Subdivision. Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006 Owned 3...
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Transcript of Subdivision. Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006 Owned 3...
SIMON HAMMERREAL DEAL
Subdivision
Who Am I?
Past Experience
Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006
Owned 3 properties Value $1.1M+ Debt $900K
Sell up – pay down debt A dozen property transactions Typical Novice Investor
The Deal March 2011
809m2 block in Wynnum 1 Lot Zoned Residential (LR) Demolition Control Precinct (DCP) 3 bed Lowset Fibro House Shed & Pool (above ground) Gentle slope to rear ( < 1m ) Desperate Seller No Tenants
How did I find the deal?
Realestate.com.au Previously on market Motivated seller Asking $439,000 (originally $459K)
Offered $420,000 Sight unseen Cash Offer Due Diligence period
Strategy
Obtain Subdivision Approval (DA) Rent to reduce holding costs On-sell:
1. With approvals or2. As individual blocks of land
Contingency Plan1. Re-sell as is2. Build
Due Diligence
CAN I SUBDIVIDE ? Contact Town Planner Online
pdonline.brisbane.qld.gov.au 1100.com.au (dial before you dig)
Aerial Photos Neighbourhood meet & greet
PD Online - Contours
PD Online - Zoning
PD Online - Overlays
1946 Aerial Photo
Dial Before You Dig 1100.com.au
Due Diligence
DO THE FIGURES WORK ? Purchase & Holding Costs Subdivision Costs Rent income End Sale Price Exit Strategies Worse case scenario Inspection
Due Diligence - Findings House only partly on stumps Sewer access from rear neighbours DCP = Impact Assessable Estimated 6 month turn-around on DA
Renegotiated Purchase Price
Purchase price $401,000 Unconditional immediately
Let’s get to the numbers
How much does a subdivision cost? BCC – around $3K
Get an estimate from a town planner Typically $70K - $80K
Subdivision Costs – Stage 1
APPLICATION COSTS• Site plan, contours from BCC records (not including contours for hydraulic assessment) $880.00
• Preparation of subdivision application (Impact), $3,300.00
• Hydraulic Assessment including sewer assessment (if necessary) $3,500.00
• Public Notification (Impact), $1,100.00
• Brisbane City Council subdivision application fee. $2,980.00
Sub Total $11,760.00
Subdivision Costs – Stage 2
CONSTRUCTION COSTS
• Sewerage Extension & Connection (design & construct) $8,000.00
• Water Connection (partially under road) $3,500.00
• Stormwater (assumes stormwater tank & soakage pit) $0
• Telstra $0
• Electrical Engineer (assume overhead & 3-phase power) $660.00
• Subdivision survey and plan preparation $3,080.00• Post approval – correspondence and application to Brisbane Water, Electrical Engineer, Telstra, plan sealing, etc., $2,200.00
• Legal, title fees, easements and solicitor. $1,000.00
Sub Total $18,440.00
Subdivision Costs – Stage 3
COUNCIL CONTRIBUTIONS
• Plan sealing fee $400.00
• Compliance fee $1,470.00
• Sewer Headworks (approximate) $14,518.98
• Water Headworks (approximate) $10,487.61
• Transport Infrastructure Contribution (approximate) * $7,673.40
• Waterway Infrastructure Contribution (approximate) * $1,000.00
• Community Infrastructure (approximate) * $4,479.30
Sub Total $40,029.29
less 35% Subsidy $4,603.45TOTAL $35,425.84
Subdivision Costs Summary
Application Costs $11,760.00
Construction Costs $18,440.00
Council Contributions $35,425.84
TOTAL SUBDIVISION COSTS $65,625.85
FeasibilitySCENARIO 1 ( 12 Months)Purchase Price $401,000.00
Closing $16,040.00 4%
Subdivision $75,000.00
Extend Sewer $10,000.00
House Demolition $15,000.00
Interest $34,090.50 7.5%
Rates $2,000.00
$553,130.50
Sale $600,000.00 $300,000.00
Commission $18,000.00 3%
Nett Sale Amt $582,000.00
Rent $0.00 $0.00
Profit $28,869.50
SCENARIO 2 ( 6 Months)Purchase Price $401,000.00
Closing $16,040.00 4%
Subdivision $65,625.85
Extend Sewer $0.00included in sub
House Demolition $15,000.00
Interest $16,869.48 7.5%
Rates $2,000.00
$516,535.33
Sale $610,000.00 $305,000.00
Commission $18,300.00 3%
Nett Sale Amt $591,700.00
Rent $9,360.00 $360.00
Profit $84,524.67
You make your money when you buy?
Your buy price is your insurance policy
The money is in the management
We Got Lucky
Council Capped Contributions Estimated Contributions were $35,425 Actual Contributions $28,000
Saving approx. $7,400
We Got un-Lucky
Market dropped Estimated land sale $300K - $305K Market Value $260K - $280K
Effect on profit $60K
Current NumbersEXPENSES INCURRED
Purchase Price $401,000.00
Closing $14,700.00
Subdivision (1) $10,046.36
Interest $14,525.00 7%
Rates $1,500.00
TO COMPLETE SUBD
Subdivision (2 & 3) $46,440.00
House Demolition $15,000.00
INCOME
Rent $8,175.00 $395 / wk
TOTAL COST $495,000.00
TOTAL COST $495,000
ESTIMATED VALUE $540,000 $270K / lot
COMMISSION $16,200 3%
NET PROFIT $28,000
So what now? Primary / Secondary Dwelling? Dual Key
2 bed up 3 bed down
Dual Key Numbers
BUILD COSTS
Land Cost $250,000
Build Cost $280,000
Interest $12,000
Misc. $8,000
Total Cost $550,000
EQUITY
Estimated Value $600,000
Total Cost $550,000
Equity $50,000 X 2
Dual Key Numbers (ctd)
Rent return = $750 / week $410 for 3 bed $340 for 2 bed
Yield On cost ($550K) = 7.09% On Valuation ($600K) = 6.50%
Depreciation
= POSITIVE CASHFLOW
Simon’s Tips
Be an area specialist Network If you don’t know….ask Buyers don’t have to buy but sellers may
have to sell Have an exit strategy Are you comfortable with the worst case
scenario?
Questions
Thank You