchen cupboards, higher ceilings in living/kitchen/family area. These are just standard now, what buyers expect.

My other concern is when the market starts to tank and there may be an oversupply of villas I would want my villas to stand out over the rest, you achieve this with good design, good specs, good location. I see this as reducing the risk. If all else fails make sure the rents cover the mortgage

 

[MTR]

I actually bought the block off Jason. So once i am a little clearer on what to do, i will contact him for some valuations/advice on configuration (3x2 4x2 spec)

I am going to see someone today regarding getting a basic feasability to see what option is the best.

Like Jason very much. Also ask him for recent sales evidence and compare apples with apples. Keep us posted, sounds like a little interesting project

 

[Altrincham]

Will Keep you informed MTR.

The challenge with the project is to get the optimal return out of the property. There are so many variables and options....but I also don't want to get analysis paralysis!!