1/2 price houses

Bit of a business idea I’d be curious to know what the investment community thinks!

Please note; I’m a licensed building practitioner so all the complications have been thought over, and I do have experience relocating and have the background to give experience to a consumer market. In other words, I’d not be comfortable taking money unless I knew we could deliver a sound product and service backed by experience.

The general concept- Take a used home from Melbourne prior to demolition in perfectly rentable condition and offer it to investors for their pre existing block (be it a battle axe, vacant land etc) for a upfront cost of between $65-85k. Once the property is tidy and rented we take a weekly repayment fee of $150-250pw directly from the rent roll until the balance of the house has been paid (depending on the house likely another 100k).

It makes sense to recycle houses as regional rentals, but the problem a lot of people have is banks don’t like lending on them unless it’s traditional methods- us reducing the costs to get a house onto the site and start producing income only benefits the investor and allows them to push that money towards better locations. It also allows them to refinance on a completed income producing project.

For us as a company, having 20+ houses producing passive income of $150-200pw is a strong business.

 

250pw at 3.5% pays for a 370k loan.

 

On the assumption;
-deposit
-serviceability
-experience

 

Sounds like an interesting idea but I don't have any answers for you.

I have been wondering about transportable housing for employees on our farm and just last week the state exempted requirements for the need to apply for a planning permit Victoria ditches planning permits for farm worker accommodation We can charge them rent as part of it.

Sorry to hijack your thread.

 

Not at all, and I’ve been dabbling in and out of the ideas and concepts around it for a while.

Theres a lot of opportunities providing you have the knowledge around the pitfalls.

As they are brought back to current housing standards they even qualify for new home grants.

 

Wouldn't you effectively be acting as a financier for the new owner?

I imagine you would potentially attract enquiry from people who cannot get traditional finance. The bank sees them as too much of a risk so they come to you? Second rate borrowers etc.

Another way forward may be to partner with a developer that's financial and experienced in all this and do some sort of joint venture arrangement.

 

Essentially yes, but reality is as a builder I know I can move and get a relocated house finished/landscaped and rented for around the 70k mark. The money collected directly from the rent role would be your margin on the project. Once the package price is met, be through fix rent term or payout from refinance the owner has their house along with any capital gain.

Honestly if I could figure a way for an investor to front the 80k each time Id go through the process with anyone who had land in a promising area.
Providing we are confident renters would occupy the property small weekly repayments are as good as rent.

With this you’re really going JV owner provides land and you provide house. Deal is split between you collecting a slightly inflated price for a second hand home/ however the owner gets a house given to them in return for a fixed rental term with us.

 

80k does not seem like much for an investor to come up with. With my investor hat on with a few blocks of land valued at something like 200k each and then forego 150-250pw of the rent! I would not find that at all attractive.

 

attractive or unattractive


Sounds like you think it’s a good idea but then you blind sighted me at the end there haha

 

Who's name is on the title, the investors or yours?
Sounds like a rent-to-buy style arrangement or am I way off?

 

Owners name on the title, we put a caveat over the property and have a rental term until the balance is paid.

definitely a similar concept as rent to buy

 

Over the house or the whole property?

 

Hello JKWS, can you clarify the total cost of the house ?
Is it $65-85k up front + extra $100K paid from rent roll ? hence $165-$185K all up ?

What about council permit cost plus separate water and utility meter cost ? (for site with an existing dwelling)

 

It will 100% come down to the site and location of services/ size of house etc but roughly speaking from past experience- yes.

Roughly my figures for a basic relocation as follows;

45k to relocate (2 shifts) 15k (single shift)
20k new roof
Internal bracing, plaster and repair, insulation 10k
Plans, reports and connections 15k

 

That seems like way to expensive. Why would anyone pay $185k all up for what is usually quite a small house when they could go to the easier to finance route and build something new for around the same price for the same size.

The ones I've seen in my state are generally around $20k raw then transport and renovate and all up around $80-100k depending on the size, condition and how far it needs to go.

 

Just the newly relocated dwelling would only be fair, however they would have to see the subdivision through otherwise it would be the one title with 2x dwellings

 

No I don't find the concept attractive as an investor. The forgone cashflow would not be too exciting.

 

Good insight! All my ideas seem good to me so its nice to get honest feedback!

 

If it costs you $70k then why would you charge $160-185k?
I honestly don't see the value add on why/where anyone would agree to the extra "margin" of $100k over the top of the cost. If perhaps you did it for more normal builders mark up of let's say 20-30% then it might be a viable thing but you're asking for people to agree to a massive markup.
I can't think why anyone would find that attractive.