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Subdividing first property

Discussion in 'Development' started by joel, 18th Jul, 2015.

  1. joel

    joel Well-Known Member

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    G'day

    Can someone help me think through this process? I'm thinking of buying a house on a decent size block of land as my first place and then subdividing.

    I'll live in it, reno, and then hopefully subdivide and sell off the backyard as a battle axe block, putting the profit in an offset acct and renting out the house. It'll then be positively geared so I can repeat the process.

    How would this type of subdivision affect the value of the house? And the rent? Most importantly, how would the bank treat this plan of mine? Should I withdraw equity after the reno to pay for the subdivision?

    I have so many questions and no one to ask! Are there any other gotchas I should be aware of? Or any faults in my plan?

    Thanks all.
     
  2. Be Developer

    Be Developer Property Developer Business Member

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    @Newdart

    Check zoning before you buy the house
    Check any easement or know where utilities are running
    Check you have required accesway for dwelling at back

    Once above boxes are ticked and you purchased property.

    Few ways to skin the cat;

    Easiest way;

    Reno the house
    Release equity(if available)
    Use the funds to pay for professional fees(town planner, surveyor, lawyer etc)
    Lodge plan at relevant authorities
    Get banks consent to subdivide property.
    Once subdivision approved.

    Bank will value first house + newly created lot

    Sell or keep or build on a new lot

    (Consult accountant/Mortgage broker/banker, town planner before you start the project)

    Done:)

    If you make money.... Rinse and repeat
    If you don't, tweak your streatgy!
     
    Last edited: 19th Jul, 2015
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  3. joel

    joel Well-Known Member

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    You make it all sound so easy! Thank you! Would there be many agents willing to give hypothetical valuations on both lots before I start the project?
     
  4. HD_ACE

    HD_ACE Game-Changer Premium Member

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    Ofcourse, most will. Ask them to provide sales evidence so you can do your own DD and ensure they aren't inflating the values for you.
     
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  5. Be Developer

    Be Developer Property Developer Business Member

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    Yes, most agents will give you figures!

    Or

    You can do your own Due Diligence.
     
  6. joel

    joel Well-Known Member

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    B e a utiful. How much does a subdivision like this typically cost, all up? Original purchase price would be circa 250k if it makes any difference.

    And yes I will definitely do my due diligence once I find a place!
     
  7. Be Developer

    Be Developer Property Developer Business Member

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    Which state?

    If SA, not sure?
     
  8. joel

    joel Well-Known Member

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    Yeah SA..
     
  9. Be Developer

    Be Developer Property Developer Business Member

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    D.T. likes this.
  10. Brady

    Brady Well-Known Member

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    Purchase price is pretty low and you mention battle axe, just make sure that type of block is in demand. It's one thing for you to get the DA and able do the development. It's another to sell and make profit. Make sure you look at all the numbers.
     
  11. joel

    joel Well-Known Member

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    Will do. Purchase will likely be through Affordable Homes so already some equity there.. Just weighing up the options.
     
  12. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Wouldn't do a battleaxe, great way to ruin your vals as there is poor demand.

    Ingle Farm is blessed with a reasonably strong supply of wide width, large symmetrical blocks which are prime for standard subdivisions.
     
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  13. jafeica

    jafeica Well-Known Member

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    No problem with releasing funds from one property to pay for professional fees for another property while maintaining interest deductibility of all funds?
     
  14. Brady

    Brady Well-Known Member

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    No issue, deductibility isn't determined by the security rather the purpose. Always want to ensure seperare facility for each purpose, keeps it all clear.
     
  15. jafeica

    jafeica Well-Known Member

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    So the purpose (pay for professional fees) is considered deductible?
     
  16. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    So long as the professional fees are for investment use - which in this case they would be.

    All very normal in most developments that I've financed.
     
  17. jafeica

    jafeica Well-Known Member

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    Cool thanks