Officer South House and Land Deal - using very little deposit

Discussion in 'Development' started by sash, 29th Dec, 2016.

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  1. sash

    sash Well-Known Member

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    Thought I would post my deal which has just been approve from a finance perspective. This is advanced strategy and now for everyone...

    Details:
    1. Bought a block 285 sqm in Officer for 144k put s 5% deposit in Dec 2015
    2. Signed construction contract with Dennis Family for 171k

    Total cost was 315k....but just got it revalued for 360k ..wanted 380k but did not happen

    So at 360k minus 315k give you equity of 45k plus the 9k I put down earlier. So total of 54k in equity or 15% deposit...LMI capitalised to the loan.

    So the total I put into the deal was a follows:

    1. 7200 - 5% deposit for the land
    2. 1700 of for construction contract (1%)
    3. 4800 for stamps
    4. 900 for legals

    So total cost to get into the deal with less than 15k

    Plan to do as many of these as possible...but harder to do now...and you also need 12 months to pass from a val perspective from signing of contracts.

    Okay now for the risks:

    1. 5% deposit made with the view that finance would be ok things can change. Made is and/or nominee and had a 6 week settlement in place so I could onsell if required
    2. Need to do this in the early stages of growth in a suburb

    For the naysayers ...there is money in H+L....you just need to know how to pick the deals...
     
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  2. Cactus

    Cactus Well-Known Member

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    Certainly is.

    Well done. Good deal.

    I am Waiting on a few to title at the moment.

    One in Beaconsfield off brunt Rd. Bought $199k 12.5m frontage. House $222k turnkey. Stamps $8k. Interest allowance $6k. Total cost $435k. 4/2/2 very nice spec end value anticipated at $535k-550k.
     
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  3. sash

    sash Well-Known Member

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    Yep...growth in that corridor now has houses starting at 400k....everyone is piling in...
     
  4. Cactus

    Cactus Well-Known Member

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    Yep... I put together a 2 part package on a 8.5m frontage lot in the same area and sold the package pre Christmas for $400k a 3/2/1. I will make 90k less gst and tax.
     
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  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Has construction finished? How does holding costs (cash) impact the sums.

    What is the best use for blocks like this - have you found 3 or 4 bedders to be the most popular?
     
  6. DaveM

    DaveM Well-Known Member

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    Great thread sash. What was your cash on cash return? A year on how are land prices tracking compared to what you paid?
     
  7. Cactus

    Cactus Well-Known Member

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    I'm a fan of the biggest house you can fit on the lot. So I go for 3/2/1 on 8.5x25+, 3/2/2 on 10.5x25, 4/2/2 on 10.5m+X28 And 3/2/2 on 12x21s
     
  8. sash

    sash Well-Known Member

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    Wow!

    Mine is 12.5 front with a double garage 17sqm....was yours spec'd up?
     
  9. sash

    sash Well-Known Member

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    Well the land settles early Feb..I have 6 weeks from notice to settle waiting on it....so have only paid about 9k now...allowing for 15k plus say about 9k for interest to complete.

    End value lets say is 400k...so 85k.....in it...so cash on cash for 25k that is about 360% return?

    Land bought for 144k...comparable land is now around 180-190k. Bank vals will be 5-10% less.

    Factored in 9k...build started in summer is much quicker than winter in Melbourne due to weather...well in principal. It takes about 5 months. Construction if started by Feb/March (construction soils done waiting on final diagrams planned for 10th Jan) should finish by July/Aug/Sept

    As for return...see my response to DaveM. I plan to hold this one......85k on 315k is 26-28% return which is sweet spot...rent is 360-370pw.
     
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  10. GetRIDof5CENTpiece

    GetRIDof5CENTpiece Well-Known Member

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    My first ever H&L signed in 2013 Somerfield Estate Melbourne S.E... details as follows:
    Land 477 sqm $355k (bought about 1/3 into land sales)
    House 4-2-2 Porter Davis (2 living spaces and alfresco) $245k
    Fees + Stamps $17k
    Post settlement mods $25k (alarm/cameras/blinds/evap/complete landscaping etc).
    Total $642k

    Current valuation $920-960k (based on three diff agents) plus own research.

