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Things to consider when redeveloping an old house & land for subdivision ?

Discussion in 'Development' started by AlbertWT, 19th Jun, 2015.

  1. AlbertWT

    AlbertWT Well-Known Member

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    People,

    Can anyone here please assist me in what other resources and challenges that I need to be aware and know before I can redevelop a block of land (with existing old weatherboard house) into two duplex or a townhouses ?

    Any kind of help and suggestion would be greatly appreciated.

    Thanks.
     
  2. RPI

    RPI Property Lawyer, Town Planner Business Member

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    Infrastructure costs.
    TIME
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Prior to even looking at what, where, how is understanding the tax impacts. This should then guide how it is acquired and assist you with running the numbers with a accurate allowance for tax that isn't unrealistic so it scares you off attempting or just ignoring it to find profit is wiped out later. Once the basic tax issues are understood

    Taxes to consider - Income tax (not CGT), stamp duty, land tax, GST, CGT on any that are kept (maybe), margin scheme, tax strategies for your specific plan...ie buy some, sell some, sell all etc ??

    Also important to understand following this knowledge is record keeping and apportioning issues. It can be easy but get VERY messy if you aren't organised. ie : One's you keep - Can you identify all the share of costs that include GST, one's you sell - Costs before and after GST ?

    Important when starting any dev is to use experts to guide you. Broker, Tax. Legal, RE Agent, Town Planner etc. Sure it wont be free but then the mistakes wont cost you. I always like to think I add value and can save developers $ by considering strategies to address unavoidable tax. I always say you don't want to overpay or underpay tax.
     
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  4. bashworth

    bashworth Well-Known Member

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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Tax is the main one, but also consider the 4 disasters, from a legal point of view:

    1. death
    2. divorce
    3. incapacity
    4. bankruptcy

    Especially if there is more than 1 person involved.
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    From a finance perspective - the number of dwellings you decide to build on the block will dictate wether its residential lending or commercial lending. Commercial lending has its benefits but also increased costs so you certainly need to factor this in your feasibility study.
     
  7. AlbertWT

    AlbertWT Well-Known Member

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    Ah I see, so in this case for tomorrow inspection of the below-attached old property site in Westmead, do I need to apply for the STCA or DA to the council before approaching my chosen builder to build new duplexes ?
     

    Attached Files:

  8. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    You need to get a copy of the following:

    1. DA
    2. DA approved plans (architectural plans, landscape plans, any stormwater to hydraulic plans

    STCA means Subject to council approval so thats different to a DA.

    The DA is also going to give you a guide as to how much the CC is going to end up costing you. It also outlines LSL fees, s94 fees, etc which are important to factor into your feasibility study.
     
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  9. Be Developer

    Be Developer Property Developer Business Member

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    @ProperTikus


    to answer your question, abt DA or STCA

    site is DA approved.. you will need to apply for Construction Certificate to Private Certifies (PCA) or Council.

    also, best to provide CC drawing to builder for a quote



    few more things:

    Feasibility study

    there is a sewer line going thru block, so most likely you will have to case it (please ask agent to send you DA Conditions)

    with HC, there will be around $10-$18k worth of fees + around $10k worth of Secuirty Bonds.

    also,. no harm asking agent, what's a reason vendor is selling it

    please feel free to use feasibility cal on my website http://bedeveloper.com.au/resources/

    p.s for attached DA, allow around $650k for construction cost (calc has default 5% contingency)
     
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  10. AlbertWT

    AlbertWT Well-Known Member

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    Thanks Shahin, I thought that the last 15 pages on the attached contract dictates that I must be building according to the council approved duplex specification.

    Ah I see, no wonder the vendor auction it this weekend for $1m above.

    I was under the impression that if once I got the land, I can then just appoint my own builder like McDonald Jones or Eden Brae to demolish the existing old house and then build 2x duplexes on top of the subdivided land.

    I guess I still need to get some more approval doco's and pay some fees.
     
  11. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Do MJ of EB even do custom homes? Even if they do they wouldn't be doing turnkey. You really need to do a bit more homework on this before jumping in.

    Westmead is very bluechip but just make sure you are clear on expectation before embarking on the project.
     
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  12. AlbertWT

    AlbertWT Well-Known Member

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    Many thank you for the suggestion and also the explanations Shahin.

    I appreciate your assistance in this matter.
     
  13. Egga

    Egga Member

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    Most important things would be time,cost and quality.
     
  14. Be Developer

    Be Developer Property Developer Business Member

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    @ProperTikus
    Champion homes, Masterton, lily homes comes to mind for Duplex build (Out of project home build list)
     
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  15. Joshwaaaa

    Joshwaaaa Well-Known Member

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    In my case hitting a disused septic tank was an unforeseen issue:mad:
     
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  16. Be Developer

    Be Developer Property Developer Business Member

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    @Joshwaaaa ...don't forget to use dial before you dig..

    hitting utilities will cost you pretty penny n lot of headache..
     
  17. Joshwaaaa

    Joshwaaaa Well-Known Member

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    All of that was done, septic hasnt been used in this suburb for decades so it was the last thing we were expecting. Also no where near the current sewage lines.
     
  18. AlbertWT

    AlbertWT Well-Known Member

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    Josh, so how is that possible ? May I know in which suburb ?
    when we bought the property, you can ask for Sewer diagram.
     
  19. MTR

    MTR Well-Known Member Premium Member

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    Hi PT
    Many have offered good advice, one other I would consider before starting a development is market conditions?

    If there is strong demand for your product today there are no guarantees this will be the case on completion.

    Its out of your control, however I would consider ways you can reduce your risk if the market changed and you could not sell at the end of the project, ie can you afford to hold? can you sell any prior to completion (OTP)?, play in lower end market, easier to sell etc.
    Review debt vs cash flow/income.

    I had a recent scenario where my 3 villa development on start of the project market was rising on completion market was falling. Something to consider when developing, very sobering, not everyone makes money when developing, and if it were easy everyone would be doing it. Moral of the story is to always manage your risk.

    I ended up selling all my villas in 4 weeks, I decided to build higher specification for the area and buyers loved the end product so I achieved higher prices than I had expected. Another way to manage your risk, build better quality product than what your competition is building.

    MTR:)
     
    Last edited: 24th Jun, 2015
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  20. Tekoz

    Tekoz Well-Known Member

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    Hi MTR,

    So where did you build previously and now ?
    I'm curious to know.