Unit vs House PPOR for a builder?

Discussion in 'What to buy' started by Maximus, 4th Aug, 2019.

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  1. Maximus

    Maximus Well-Known Member

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    Hello everyone,

    Facts:
    1. $130k deposit (potential for $150-160k by end of year)
    2. $45k yearly wage approx. (currently seeking other employment to improve borrowing capacity)
    3. I am a licensed builder (2 years tafe, 4 years university studying Construction project management)
    4. Budget 650k (no pre-approval as yet)
    5. First home buyer

    Situation:
    At 29 years old living with certain family members has become untenable, i have been saving for years as i knew i would have to leave ASAP.

    I am currently looking for my first property as a PPOR and am in the dilemma of do i want a unit in a better area where i would enjoy living or purchase a house in western Sydney which i could develop in the future.

    I am looking at units in older small blocks 6-12 units around the Rockdale,Kograh area 500-550k range.
    In terms of western Sydney i am looking just south of Liverpool in Casula ( i have worked in the area and its quite nice but far from where i want to be) with houses coming up around the 650k range with blocks around 600sqm, large frontage for future development.
    I am open to other areas but a train line in close proximity is non-negotiable (2-3km max distance)

    Other people on this forum have stated that since it will be your PPOR you should select somewhere you want to live.

    Im pretty sure i already know the answer but which is a better option?
    Keeping in mind i could easily/cheaply add a second dwelling to the land (for myself) and rent out the main residence for cash flow.
    So my options are a 2-3 Bedroom unit in an area within 5km of the beach or a brick house out west with development and cash flow potential.

    Thanks all for your input
     
  2. Trainee

    Trainee Well-Known Member

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    You want to check your borrowing limit first. Borrowing 500k your repayments will be assessed at 30k a year which is your entire pay.

    Use your strengths. Get something with problems that you know how to fix.
     
  3. Maximus

    Maximus Well-Known Member

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    Sorry 45K per year is clear in the bank, my earning potential is actually much higher but certain family circumstances have held me back from finding other employment.
    That deterrent no longer exists so hopefully i will be in a much better paying role within the next few months.
     
  4. Marg4000

    Marg4000 Well-Known Member

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    Your first home does not have to be your ideal home.

    As a builder, you are in the fairly unusual position of being able to renovate, or add a secondary dwelling, comparatively cheaply.

    As such, I would suggest a house, sound but run down, on a good block of land with room for a decent granny flat. Focus on position and adding value.

    Live there for 4-5 years while renovating the house and building the secondary dwelling, probably the extra dwelling should come first for extra income.

    You are then in a good position to reconsider your options.
    Marg
     
  5. Joynz

    Joynz Well-Known Member

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    Being a licensed isn’t necessarily the same as being a carpenter.

    Maximus - do you have carpentry etc skills? Or would you need to hire others to do any renovation?

    Also, is your building qualification DBL or DBU?
     
  6. Maximus

    Maximus Well-Known Member

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    I can build a residence from start to finish with no external labour input if necessary. I have practical skills and experience in most aspects of residential and civil construction.
    The only exception to the above is electrical work, as it happens a really good mate is an electrician and i know several plumbers.

    In regards to DBL or DBU i had to look that up and it only applies in Victoria.
    I am a fully license builder in NSW and that i am aware of there are no restrictions placed on my license, that is apart from electrical and plumbing works which require different license class's.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Go for a decent paying contracts admin role or similar (double your current net), that'll improve your borrowing capacity and make life easier.
     
  8. Maximus

    Maximus Well-Known Member

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    I have been predominantly site based but thats what im looking to move into now, a bit difficult without having the relevant experience.
     
  9. Engineering

    Engineering Member

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    If you can renovate, and you have the tools. I don't see why not get a place that you can renovate while you live in it. I'm taking it that you do not have a family (as in kids).
    I have personally done it myself, fix up where I live, and its a value add for sure. That way, once the reno work is done, you enjoy for as long as you live, or flip it and actually get your experience in the field.
    Its great that you are a builder, your current PPOR can be also near to mid term strategic move. If you want to grow as a builder, it implies there needs to be a starting point.

