$500K equity $300K cash - and ready for a development

Hi guys,

If you had a friend with $500K equity, $300K cash at hand and a day job that paid $60K net p/a, what would your advice be if he or she was interested in property development, yet had limited experience?


I personally understand that all deals are different but I'm also a beginner and therefore my words hold little weight. With that in mind I wonder what some of the more experienced guys on this thread would do if they were in a similar position right now?

cheers, BP

 

Keeping learning, books, seminars, forums etc and network with people who invest.

 

Learn way more before even considering making any sort of move. What sort of experience do they have so far? Do they own other investment properties?

 

Agree with others. Learn first, go from there.

 

1. Don't jump into anything without advice and careful planning

2. how much can they borrow.
Equity doesn't help if it cannot be accessed

3. How much do they need for what they want to do?

 

Go buy some land. Bargain hard.

Go to a project builder and pick your house. Again bargain hard.

Go home, grab beer and remote, sit on lounge watch TV. Wait about six months for completion.

In the meant time also have a few verbal confrontations with building supervisor over poor workmanship, delays and cost blow outs.

800K won't get much of s development.

 

Hi,
No they dont own an investment property but the person in question is in fact a licenced builder.
BP

 

Property is very fault tolerant. So if he makes a mistake then it's not too serious.
However Colm Dillon has two complementary ebooks. Get both - the best $200 he will ever spend.
a. Land subdivision made easy
b. Residential Real Estate Development Made Easy Second Edition
A Comprehensive Instructional Course For Individuals Who Want To Become Residential & land developers

Once he studied them inside out he will be in a much better position to engage the right people by asking the right questions.

 

Really? I would have said the exact opposite if we're talking property development.

 

If you buy in a good area and your conservative in your numbers worst case can build s single new dwelling and get out with costs covered.

Als there are a lot of builders who will dual occ for you inc planning etc. not the most profitable but simple and still profitable if in good area.

 

Completely disagree with both sorry.

Lots of things can go wrong, even with a single new dwelling build - which would be a very unusual development anyway if you're aiming for a decent profit in the first place. There's probably quite a few scenarios where the whole thing takes longer and costs more than simply buying the equivalent property in the first place.

Dual occ is even worse - there was that thread recently where a whole bunch of people in brissie relied on the builder's say so about whether dual occ was allowed and then the council shut it down, leaving owners with a dud property that they probably can't rent or sell to cover their costs. Never mind the possible legal fees to challenge the council.

 

Did they engage a qualified town planner? Did they call council themselves? Not exactly rocket surgery.

 

+1 for this book. Very practical and well laid out.

 

I'm glad you have queried that statement. I did not quantify "if he makes a mistake" - as in how big is the mistake? 5k or 20k or 50k? For some it will be a disaster and for others only part of the school fees. Similarly I didnt quantify the next part either "it's not too serious" - again how serious is serious? For some an error of 5k or 20k or 50k will have a different meaning. Often developers done their feasibility but once with construction done they found the numbers arent profitable anymore as many unforeseen things can go wrong - even with the most detailed planning.
However often the "mistakes" can be rectified by 2-5 years of waiting for the equity to catch up. (Again many factors come into play with that statement)
The bottom line is the OP's mate need to study those ebooks as recommended before diving in. It's just 2 weekends between knowing and not knowing and then the practical part to follow.

 

Go and talk to a couple of experienced professionals - as a builder your friend should be able to suss out who they would be. A planner, a surveyor, an architect...as a start

 

800k can go extremely far if youre smart an dbesides, you wouldnt want to be going big on the first development.

there is more than enough in the tank to get it going, whether or not it's a good idea is another discussion.

project build idea on a single lot is a terrible one imo.

 

Not if you buid and hold. This method (project build) has to be the most simplest way.

 

the objective of developing property is to make immediate profit or equity

 

My mate at work did her first development as a single house on a single lot and made immediate equity. She bought smart in the rising area and got a good deal with a builder, built the right type of home for the area at the right specs and did some of the work herself. All that meant accessible equity at the end of the build which she has used in another project. It can be done.