VIC Corio development site?

Hi all

Been lurking around the Geelong area (still waiting for new finance) and have been looking for something to develop and saw this Lot 2 - 3 - 4 / 172 Matthews Road Corio Vic 3214 - Residential Land for Sale #201942346 - realestate.com.au

Any thoughts on if this would be a good deal or not to cut my teeth on? New units sell high 200's in this area. Like this one: 105 Goldsworthy Road Corio Vic 3214 - Unit for Sale #126747110 - realestate.com.au

Here is my quick and dirty analysis. Please pick it to pieces!

Purchase $450 000
Purchase cost $ 25 000
Build @ $170 000 each = $510 000
Hold cost $10 000

$995 000

Sell each unit for $300 000

You lose $95 000 not including agents fees and professional counselling

 

@MTR @Westminster ?

 

I reckon your feaso might be pretty spot on! Hahah.

Why not try a retain and build for your first? Do a minor renovation on the front and build a new one out back.

 

Yeah. I think that's probs a better alternative...

 

I suspect beyond losing your money, your existing house and sanity that your sums are pretty accurate.
I'm not definite on the construction costs as I don't build in Vic but that seems reasonable.

 

Thanks for that @Westminster @LifesGood I can't understand how they hope to sell at that price...They really can't expect to get more than $300 000 surely?

 

GST?
Infrastructure costs
Perhaps $1200-1500 per sq to build, dependent on spec this is Melb? not sure whether it is more for Geelong, regional centre??. Is the case in Perth regional builds pay more

Some people buy to land bank, some are inexperienced and think the end values will continue to rise and therefore they add a premium to end values, which is how developers lose their shirt.

 

Hi @MTR . I believe builds in Geelong area are comparable to Melbourne price wise. Apparently all the infrastructure is in place and paid for - even the driveways.

What do you pay GST on? Excuse my ignorance.

 

Right.
I leave this with my accountant, margin scheme gst

GST and the margin scheme

If its your first development you may want to buy in your own name??? perhaps no GST? Don't know???that's something you will need to discuss with your accountant.

I buy development sites in a Trust, structure is important to help with tax etc.
This is something you don't want to ignore if you are going to pursue this strategy.

 

Thanks for the heads up I think I will keep my first in my own name as I have no other job at present. However I will look at other structures if this gets to be a "thing". We used to have a trust but never used it. I will definitely ask the accountant if I decide I am a business.

 

I think you analysis is pretty accurate, except maybe abit light on the build costs.

Here's another way to look at it. I like breaking costs down to a per lot basis.
Lets say you got a deal at 475k including costs. It works out to just under 160k per lot. Even IF you could get them built at 170k each (I think 190k is more likely), each unit will owe you 330k. That's before we add any holding or finishing costs.
A 300k sale price, leaves you at a 90k loss without including holding costs, legals, agents etc.

There's nothing in this deal... A 1m development that will cost you about 15%...

Unfortunately, a newbie who wants to develop for the sake of developing will end up buying this. And learn a costly lesson.

The problem with developing in areas like Corio is simple. End values are not high enough! And even more so now after the recent increase in prices of the area, you just cant buy land cheap enough to make a development profit.

 

Hi Connor. Thanks for affirming what I had thought. Back to the drawing board. Just want to do one simple subdivision to both learn and profit from.