    Rather pleased :p
     
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  11. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Whoa land isn't settled yet and you bought it a year ago. That's some nice planning time :)
    Here's to the weather to improve and some prime construction time for you
     
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  12. sash

    sash Well-Known Member

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    Weather is a problem in Melbourne if you start builds in April...it is the period to lock-up which is an issue.

    My last build in Mickleham will be handed over on mid Jan. Slab went down on early May...so took about 8 months. Similar to Officer but did not get the equity benefit...I did in the Officer deal...had to tip in about 37k.

    Numbers:
    1. Land bought for 125k....now worth 175-180k
    2. Build cost 175k...with Burbank...got a quote recently for similar home it is over 190k
    3. Total build cost 300k plus 10k interest
    4. End value 375-385k
    5. Rent is 360-370pw....very spec'd up but did not pay a fortune for this.

    It gets better in ....Geelong..for a 3x1x1
    1. Land bought for 99k...same land is being sold for 125k
    2. Build cost 159k for 12.8sq home...most builders will charge 170k
    3. Total build cost 258k with land....
    4. End value appromixately 330-340k
    5. Rent is 330-350pw....up market specs
    6. Tipped in 30k into deal....
     
    Last edited: 30th Dec, 2016
  13. Connor

    Connor Well-Known Member

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    Great looking figuers @sash !!
    The val is a typical 10-15% short...it's near impossible getting a decent spec'd up home in the area under 400k now. Hell, i've even seen 3br units priced at 380k!!

    I'm pretty much in the same situation, land settles March/April and while i always use 20% deposits, it's looking as though I'll only have to contribute 10% to get an 80% LVR.

    The other little bonus i've noticed is over the 12 months of signing up for the land to settlement...rents have increased about $30 per week. I had been working my figures off $330pw. It's now looking like $360pw is gonna be easily achievable.

    Great stuff :)
     
  14. Connor

    Connor Well-Known Member

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    How big is the Geelong land?
     
  15. sash

    sash Well-Known Member

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    Nice one!

    Was great we got in early...the current deals in the areas are not as good...land price increase and cost of construction is an issue.

    Looking at other areas now....
     
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  16. sash

    sash Well-Known Member

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    It is only 200sqm....most builders could only get a 2x1x1...I managed to get a 3x1x1.

    It is in the Villawood Estate...rents are very high there....
     
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  17. D.T.

    D.T. Specialist Property Manager Business Member

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    Same as anything , anywhere
     
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  18. RetireRich101

    RetireRich101 Well-Known Member

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    O.T.P would be another vocabulary. If one bought an OTP in booming sydney/Melb using a $5k deposit bond in the space of 12-18mo, you probably arrive similar increase?
     
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  19. RetireRich101

    RetireRich101 Well-Known Member

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    That's nice gain of 43%. Well done.
    However if you look at a neighboring suburb such as Keysborough for example Free Suburb Profile report for Keysborough VIC (3173)
    Nov 2013 house median was $425K,
    Nov 2016 house median was $636k
    It's a 50% increase, which is more align with the overall Melbourne increase for last 3 years, don't know?
    So if you were to purchase a relative new house in established suburb of Keysborough in 2013 would you better off in terms of growth and less hassle factor? Even a H&L, I imagine there's a lot of work to select builder, plans, tiles etc...
     
  20. RetireRich101

    RetireRich101 Well-Known Member

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    $315k > $360k, 14.2% increase.

    I think if you drop a pin in any Melbourne suburb in the last 12 months, you're probably achieve bit more and with less hassle factor? The uncertainty of the Melbourne house market in 2017 when the house completes may also another concern.

    looking at Google Map Officer South scares me with so many green undeveloped land