What would you do if you had.....

Discussion in 'Investment Strategy' started by Hodgo, 1st Jun, 2016.

Join Australia's most dynamic and respected property investment community
Tags:
  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    Something doesn't seem right here. You have done a development but appear to have made no money - is this the case?
     
    Phantom likes this.
  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    it really sounds like you can't move forward anyway - limited servicing, limited actual affordability, and some of the cash you have will need to go into your parents house, stsmps etc. Maybe buy them a house, subdivide it and sell the new block to reduce the loan?
     
    Terry_w likes this.
  3. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    2,293
    Location:
    Middle Earth
    Look for a retain and build. Parents get the front house, you build at the back. Sell/Rent. After a while renovate the front house to your parents liking.

    May I ask, where in Perth are you looking to buy a place for your parents?
     
  4. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    No not the case, we made around $160K after initial deposit was put in. The units are worth around $1,370K (valued by the bank).

    We had loan of $1,047K, we just increased the loan to 90% ($1,233K) to get the $160K out so we could do the next project.
     
  5. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Yeah these are the kind of options I'm looking for, thanks Jess.

    If the loan was higher than the price I'd get for selling the block would I have to pay tax or would it still be considered a loss, hence no tax to be paid?
     
  6. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Rockingham area, we live in Baldivis, they want to be close to the kids and close to amenities and entertainment, so Rockingham foreshore area, such as around Kent street, Harris Street, Jupiter Bend etc. Maybe Anchorage Estate.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    That is a very tight profit margin.
     
  8. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    2,293
    Location:
    Middle Earth
    Will be difficult to find a decent dev site in Rockingham. A bit further south maybe? There can be quite a bit of entertainment in Mandurah foreshore and potentially pick-up a dev site for cheap money. The numbers won't stack up in the current market but it'll be a long hold for your parents.
     
  9. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    In this market in Perth making $160K is pretty good I recon.
     
  10. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Has to be Rockingham mate. Mandurah is out of the equation.
     
  11. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    What about buy anywhere in Australia, subdivide and sell all blocks, including existing house if it can be retained?

    Anyone made decent money doing this?
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    its good but a blow in costs or a delay could wipe out any profit so you should aim for a 20% margin on doing a development to factor in these sorts of things.

    if you have done one you would probably have learned a thing or 2 so the next one should be better.
     
  13. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    I suppose I'd really like a way to increase our wealth so we can afford to pay the repayments on my parents new place. That's either lump sums of cash or positive cashflow from property.
     
  14. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    Hi Dave
    Just a quick one about developing, if its in the Perth market today be very wary, now is not the time to develop in this market as it is falling. I know there are some who are doing this, but personally unless you are making at least 20% on completion don't go there. Valuations are just that, and usually are conservative, if you need or plan to sell then there is another layer of risk.

    I have yet to see figures today in the Perth market that make any sense, risk vs reward... zip.
    I know I am calling a spade a shovel.

    MTR
     
  15. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Yeah this is a concern of mine too. I'd be happy to look at subdivision across east if that's the way to go. I'm just not familiar with that market. I'd be happy to pay an agent though if it was the right way to go.
     
  16. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    If this is your first development I would not recommend East, also markets are close to peak here, unless you purchased your land 12 months ago it may be hard to make the numbers work as land in Melb where I develop has increased significantly.

    Also I would tend to play in your own backyard if its your first deve. There will come a time the Perth market may make sense. The alternative is to land bank, but of course this requires holding costs.

    Still keep research and looking at potential development sites as you may end up purchasing a bargain but unless it makes sense don't buy.
     
  17. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Second Dev MTR but this isn't my full time job, I simply don't have the knowledge making it risky in any market. I'd be looking for a buyers agent and have one in mind already. I'd just like to see what options I have first and where those options exist :)
     
  18. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    I am onto my 5th project, Melb and Perth. I still consider myself a novice. Only way to learn is to get your hands dirty, however the easier way to lose money is developing when markets are turning.

    I wont do this as I don't want to lose what I have made, protecting assets - just as important IMO.
     
  19. Hodgo

    Hodgo Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    218
    Location:
    Baldivis, WA
    Anything out of the box I should look at?