Adelaide splitter blocks

Thanks Jim. I'm going to focus on Christies Beach but doesn't seem to be much on the market there.

 

Been following that market myself. It went quiet over Xmas period and will probably return to normal soon.

 

EPIC FAILURE

Found a nice site, numbers stack up, surveyor happy, building designer happy, I'm happy, BUT just got off the phone with my accountant, I forgot about Goods and Services f*#king Tax.

Vacant land | Australian Taxation Office

He thinks this type of venture would be treated as operating a business and since land that is classed as 'trading stock' is subject to GST, I'd have to register for GST.

I have absolutely no experience in this field!! I'm not currently registered for GST.

Anyone here prepared to share with me how the GST was calculated on their land sale?

 

This is how I understand it, in laymens terms (check with your accountant or Paul on here or one of the developers)

Assume sells for 250k which is 50k profit

No GST reg: pay 10% of 250k which is 25k
Or
Nominate margin scheme (requires buying in a gst registered entity such as a trust): pay 10% on 50k which is 5k.

Obviously lots more to it, but the latter is a much better scenario.

 

Thanks DT, that's how I interpret it as well, much better option to only pay 10% of the profit margin.

Yeah, buying in a trust is the way to go for this type of project- will talk to my accountant some more.

Or I might just scrap this idea all together, go back to my original plan and keep looking for a retain and renovate site.

 

Not a chance - for resi lends they will only value against values which are titled, not TBC.

 

Thanks for confirming that Corey.

 

@Erica if you keep on doing this you will need to start considering it as income and GST not as a CGT event.
It's another bite into the profit cherry which is why we aim for 20% plus to get enough money left over at the end

 

Hi Westminster,

I would like to continue undertaking small scale developments regularly, such as one per year. I am waiting for my accountant to get back to me with info for strategies how to set this up to minimise income tax and GST.

Can I ask you, did you start regular developing by using a trust of some sort or go strait to a company structure?

I'm researching obtaining finance for a trust vs company- both seem to limit lenders considerably and not as good interest rates.

 

It shouldn't require using any different products to standard lending - no difference in rates. If it's a trust some lenders will require their solicitors to review the trust deed for the first lend with them - generally $250-500.

 

Thanks Corey!

I'll talk more to my broker (and stop looking up unreliable info on the internet)

 

Hi @Erica, as Corey has said its pretty much the same. As director of the trust I give the bank a Directors guarantee as my income services the loan until the Trust can be self sufficient.

I did start off in personal name and still do some holding projects in my personal name as they will be held as investments and use CGT. Others which are being sold are in Trust or SMSF and will have company tax and GST.

 

OK, so I've now missed out on about 10 properties with offers too low or outbid at auction, I have come to the conclusion Johnny is right!

I have squeezed the profit margin right down to a measly 10% and am still missing out- builders are buying at a price point where no money can be made from the subdivision of the land alone (they are only making money on the construction only).

So officially scratching this plan, and going back to looking for a retain and reno site. Oh well, an interesting learning experience, and you never know untill you try.

 

Yeap. I had the same experience.

There could be good profit in bigger developments. But until you can afford them have to do something else in the meantime. If the market was rising that would make it easier for people like us.

I will be a developer... One day

Good on you for trying though.

 

Unfortunately every man and dog wants to be a developer - so all the low value, low effort properties (simple subbies) are poorly valued. It's very common for people to buy completely unprofitable developments to 'landbank' them until they're worth it - absurd.

As always, the biggest profits will be in targeting strategies which the majority do not follow - as the demand side of the equation is lower.

 

Hi, I am new here and looking at doing a demolition and subdivide on my block at Reynella East.

I earn approx 40k and my wife is on approx 55k. We have 2 kids.

The house is 3 bed 1 bath and block its approx 650m2

We bought the house about 5 years ago and unfortunately we have spent about 35k on it, as subdivision is only a new consideration.

Can anyone please give me some advise as to wether subdivision would be worth it, if any profit can still be made?

Or

Is there a better alternative to maximise profit?

Thanks in advance for your help.

Tim

 

Tim, what other research have you done so far?
I'm guessing you have stumbled across this forum whilst doing some prelim research.
Suggest you look into
- your existing block, does it have any easements, slope, large trees
- council development plan, what does it allow, are there any similar sites nearby, has someone pushed further than the plan
- build, what will fit your block, figure out building envelope, then whats going to fit, then whats that going to cost
- sale, whats the end result going to be worth

This is only very minor things I would want to look at first before speaking with
- Surveyor/conveyancer
- Council
- Builder
- Real Estate Agent

And please before you speak with any of the above speak to the following
- Banker/broker about finance
- Lawyer/accountant about structure/taxation

 

That's all so far but I should clarify that I was probably not looking at building after subdivision, just selling the land.

There are no easements, the land is flat and there is a big lemon tree in one corner of the block.

There seems to be a number of sub divisions going on nearby. One across the road, divide and building has begun. One around the corner, divide and one lot has sold. A number that have/preparing to divide and kept the current house and built a house.

Have not spoken to anyone about it yet, I guess I was hoping that someone here might have a ballpark figure, if any, for potential profit, given my situation.

Thanks for the help so far Brady!

 

- What are 375sqm blocks selling for in the area?
- It it a corner block? Do you know were the sewer and water connect? Will you need an extension?
- What would the house sell for in it's current condition? You have spent $35k is it fully renovated? Where did you spend this?

Sale Price - Costs (agent, TAX, subdivision, services, conveyacner, surveyor) - Current Vale = ???

 

There are no 375sqm blocks near by, closest is 348 for $208k mainly they are 300sqm at around 175k.

Current house is roughly centered on the block. It is a rectangular corner block, sewer runs down the border of the long edge of the block, over half way down and then in to the house, probably no extension needed. Not entirely sure about water.

We added solar, ducted gas heating, ducted evaporative cooling, landscaping front and back, a built in wardrobe and extra storage in the kitchen/dining.

Evaluation before the front landscaping was 330k. Everything else was already done. We were also going to paint inside and do new flooring, if we sold the house.