Post Project Review Of 1 Into 2 Subdivision

How much cash did you inject to begin with, what sort of ROI (return on investment) did you get?

 

Approximately we would have put in around $210-220k with a loan of $550k to cover the $750-770k of total costs, with sales net of commission coming in at $800k. The project will pretty much take a clean 12 months to make the numbers easier

Looking back at how we negotiated the price to purchase the property I think that we could have taken a better approach. Agreeing asking price and reducing it when we had a better estimate of costs likely anchored the price higher than we would have liked, so we could have improved our margin there. I suspect that we got a little bit of FOMO when wanting to 'get our development journey started'.

The IRR will hopefully work out to be about 20% based on our gearing but as you've highlighted more gearing means the IRR increases or decreases much more quickly with overs and unders. We're looking at rolling into the next project at present and will definitely take the feedback from the previous posts in mind.

 

You no doubt would've learn't alot, and no feaso is better than actually undertaking a project.

And its great that you made a profit in the process!

Did your land sell quickly?

 

100% agree, and the questions that we're asking as we run the numbers on another couple of projects are now (hopefully) so much more informed. It almost seems a little scary that we jumped into it the first time thinking how little we knew then compared to now, due to the million questions and people we try to learn off along the way.

The land actually sold very quickly, though not without a couple of hiccups. We planned on building on one block (larger, awkward, more triangular) ourselves as we're more experienced in that department and put the 490m2 rectangular block on the market in mid December. The REA advised an asking price of 450k on a block that we had priced at 410k, and not only did we not get a serious offer before the end of Jan, the best we got was about 370k and the REA advised us that was where the market was at. Needless to say we were nervous.

We lowered the price to 420k and had a fair few buyers come out, inspect, and put down reasonable offers in Feb. We settled on 410k for that block, and as COVID started coming along we put the second block on the market too. The awkwardness of the block led to fewer offers but we accepted one at 412.5k within a few weeks, which was almost a big relief to de-risk the project, even if we were foregoing an extra $20k of so by building and selling a house on the block.

We've felt bad because the aforementioned civil engineering delays have meant that the blocks haven't been registered as quickly as expected (will be up to 3 months behind where we originally thought) and as someone who waited an additional 12m for the land their PPOR was built on to be finished and registered, I know how they feel and it's not great. A big concern is that they get cold feet and break the contract, although I'd have thought this is unlikely and we are almost there now.

 

Only an extra 20k to take on the risk of building a house and then trying to sell? Whilst paying more in commissions etc, I'm glad you sold as just the land as well.

 

The latest thing that we're weighing up, and old hands are probably all over this, is whether to push to get the titles registered before 30 June. This would speed up settlement, which has already been delayed, but I just calculated what land tax in Qld is when held through a company and on two blocks it's huge! Likely to be at least 70% cheaper if one title is held.

Before we make any decisions, do the two new titles need to have their registration with the land titles office by midnight 30 June for land tax to be charged on the two blocks? If this hasn't happened then there's technically still one block (even if plans have been sealed) and land tax will only be charged on that one?

 

A question that I've recently been asked on this project is 'did we look at selling the house (i.e. take away on a truck) or moving the house onto one of the new blocks instead of demolishing it'?

This one was a brick house on a concrete slab but had it been your standard 1970s/1980s high set on stumps style house, what do other people here usually do?

• Do you save all/most of the demolition cost if someone takes the house away/you move it onto one of the lots and reconnect it?
• At a very high level how much does it cost to pivot and shift a house on a 1000m2 lot and reconnect the services?
• Again at a very high level, how much do companies that buy houses generally pay to take something pretty average away?

Always keen to see if there's a little extra to be made during the process, when you think about it demolition seems quite wasteful!

 

Sorry to bump this, would be really keen to get people's thoughts on the question above as it will likely be relevant for our next project.

 

Hi, this question was asked on another forum i read in the last week or so. I cant remember which, but if you join the facebook groups 'property developer network' and the 'property developer australia' facebook pages, you will see it. It was also a brisbane related question and recommended companies and prices were provided.

 

Just found the post, its by a lady named wendy from june12 on the 'property developer network (group)' facebook page.

 

Thank you so much for this. Application to the group is pending but I'll check it out, sounds like exactly what I'm after.

 

I have also applied to join these pages, thank you