Selling land and home package

Discussion in 'Development' started by melbourne171, 20th Dec, 2021.

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  1. melbourne171

    melbourne171 Well-Known Member

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    Hi
    Instead of building houses on the subdivided lands, I learn that developers have partnerships with builders to sell land and home packages after subdivision. So, the buyer borrows money from the bank to pay the developer the subdivided land costs and pay the builder the building costs. Is it correct?

    Can I ask which builders in Melbourne I can approach for this 'land and home' package strategy?
     
  2. Piston_Broke

    Piston_Broke Well-Known Member

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    Many strategies out there.
    Often the sale of the land and house build is done at the same time and provided by 2 parties.

    Whichever way you do it, you still need to be cashed up unless you can sell off the plan at a discount..
     
  3. melbourne171

    melbourne171 Well-Known Member

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    Thanks for reply.

    What are other strategies? I do not have cash for construction costs. What are the strategies to maximise profit?
    Why do I have to cash up after land subdivision? After signing sect 173 with the Council, I engaged with a surveyor to get a subdivision plan and engaged a solicitor to have two separate land titles. I suppose that I can sell the land to the buyer, and the buyer can sign a separate contract with the builder for construction costs.
     
  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Is there any reason why you went into the process without funds to do construction or did you always intend to just sell off vacant land?

    If it's a small development (let's say 3-5) villas/townhouses then the developer would get the DA so that designs are done for the blocks as well especially if they are small lots. The Developer might then tender it out and get a price from one builder where the builder is happy to enter separate contracts with new owners. Builders will charge more for this as generally they won't be able to do all the construction at once and lose certain economies of scale. Developer would advertise it like a OTP purchase with split contracts - one for land and then a contract between the builder and new owner. Generally not a great profit uplift on this

    The in between model is get DA and then sell off the plan with the secured contracts acting as secured funds to enable banks to fund the construction of the whole complex. So the bank might want 50% presold and then will fund the construction. This generally provides more profit but also more risk.

    If it's a simple carve off a rear block and the site is regular shaped then having a design done might not be as important but if the new owner needs to go through the DA process for their house it might not be as attractive vs them being able to design what they want. Depends on the local council rule if they can go straight to building permit or if they need DA.
     
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  5. melbourne171

    melbourne171 Well-Known Member

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    I have a subdivision of two townhouses only. If I partner with a builder to sell land and home package with two split contracts, the profit is less but it may be not much less profit compared to option 2 above. I guess.
     
  6. Piston_Broke

    Piston_Broke Well-Known Member

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    From the OP I assumed there were more than 2 involved. It's probly not woth the legal and accounting dramas and risks for a builder unless they know you well.

    If you had 20-30 a small builder may be interested. 2, I doubt it.
     
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  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Home world display villages etc - Most project builders have land available and can package something. Some make nothing on the land and others add a fee. They want to sell the build.
     
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  8. Lindsay_W

    Lindsay_W Well-Known Member

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    You've got to ask, what is in it for the builder, why would they want to do this with you?
    Typically the land is sold separate to the build, you would probably get more money for doing that.
    Most arrangements where the builder sells the whole thing as a package they get a discount on the land portion so that's their incentive to do it, with a duplex build it's probably not worth the risk for the builder.
     
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  9. Abraham

    Abraham New Member

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    Hi
    I have a house which is quite old. Are there any options to sell a portion of the land and build a house in the remaining portion. Hoping that the money from selling the portion of the land will fund the house that we would like to build