    Look at suburb price disparity for lowest a run down property sells for and the average such property sells for renovated, and try to keep in mind what it would cost.

    Buy, fix, sell - rinse - repeat.
     
  10. Maximus

    Maximus Well-Known Member

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    Hey,

    I totally agree with all the advice, the unit purchase idea has been taken off the table.

    I am actually only interested in a property that requires renovation, it really is an easy way to add value when you know what you are doing. Also can potentially build a duplex on the site STCA.

    Im currently looking in Glenfield (direct line to central) and Liverpool (surrounds), i have added Glenfield due to the potential rezoning of land in proximity to the station (highly speculative on my part).
    My parents PPOR is 600 metres from Belmore station which was to be rezoned but has now been cancelled, although the house next door and on has an 18m height allowance.

    I dont place much trust in the potential rezoning aspect but Glenfield is cheaper than Liverpool and surrounds.

    Will seriously start considering a purchase around December as i should have all my unkowns addressed and a more clear understanding of my limitations.

    Cheers,
    Mus
     
  11. Engineering

    Engineering Member

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    Man you've got balls.
    The first project you wanna dive into the deep end.. But if you can pull it off, mate that would be the moment you are off the runway and only a matter of time before you pierce through the clouds. No discouragements here, if you are sure you can make the numbers work, go for it.
    I've done a number of duplexes, incredible quantity of paperworks, much more than a single house, and in an absolute different league to reno jobs. I like reno projects, as I can make a 20m2 deck, just like that, and it looks great, feels great, because that is a reasonable sized deck. Did I say anything about the council, no, lets not mention.
    Anything knock down and rebuild will have a certifier on your back till final OC. Thats not a problem, per se, its the costs. If you qualify for such finance, why not.
     
  12. Maximus

    Maximus Well-Known Member

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    Hey,
    The duplex idea is 10 years in the future once ive paid off a large portion of the mortgage, the market doesnt really support such a development at this time.

    I like renovations as well but the fact is every know and again you will get a client that is very happy with your work but will refuse to pay, they know you essentially have no recourse when the work is done without council approval or a contract.

    In terms of certification i agree its a huge cost, but there are a few good compliant certifiers out there who make the job run pretty smoothly without sacrificing quality.

    The council will attempt to draw blood from a stone.
    Our current council has dumped over 500 units within 50 metres of our current place in the past few years, our area was deemed a "conservation area" when we spent a year trying to get approval for a single dwelling back in 2012-2013.
    All of the extra reports required to show the single dwelling was "in keeping with the area" cost more than a new car.
     
  13. Engineering

    Engineering Member

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    I have renovated the crap out of a property in the past. Nice big deck, a bit of extension, new waterproofing and so forth. It was a complete gut job. Stripped it down to bones and done it up from there on.
    Council didn't have to know what we are doing. What ever you do inside the house is up to you council will not care much about it.
    So when the deck was a bit larger, the rear wall went further back by a few meters, no one cared.

    The property sold fine.

    I can relate to what you are saying about clients not wanting to pay. But this is not a concern when we are selling the entire house as it stands.

    Plus, if the market conditions are right, you can put it on the market as an auction, that way if it sells before the auction, it will sell under auction conditions. The property sold in its current state and condition. The buyers have no recourse for claiming warranty off you.

    Mind you, I DO NOT ADVOCATE SHODDY WORKMANSHIP. Renovate, but do a job that will last the expected duration, don't compromise on integrity. Nor do I advocate breaking council rules, as that will catch up to you if you repeat many times.

    The point I am trying to make is that you have more flexibility with renovation, and there are ways to save money.

    10 years down the track you do a duplex, mate that is a given, you've got to have goals. Do apartment blocks, town houses, these are all good for making a humble living if I may say so mildly. Doing a quality job in these knockdown and rebuild projects is where you will make a name for yourself. I know a number of local builders who went up in this manner. And when the market was hot in 2017 they raked it in.