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What are options if cannot do subdivision in Brisbane?

Discussion in 'Development' started by melbourne171, 10th Sep, 2016.

  1. melbourne171

    melbourne171 Well-Known Member

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    I got an offer accepted today with 21 days due diligence. The house is within 5km from CBD.

    Basically, the house sits on 800+sqm, LDR, overland flow flood (85%), termite damages. Initially, I am planning to split 1 lot into 2 lots of 400+sqm. However, private town planner told me that this is impossible as it requires 300m2 of new lots above 50 years floor water level. The way to fix this is to raise the land by soil excavation and add bigger storm water to avoid overflow running into neighbor houses. It is costly.

    If subdivision is impossible, there are another two backup options:

    1. Fix structural damages and renovation.
    2. Buy a new modern house on existing lot. Do not know if this can make any profit?

    Do you think any other options?
     
  2. Agent30yrs.

    Agent30yrs. Well-Known Member

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    What did you pay for it ?
     
  3. Agent30yrs.

    Agent30yrs. Well-Known Member

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    and is it demolition control ?
     
  4. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Option 1 to subdivide and build 2 lots: Seek advice from another TP to make sure the advice is accurate. I have gotten advice in the past and if I listened to the first TP, I would have terminated the deal and lost more than 500k profit. Lucky I consulted more than 1. Not saying your TP is wrong, I would just check with more than 1.

    If indeed there is extra costing then get some prices and factor that into a price reduction request before the DD is up. Present it in a logical and factual way to the vendors. It devalues the site and the owners need to accept this and reduce value accordingly, otherwise its deal over.

    Option 2 to fix and renovate: Again seek reduction in price with quotes from builders backing up your position. You also need to do DD on what newly renovated homes in that area on similar size land sells for. Work out approx. build costs for the demographic. Also need to factor in the overland flow stigma into the feasibility as it will likely affect sale price. Then see what the numbers are like

    Option 3 to Build new home. Same as option 2. Ask for price reduction, do DD on what new homes selling for on similar size lots and work out approx. construction costs. Then look at all the numbers to see if any of the options stack up and if so, at what price do you need to secure the land at to make it worth it.

    Option 4 to subdivide and sell lots: Subdivide and sell lots. Same DD as other points just without the construction costs.
     
  5. melbourne171

    melbourne171 Well-Known Member

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    It is not in demolition control. I pay the similar and less price as the house with 400sqm land size lot on the same road and nearby.

    My questions are any other options?
     
  6. melbourne171

    melbourne171 Well-Known Member

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    Thanks Leo.

    I have checked two town planners: one said impossibility. another said it is dependent on survey plan and flood/hydraulic reports costing $5000-$6000 and taking 3-4 weeks to complete the reports. Should I spend $6K on the hydraulic reports now and ask for due diligence extension?

    I will quickly get the quote for repairing and renovation and also check the project builder for new house price.

    Before submitting offer, I have also negotiate for price dropped $40K. I am not quite sure if I can negotiate further price drop based on subdivision problems.
     
  7. melbourne171

    melbourne171 Well-Known Member

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    Can I ask which companies are popular project builders in Brisbane?
    What is the building cost for high-end product and large house i.e. 30-40 squares?
     
  8. Leo2413

    Leo2413 Well-Known Member Premium Member

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    That's really a business decision and only you can know what's the right call for you. If it were me in the same situation, I would look at the overall strengths of the deal first, mainly the location of the site. If its really in a good location, possibly any city views when building or some other X factor, then I would pursue it but minimise the risk.

    I would go back to the agent/vendors and let them know of the issues 2 TP have presented to me and therefore I need additional time for the DD, as any other developer really would. I would let them know I am happy to absorb the extra costings in the mean time. Then later on after you get your reports, you can work out if a price reduction is needed. So all in all you may end up losing 10k from the deal. Its a business call.
     
