Syed from Melbourne

Hello all,
Long time lurker first time poster. Using the knowledge i gathered from somersoft i was able to buy my first and only investment property back in 2013 using equity in my PPOR. Both properties are in craigieburn.

This time around i want to use equity in both properties and apply the following strategy.

Buy a corner block. Subdivide the backyard and build another house. I am going for capital gains here but dont want the property to be negetively geared either. Will be happy if i can achieve neutral cashflow. Would like to rinse and repeat every 2 years.

What do you think guys. Does the strategy make sense? Is it possible to buy something in melbourne for this or should i go interstate. I am currently looking in braybrook area.

Thanks,
Syed

 

Welcome Syed

The strategy makes sense but what do the figures say? It could be positively geared but depends on how much deposit you're putting down, yields, cost of construction, room for rent increases etc. Many variables to be accounted for which you will have to consider while doing your due diligence. Talk to the local REA's and see if someone has done something similar in the area.

 

Hi Syed
You could possibly subdivide the backyard and sell it then put the profit back onto the loan of the front house this could make it positively geared - or at least more positively geared than it is now.

 

Thanks alex. I should be able to put around 120k towards deposit with 90% lvr. Is there a spreadsheet you guys use for this kind of analysis?

Thinking about getting a 600sqm block for around 500k. Subdivision etc cost around 80k (no idea how much it will cost atm and this is just a guestimate). Construction 180k for a double story house. Rent around 350 pw old house and 380 pw new one.

Thanks again.

 

Hi Syed
Welcome
I am a developer, currently developing in Melb.

I think its still a very good market, relatively stable.

I like your strategy, start with smaller projects what @Xenia mentioned is good and with experience work up to larger projects if this suits your strategy.

Also check out threads under "developing" there are some projects listed, one in particular in Melb by @Bedeveloper that may be helpful.

All the best

MTR

 

Thanks guys, this is awsome. Ill get a plan of action and share it with you guys when i get home from work. Would be great if you guys can tell me if timelines are achievable.

Many thanks for your quick feedback.

Thanks,
Syed

 

There's a spreadsheet for everything! Found this from a list @devank created Dropbox - 31 DevelopmentScenarios.xls

 

Cheers alex.

 

Feasibility is everything with subdivisions.

180k seems on the cheap side for a TH as well. Depends on who your target buyer is.