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Starting out strategy

Discussion in 'Development' started by Dapa, 26th Sep, 2016.

  1. Dapa

    Dapa Member

    Joined:
    26th Sep, 2016
    Posts:
    8
    Location:
    NSW
    Hi all,

    I'm new to the forum however have lurked for some time as I try and build up my knowledge.

    I am in the fortunate position of owning a business that generates sufficient income that I can focus full time on something I love, property. For the next couple of decades (I am ~40) I plan to start building houses, some to keep and some to sell. My first question is a simple one, I am not going to start off with an unmanageably large project and I have been researching purchases that would either support subdivision where I'd either build two new houses or maintain the existing property and then build another house on the newly created lot. Alternately, it seems people starting out in development commonly look to start with a 3/4 bed townhouse development.

    I am angling towards the townhouse project as to me the subdivide and build one property exercise seems relatively simple and therefore presumably lower return (and a bit easy?). Would this be an unwise choice? I'm not a total newbie, a few years ago I built a 4 bed 4 bath house which generates a decent return (holiday let due to it's location). I'm reasonably up to speed with the intricacies of the whole process, site appraisal, feasibility, negotiation, financing, legals, sales etc. I'm looking to put what I know into practice (and also make use of the equity that I have available). I do also realise I have lots to learn, contacts to make, markets to research and frustration, delays and difficulties to deal with. All things I am looking forward to. On that basis is a simple sub-division just that, too simple? Should I focus on bigger things? Cheers, I look forward to your educated and considered replies ;-)
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    18th Jun, 2015
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    Location:
    Perth WA
    I would start with a simple split and build - it's a good way to learn the subdivision process. From there you can go onto bigger and better. :)

    It's also relatively simple in terms of financing - the more you build, the more complex it becomes, especially if commercial finance is involved. Have a chat to your broker about what's possible for you based on your current income and commitments - if you'd like to go onto bigger and better projects they'll be able to guide you as to what's possible long term.
     
  3. Dapa

    Dapa Member

    Joined:
    26th Sep, 2016
    Posts:
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    Location:
    NSW
    Thanks Jess, I hear you. I will see which site type of site falls into my lap first. At the moment I have two options on the table, both supporting three townhouses, both are 700m2 plots with an FSR of 0.6, one with DA for three townhouses and one without a DA, yet.. Roughly a $100k difference in price..
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,756
    Location:
    Perth WA
    3 is good, there are a couple of lenders who will finance this under resi terms.