Before buying a knockdown rebuild property..

Hi all,

My wife and I are looking at upgrading out PPOR, and are now considering buying an old house on a decent size block of land to knock down and rebuild our dream home on.

I have no experience at all in this, but we are looking at using Carlisle Homes or Boutique Homes to do the planing and building, and organizing our own demotion contractor.

We're in the very early stages of this, but are looking around Eastern Suburbs of Melbourne (Mount Waverley, Forest Hill, Nunawading) for a 700m2 block.

We've come up with some very rough costs on what would be involved in this:

Rent elsewhere during development - $30,000
Demoltion Costs - $30,000
Site Costs - $50,000
New Home Construction Costs - $350,000
Landscaping, Driveway etc - $20,000

What checks could we do on a property before rushing into anything and purchasing it:

Is it worth paying for soil checks prior to purchase? Worst case, how much would this affect the development of the new house?

Should we be showing the plans/overlays of trees and easements etc. to our builder prior to purchase to make sure it is suitable?

Should we be contacting council prior to purchase to ensure there would be no issue with obtaining demolition and building permits etc.

Any other recommendations would be greatly appreciated!

Thanks

 

Just to sum up all of the above

I guess my main fear is that we purchase the property, and find out early in the planning stage that we can't build our home, or it will cost a lot more than expected due to something we missed.
I'm hoping to find out the main checks we should be going through before purchase.

 

As part of your offer make it conditional to a feasibility study and get a soil test and feature and contour survey before you settle. Then get plans drawn up and send these out to a few builders for quotes.

 

Also ensure there is no heritage overlay

 

With your construction estimate, roughly how big a house, single storey or double?

 

And add 10% to your budget to allow for the unforeseen expenses that WILL crop up as you build.
Marg

 

These figures might work for some sites, not for others. $350k can build a decent house on a basic block, but it doesn't go far if you've got to do a custom build as the block has some challenging aspects.

For example on our house we're building:

Demolition cost was less than $10k.
* We got the landscaping done cheaply, only $17k.
* Our driveway is quite steep so required extra engineering for drainage, plus council approvals. Probably cost about $15k all up.
* Lots of trees, there was a lot of back and forth with the council and the aborists. This added costs but was over 2 years ago so I've forgotten about it.
* During our final inspection last week, my wife decided she'd like some extra mirrors in the wardrobes across several rooms. That one was pocket change at $500, but it all adds up.

I could probably do it again a lot more efficiently. I don't regret the decisions we've made, I'd still make the same ones again, but there were a few gaps in the initial design that would be eliminated with experience.

If it's an investment build, budget for a 10% buffer. About half of that might go to things that that could be eliminated with experience, but there's a lot of things that can come up that can't be foreseen.

If it's going to be your own home, add another 10%. These are the things that you'll realise you really want but didn't think about, or the things that builders just don't include in their quotes. These are the differences between building a good house and an amazing house.

 

Single Story, 4BR, 2 Bath, 2 Living Areas

 

Thanks Peter.
It is for a PPOR.
Given our estimate for demolition and construction is just that (an estimate)...how would we go about obtaining finance for the build? Would we obtain a construction loan after we have settled on purchasing the block of land with the run down house?

We're expecting to pay around $800k + purchasing costs for the block of land. We'll sell our current home (which is paid off) and get around $650k, putting that towards the new land.
Would we be better off getting finance for the entire project prior to purchasing the land, or treat it as two different loan applications?

Note: We do intend on seeing a broker when our plans are a little more refined

 

@Frosty123 how the project is financed, depends on the process through which it's completed.

In your case, you'll initially finance the land purchase. That's straight forward like any other real estate purchase.

From there you need to get a fixed price building contract for the build. That defines how much the construction is going to cost and what is included. That only leaves the things that aren't included...

This scenario is fairly simple because you've got a lot of cash from the sale of your existing PPOR. Ideally you'd be in a position to set aside say $200k to cover the planning, demolition, all the little upgrades and finally the landscaping. You probably won't use all of that money, but anything left could be used as a lump sum payment of the loans. The main point is having this cash available gives you plenty of flexibility (this is why cash is king).

If you don't sell your existing PPOR before you build, then you could achieve the same result by releasing equity in the existing PPOR.

 

Should be easily achievable within your budget as long as it is not a challenging block of land. Feel free to send me private message if you need any insights from a builder’s perspective.

 

Add 30% to the price quoted by builder.
i.e. 4/2/2 Carlisle range $300k + $100 = $400k

 

I am looking at something similar. I am looking to buy a new piece of land but there is pressure to close the deal. Since I have no experience in the property market I do not want to be pushed over by bullies. I am looking for things like a checklist that gives me peace of mind before closing the deal. Does anyone know how long it can take interacting with council to find if there are utility or sewage lines at the frontage of the property?
There are trees on the property all around the boudary of 30 X 13m. There are some trees in the middle. Will the council be a pain?
Elevation? What is acceptable or wrong elevation? There is an elevation along the width of the property. How much will it impact my building cost?

 

Drainage/sewage should be shown in the sales contract
Depends on what council and tree species
North for the outdoor and living area's is the best elevation
Not enough detail to guestimate costs

 

Do you mean if the land is elevated towards North, that is good?

 

You get more sunlight being exposed to the north.
Much in the same way that apartment on the south side are less desirable

 

Thanks. I see the rationale now. It hasn’t been long that I arrived from the land where the sun travels overhead.

 

@Experts - I have another question on stamp duty. I was looking to purchase a block of land in the range of 600-650K. I am a FHB. I entered the deal thinking my stamp duty will be exempted till 600K and I will need to pay stamp duty on the remaining amount e.g. 650 - 600 = 50K.
However, my mortgage broker just informed me that I will have to pay stamp duty upfront on 650K and claim back refund after I have completed the build.
This puts me on back foot as that is another 35K extra which I do not have now. That will make me go for 85 - 90% loan + LMI with some harsh interest rates.
Is this the correct scenario that while buying standalone land as FHB I have to pay the full stamp duty?

 

For sure, once we had locked down the design and builder prior to paying a deposit, the builder was happy to review Site information (Easements, photos ect) and if that all checked out they even would send their local site rep past for a quick look before we went to Auction.

They then would give us a verbal adjustment to the quote, for any items such as slope or easement's, they did this for 3 properties we were looking at over a 3 month period.

 

Hi, we are also looking to do the same thing around the same area. Wondering how did you go with yours?