What risks to consider in H&L?

Right, now I understand. Yes you are right, sales tactic, those bustards..

 

One other observation is the soft rental in a new H&L estate, especially when you get in the first stage where infrastructure and shopping centre is not existent until the 5th stage of land release. The vacancy rate is generally higher than established.

 

There are no hard and fast rules to land devs. Some are so large that capital growth is slow and difficult and established houses must compete with new builds for years if a sale occurs. Others are well done and are large and attract buyers. Infrastructure, transport etc will slowly build and add to value but further land releases will hamper this slightly. Family demand will guide growth so look for schools, medical, shops etc.

A well planned estate like Springfield (Lend Lease) in outer Brisbane is a great example. Compared to other SE QLD small estate devs. Springfield is now a massive community with two rail stations, buses, community facilities and a uni, hospital and now all the takeaway food places are being built. You know its a "built" suburb when it has a cop shop, maccas and KFC. What has been built was planned from day one. Small lot devs from private developers wont have that.

Short term capital growth in H&L devs shouldnt be a driver for purchase. You will end up selling against brand new houses.

 

There is a lot of input from people who are not doing H+L land.

Here are some of the key tips:

1. Buy in Stage 1 or 2...or earlier stages as @MTR says....

2. House and Land does go up....don't listen to the nuffies who say otherwise. Some of them have no idea. Mine have all gone up about 100k plus.

3. Build quality to price is very important

4. Do not buy a H+L off the big name builders you will kill your profits.

I does require some skill...espcially on now to optimise value on your block.

 

Buy in early stages,
Use a smaller builder
Have 'skills'

Sounds legit.

But then I'm not doing H&L.

These equity gains, is that from sale or refinance valuations? What sort of timeframes from initial deposit to equity gain?

To beat the wider market in Sydney and Melbourne it'd have to be above 10-15%pa yeah?

 

In all honesty, I wouldn't hand over a deposit for land unless I was making a minimum 10% on the completed product at current market prices. 15% is better.

Factor in the Melb boom and end values are up 30% on cost easily based on comparable sales.

Waiting on a refinance for an Officer H&L, I should be able to pull out my entire deposit and still be around 80% LVR. Be interesting to see what price the bank puts on it.