VIC Thoughts on these Corio / Norlane Properties

All this talk about subdivision in Norlane and Corio is great, I love development
But there is an elephant in the room.... Cost!

The development figures just don't work. Even for a simple backyard sub division where you keep the front house and build in the rear, there's just no margin in it.

Here's an example:

Purchase a subdividable property for 320k including costs.

Build a new dwelling for say 200k finished.

Allow 20k for reno of existing house and interest costs

Project owes you 540k,

Even using these very conservative figures, you'd need to sell each home for 270k each just to break even. (without factoring in selling costs)

The end values for just don't stack up. And for a modest 540k project you at least want a 20% profit for efforts.

Has anyone done this and turned a profit?

 

maybe acquire and hold the property and build in 12-18months time?
isn't H&L operate similar?

 

Ditto mate....i constantly get asked about chasing the rainbow on devie sites.....the easiest thing is H+L.

Why...because the cost of putting a house on a subdivided block is huge. Add another 40-50k per house just for development approvals, extra services provision etc.

In places like Norlane...it just does not stack up...why not go to Torquay instead pay the 300k minimum for a block..put a 4x2x2 for say 240k and sell for 650k plus....

As you said a devie block in Norlane will set you back say 280k minimum...add to that cost of two small say 16sq dwellings..that would add 420k....are people sayin' that 350k is now the new norm for a new small house in Norlane? No chance!

 

Exactly, no councils to deal with, no painful neighbours, no objections....just straight forward builds...and with devie type margins it's been too good to resist.

 

H&L it's possible to secure a 10-15% margin on the buy in...meaning comparable products are selling that much more.
If the market rises great....if not you still have that margin.

Devie sites you tend to pay a premium...hoping it goes up to realise a dev profit isnt ideal. Numbers need to work in the market you're buying in.

 

ohh and dave, may be a bit late to search elsewhere haha, i meant in my first post have i paid too much for it. ahh well hopefully the area continues to go up

 

but sash even in a market where it doesn't gain capital value over that time cant you for example
property 400k
subdivide and building 200k
600k total costs

sell front unit for 300
keep back one as its new and you can claim depreciation and rent out for about 320

so with the remainder 300k debt you have, you have a property paying a bit over 5% return with depreciation claims and everything?

you're starting to make me like these h and l packages though, I've never considered them before propertychat

 

But why would you do this? Go to all the trouble and expense/risk to plan, build, subdivide...and not make anything?

The goal in developing is to make a capital profit. Rental yield is a way distant second and depreciation while nice, really shouldn't influence you decision to develop.

I agree with what you saying though, you be well ahead doing a straight H&L build.

 

OK...so lets say you buy a place in Newcomb for 400k...subdivide and renovate front and sell for 340k.

Here are the numbers:

1. Old house with land plus stamps/legals - 416k
2. Reno of old house - 22k
3. Subdivide/new house/ extra infra - 210k
4. Sell costs of old house - 12k

So total costs 660k

Sell new house is probably worth 80k more at 400k....

A H&L is much less hassle and you can make the same amount without blinking..if you buy the right block...profit is more like 100k

 

is there are need to renovate the house to blend in the new? i know Perth needs, not sure about VIC

is there a need to sell old house, though you have the option to to sell now, keep for 1-2 years, or keep forever.

if not renovating and selling, could save you 35k.

is there a need to strata title/subdivision (not sure of VIC requirement), as you could potentially leave in one title to reduce out going expenses....title when you ready to sell, assuming you don't need to go aggressive with bank releasing equity as valuation could be a concern.

the land plot/property you chose, is there room for a duplex or 2 standalone new dwelling instead of 1 new dwelling? chose bigger land or RGZ?

if Melbourne tide lifts Geelong, you have 2 titled dwelling, possible 3 ...so bigger your bet? lol

it's lot of work yes, but better than boring H&L lol

 

Once you've dealt with councils, multiple planners with differing opinions, surveyors, civil engineers, development resistant neighbors, VCAT tribunals, plan substitutions, unexpected site costs etc.... And for similar development levels of profit to H&L.... I'd take the 'boring' way any day.

 

oh bro i agree, I'm just trying to justify my purchase and rectify it in my head lol.
just need to hope norlane goes up now, seeing its similar distance to Pakenham from melbourne but also close to a beach and geelong city, lets hope it keeps going up and up.

and guys when you do the geelong dinner meetup, id be keen to come along and say hi, feel like i know alot of you already from all the posts I've read

 

I've never done developments clearly but surely it isnt that much of a hassle is it?

 

Some councils are harder than others, but every dev is unique and unexpected circumstances do happen. Cost blowouts are ridiculous when the unforeseen occurs and you have to engage advocates, traffic engineers, arborist's etc

For the risk vs reward, H&L has definitely been a safer bet in Melb at the current market.

 

Has anyone looked into 88 Fairbairn Drive , Corio?

88 Fairbairn Drive Corio Vic 3214 - House for Sale #126123614 - realestate.com.au

Any thoughts? Looks like its been on market for a while now.

 

Thanks Sash. As a keen follower of the Geelong market, I must admit I've had a bit of FOMO in regards to Norlane. But this post reminds me exactly why I went down the H&L path a few years ago.
That's not to say there's not money to be made in Norlane, although the people that bought there 2 or 3 years ago will be the ones making most of it. But sub dividing blocks out there isn't for me.

 

The other thing people are not considering is that most locals won't live there....if they could help it....there are other areas which are much better.

 

+1 to the geelong dinner meetup, I'll do my best to make time GTown!

I think that house falls in an area within Corio that is considered very rough, and has a noticeably active housing commission that has drawn comparisons to Solar Drive in Whittington. Not great for investing.

 

@Melmac the words were taken right out of my mouth! Corio is a huge suburb, and that particular pocket has a rough reputation. Almost all Corio's active housing commission area is located over there in that pocket.

Edit: I shouldn't generalise, I've met the family that lives next door to that property, and they seem nice enough.

 

mate that fomo is real, every week id be putting in offers or getting outbid, you start to feel like you're going to miss out and before you know it you're offering more than what you planned with something that you weren't originally going for. what do you guys think this will go foe? I'm guessing/hoping about 390k
17 Brooks Street Norlane Vic 3214 17 Brooks Street Norlane Vic 3214 - House for Sale #126385498 - realestate.com.au