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A simple little deal, just gone unconditional.

Discussion in 'General Property Chat' started by Leo2413, 3rd Mar, 2016.

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  1. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Ok so been keeping this very quiet since I've been working on it but now its gone unconditional so I will share some details. It's a very neat little project but one I anticipate won't cause too much trouble to get off the ground and have a good end profit margin. Was able to get it at a good price too. Its not typically what I'm interested in but for the location, the price and the current cycle of the state bought in, I think its a no brainer deal.

    The Deal:
    Location:
    Brisbane, within 12km of the CBD, good suburb.Decent street, not the best but surrounded by good streets.
    Property: 3/1/1, on approx. 550sqm block, relatively flat land. Currently in quite poor cosmetic condition and will rent for about $350-365/week.
    Price: 415k, off market buy.
    Settlement period: 4 months negotiated.
    Plan: Do a very slight cosmetic reno to get it looking a little better and then rent out. I estimate the reno will cost under 5k. Should look more presentable and rent for around $370/week. So will be a short term negative cash flow deal, but not by much. Will rent it out for 6-12 months or maybe longer (not decided yet) and then knock it down to build a new, modern higher end home. Currently in neighbouring streets new modern homes are selling for anywhere between 950k and 1.2mil. So there seems to be a decent margin there for a new home build. I like this project because it feels to be a low risk, neat and simple project that should yield a decent return on total costs. Also, the short term holding costs are quite low and no change to the density of the land so the project shouldn't have any problem to get approved. I have actually been quite lucky in acquiring this deal so always happy to have luck on my side.

    I'll start a new thread in the development section when this project eventually gets off the ground.

    Cheers.
     
  2. Eric Wu

    Eric Wu Mortgage Broker Business Member

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    well done, which suburb if I may ask?
     
  3. HUGH72

    HUGH72 Well-Known Member

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    Nice one, it's not our suburb of the moment Mount Gravatt East is it? If it is, it's a steal.:p
    Or middle ring Northside?
     
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  4. Daniel007

    Daniel007 Well-Known Member

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    What's the reasoning for the small reno if you're going to knock it down in 12 months, especially when the extra rental income gained won't cover the 5k spent?
     
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  5. EN710

    EN710 Well-Known Member

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    Sounds like 8 mile plains/ Rochedale ;) so the suburb next door?
     
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  6. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Thanks @steadyrich and @HUGH72. It's actually an unusual reason why the vendors are selling and their situation and I have given my word on privacy so I really can't disclose the suburb to be safe, though I would love to.

    @Daniel007 The reason is because parts of the house are really too cosmetically 'trashed', I wouldn't want to wake up looking at that, so I wouldn't expect anyone else to either. Also, it will attract a wider pool of tenants and most likely secure a better quality tenant if the place is more presentable and looks better, than to leave it completely in this condition. Really doesn't take much to make a crap place look nice.
     
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  7. Leo2413

    Leo2413 Well-Known Member Premium Member

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    :) A little closer, but just had a look Rochedale...and there are some very nice modern homes being built there. Never realised. Should spread my wings a bit..:cool:
     
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  8. Xenia

    Xenia Adelaide Property Manager Business Member

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    Congratulations champ.
    X
     
  9. teetotal

    teetotal Well-Known Member

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    Do you expect the demand to stay at current level in 12 months time ?
     
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  10. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Thanks @Xenia ...but honestly really lucky on this one. :)
     
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  11. EN710

    EN710 Well-Known Member

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    Yes and they're sold closer to 1M, my next door suburb with similar name has half the median price.:confused:
     
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  12. MTR

    MTR Well-Known Member Premium Member

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    Hi Leo
    Do you mind going through the numbers, I am not whatsoever familiar with the area.

    $415K
    Stamp Duty?

    Building for high specification, double storey/single storey?? How many squares??

    Would it be anywhere $1400-1800 per sqm?

    What size home do you need to build to achieve $950-1.2M

    What is your target market? and how hard is it to sell at this end?? smaller market of buyers at the higher end.
    Also, market conditions at the moment. Have you factored in where the market might be in 12 months?? As a developer this is the scary stuff, I know this one

    $420,000 build?
    $415,000 land
    $ 16,600 stamp duty?
    $ 20,000 reno?
    $ 35,000 holding costs
    $906,600

    still need to add selling costs in this?

    Anyway, am I way off with this?? I don't know build costs in Brissy, but am basing this on Perth and Melb build cost and I think for these end values I would expect a big home - 30 sqm??

    MTR
     
    Last edited: 3rd Mar, 2016
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  13. EN710

    EN710 Well-Known Member

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    Would be interested on this as well. Including bulldozing the existing place?

    30sqm ain't big... :D
     
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  14. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I think its much more likely than not. For me that's good enough. Also there are multiple exit points for the deal to mitigate risk.
     
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  15. Leo2413

    Leo2413 Well-Known Member Premium Member

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    :eek:..... not for long.
     
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  16. MTR

    MTR Well-Known Member Premium Member

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    Did not include this??I average around $10-18K dependent on whether there is asbestos??? size of property /house
     
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  17. MTR

    MTR Well-Known Member Premium Member

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    should it be 300 sqm, I get confused with sq and sqm/???
     
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  18. EN710

    EN710 Well-Known Member

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    It is confusing

    And to add to that 30 sq is 280 sqm :eek: 300sqm is 32 sq (I use this calc Convert squares to square metre - Conversion of Measurement Units )

    Planning my PPOR and increasing size to 27sq which is ... 250sqm :confused: When people ask how big the house would be, I said 27sq and got blank faces
     
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  19. MTR

    MTR Well-Known Member Premium Member

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    thanks

    The block is large enough to do single storey which would be much cheaper option than double storey, my build costs on $1400 (average spec), if we went double storey I think it just wont work??
     
    Last edited: 3rd Mar, 2016
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  20. Leo2413

    Leo2413 Well-Known Member Premium Member

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    HI @MTR

    I'll try to answer it on some rough but I think not too far off numbers:
    Reno: Under 5k
    Stamp duty: $14,494
    Build: Approx 260sqm, flat land, 'higher' end spec but not highest, approx. 440k turn key.
    Holding costs: Approx 3-4k.
    Demolition: none, house will be given away. Had 2 companies assess and both said almost the same thing, basically it can be given away with no problem. Who would want that crap and what they would do with it is beyond me, but I guess the reno will make it appear slightly better.
    Contingency: 35k
    Total costs: $913,494
    Projected current end sale value $1,100,000-$1,150,000 based on recent sales very close by, with smaller land size compared to mine, in some cases smaller by over 100sqm which is not insignificant.

    So a rough gross profit in today's market might be between 21% - 26% margin on TDC. Also it should be a quick project, once started definitely less than 6 months. Also I do have a really good builder for this stock. We have built a good relationship over the years so it helps.

    So hopefully it works out. Its really low risk all round so I'm not too worried. Finally... its a really nice feeling to hold a development site with no pressure or financial strain and more likely than not good upside.
     
    Last edited: 4th Mar, 2016
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