  9. Leo2413

    Leo2413 Well-Known Member Premium Member

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    I know the stock you need to build and I very much doubt project builders will touch it, especially if its not a straight forward build. I would estimate your build cost for 2 higher end homes will be 950k to 1,050,000.
     
  10. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Before going unconditional, you have to secure the land at whatever price makes it feasible regardless of how much a reduction you need. Make sure you're quite certain the numbers work before you go unconditional, otherwise its next deal.
     
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  11. melbourne171

    melbourne171 Well-Known Member

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    Hi Leo

    I asked building cost as I just thought about worst scenario, going with option 3: Build a new home with project builder for low cost.

    Basically, the house is on a busy road (not city view). I have not inspected the IP yet. I will fly over Brisbane to have a private inspection. Agent told me that I have 21 days for due diligence.
     
  12. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Building a low cost home in that area will likely yield an end stock that the demographic won't want. You really need to do thorough DD on what type of stock you need to build. Also need to factor in the busy road as it will affect end value. I don't know much about this deal but it sounds like you're going to need the land at a really good price to make it even remotely feasible.
     
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  13. melbourne171

    melbourne171 Well-Known Member

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    Hi Leo
    The suburb is next to the suburb you are purchasing in your recent thread. Searching the RE.com.au, I have found that most high-end houses have been sold for more than $1m though it stays on small land lot (400m2) whereas old houses on large lots did not achieve such prices. This is incredulous in Brisbane. People care more the luxurious houses not the land size (!?) Why??? In Sydney and Melbourne, land value is much more important.
     
  14. Agent30yrs.

    Agent30yrs. Well-Known Member

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  15. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Don't worry about the why mate, just cater to the demand ;)
     
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  16. melbourne171

    melbourne171 Well-Known Member

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    I have engaged a hydraulic engineer for the/flood assessment report. The report will be completed close to the due diligence date. I may ask for price reduction if the report says the it is unlike to subdivide this property.

    To negotiate the price, should I write an email to real estate agent to explain the reasons for price reduction or I have to ask my solicitor to forward my letter to the seller solicitor?

    As there is only 7 days between the contract unconditional date and the settlement date, do you think there is enough time o proceed settlement on time? Should I ask solicitor to extend the settlement date now or later?
     
  17. Yujin

    Yujin Member

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    Once you get your report have a look and see what it says. If you need to negotiate I would call the agent first to discuss and let him/her know the details of the report and that you would like to renegotiate the price due to XYZ and see what they say. If the agent is agreeable he can start to talk to the vendor and explain the situation which will be much nicer than getting the news from the solicitor. After the phone call send the agent an email with everything you discussed on the phone and also let them know you will send an email to your solicitor.

    When the solicitors deal with it they may write the request in harsh lawyer-speak and may reduce your chances of getting a reduction especially if the situation is not fully explained and it sounds like you're just trying to knock them down.

    Are you using bank finance for this purchase? 7 days is really tight and you will most likely need an extension, in your phone call with the agent I would also mention that you think you'll most likely need more time to settle. He/she can also start to inform the vendor, you're really at the mercy of the seller just hope they're having a good day...
     
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  18. LeonW

    LeonW Active Member

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    ^^^^
    What @Leo2413 said. I've gotten 3 different answers from 3 different town planners (one being the council planners), and until I held there feet to the fire they were adamant they were correct. Turns out my usual guy was spot on, which was fine as the other guys were telling me I could do something that would've been a terrible battle to get approved.
    Always worth double checking. Most private town planners will give you one free phone call and simple assessment of a site (just don't waste their time repeatedly)
     
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  19. Azazel

    Azazel Well-Known Member

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    Boy, has anyone seen @Leo2413 and @LeonW in the same room together? ;)
    Very fortunate to have such experienced people to give advice.
     
  20. Observer

    Observer Well-Known Member

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    Hi Leo. If it was a more straightforward build would you consider using a project builder or still go with a custom design?

    For my first development I was considering using a project builder if other conditions permit.