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Subdivision. Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006 Owned 3 properties Value $1.1M+ Debt $900K Sell up – pay down debt.

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Presentation on theme: "Subdivision. Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006 Owned 3 properties Value $1.1M+ Debt $900K Sell up – pay down debt."— Presentation transcript:

1 Subdivision

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3 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

4 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

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8 Realestate.com.au Previously on market Motivated seller Asking $439,000 (originally $459K) Offered $420,000 Sight unseen Cash Offer Due Diligence period

9 Obtain Subdivision Approval (DA) Rent to reduce holding costs On-sell: 1. With approvals or 2. As individual blocks of land Contingency Plan 1. Re-sell as is 2. Build

10 CAN I SUBDIVIDE ? Contact Town Planner Online pdonline.brisbane.qld.gov.au 1100.com.au (dial before you dig) Aerial Photos Neighbourhood meet & greet

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16 DO THE FIGURES WORK ? Purchase & Holding Costs Subdivision Costs Rent income End Sale Price Exit Strategies Worse case scenario Inspection

17 House only partly on stumps Sewer access from rear neighbours DCP = Impact Assessable Estimated 6 month turn-around on DA

18 Purchase price $401,000 Unconditional immediately

19 How much does a subdivision cost? BCC – around $3K Get an estimate from a town planner Typically $70K - $80K

20 APPLICATION COSTS Site plan, contours from BCC records (not including contours for hydraulic assessment)$ Preparation of subdivision application (Impact),$3, Hydraulic Assessment including sewer assessment (if necessary)$3, Public Notification (Impact),$1, Brisbane City Council subdivision application fee.$2, Sub Total$11,760.00

21 CONSTRUCTION COSTS Sewerage Extension & Connection (design & construct)$8, Water Connection (partially under road)$3, Stormwater (assumes stormwater tank & soakage pit)$0 Telstra$0 Electrical Engineer (assume overhead & 3-phase power)$ Subdivision survey and plan preparation$3, Post approval – correspondence and application to Brisbane Water, Electrical Engineer, Telstra, plan sealing, etc.,$2, Legal, title fees, easements and solicitor.$1, Sub Total$18,440.00

22 COUNCIL CONTRIBUTIONS Plan sealing fee$ Compliance fee$1, Sewer Headworks (approximate)$14, Water Headworks (approximate)$10, Transport Infrastructure Contribution (approximate) *$7, Waterway Infrastructure Contribution (approximate) *$1, Community Infrastructure (approximate) *$4, Sub Total$40, less 35% Subsidy$4, TOTAL $35,425.84

23 Application Costs$11, Construction Costs$18, Council Contributions$35, TOTAL SUBDIVISION COSTS $65,625.85

24 SCENARIO 1 ( 12 Months) Purchase Price$401, Closing$16, % Subdivision$75, Extend Sewer$10, House Demolition$15, Interest$34, % Rates$2, $553, Sale$600,000.00$300, Commission$18, % Nett Sale Amt$582, Rent$0.00 Profit$28, SCENARIO 2 ( 6 Months) Purchase Price$401, Closing$16, % Subdivision$65, Extend Sewer$0.00included in sub House Demolition$15, Interest$16, % Rates$2, $516, Sale$610,000.00$305, Commission$18, % Nett Sale Amt$591, Rent$9,360.00$ Profit$84,524.67

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26 Council Capped Contributions Estimated Contributions were $35,425 Actual Contributions $28,000 Saving approx. $7,400

27 Market dropped Estimated land sale $300K - $305K Market Value $260K - $280K Effect on profit $60K

28 EXPENSES INCURRED Purchase Price$401, Closing$14, Subdivision (1)$10, Interest$14, % Rates$1, TO COMPLETE SUBD Subdivision (2 & 3)$46, House Demolition$15, INCOME Rent$8,175.00$395 / wk TOTAL COST$495, TOTAL COST$495,000 ESTIMATED VALUE$540,000$270K / lot COMMISSION$16,200 3% NET PROFIT$28,000

29 Primary / Secondary Dwelling? Dual Key 2 bed up 3 bed down

30 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

31 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

32 Be an area specialist Network If you dont know….ask Buyers dont have to buy but sellers may have to sell Have an exit strategy Are you comfortable with the worst case scenario?

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