The Beginning Referred by a client who lived across street, had been trying to sell by herself on Gumtree for 12mths Approached owner directly but was told she had promised to another buyer. Received a call from owner about 2 mths later offering the property to me for $385k. Immediately organized “Heads of Agreement” & had signed by owner. Found out she had already signed a contract for a house on Russell Is. So designed the contract to suit. 55 days Due Diligence and 90 day Settlement.
Cash Out Cash In Purchase Price $385k Purchase Costs $19k Finance Costs $5k Demo Costs $15k Subdivision Costs $70k Hold Costs $20k Expenses - $514k Sale Price $570k Minus No Commission Legals $2k Sales Proceeds- $568k Budgeted Numbers Expected Profit $54k (Nothing to write home about but good buffer profit)
Good Points About The Site Flat regular Shape site yield 2 of 10x40m lots Sewer line in good position for connection at rear of site Precedence set in the area 2 x neighbouring sites Water in the street but across the road Lot next door came up For Sale at $298k in DD period & Sold for $292k in 2days.
Issues To Solve There was an issue with New Flood Map showing flooding coming into rear corner of site even though the Floodwise Report was clear. Site was on Contaminated Land Register which we never found out until DA was to be approved. Needed to have testing and remove from Register. Finance issues- SMSF & short term made it expensive to get in & out. Ended up sourcing Private Funding. Structure with SMSF limited exit strategies
Challenge #1 Didn’t know about CLR issue until after settlement. Actually an issue of disclosure by seller but how do you go back to a 76 Y.O. pensioner and ask them for compensation. Lesson: Make sure you do all the necessary searches in DD period yourself.
Subdivision began before settlement Owner Gave Consent for DA during Contract Period…(In Contract) Site surveyed Application to council submitted Public Notification Started Advertising End Product
Challenge #2 New Flood map shows flood encroachment on land!
Changed Engineers Original Engineers still insisted on having a Hydraulic study done. Spoke to another Engineering Consultant and sent through Contour Survey and Floodwise reports and they were happy to sign off on the engineering report for the application. Found another Engineering Consultant.
Removal & Demolition Of Existing House Demolition Firm reduced the Price of Demo by $4,000 if they could sell & remove the house. They also took care of the Council Application & Disconnection of services.
Meeting Council Conditions 2 crossovers existed Connection of sewer and water (QUU) 1 New roofwater kerb point installed Compliance certificates New fencing with new buildings.
End Result Sold the right hand lot for $290k Left hand lot under Contract for $295k Both Sold as House & Land by myself so no commissions on sale of land.
Cash Out Cash In Purchase Price $385k Purchase Costs $14k Finance Costs $12k Subdivision Costs $78k Hold Costs $20k Expenses $509k Sale Price $585k Minus Gst $14k Legals $2k Net Sales Proceeds $569k Actual Numbers Expected Profit $60k
Summary of Actual Numbers Came in under budget on costs by $3k Projected sale price of $570k and got $585k CLR cost us $10k & 6 weeks GST wasn’t accounted for in original budget($14k) Cash on Cash Return was 40% ($152k of our own money / total costs) Good to take profit & capital to reinvest You make your money when you BUY not when you sell!
Challenge #3 By being too hands on I missed the boat: Got too tied up between work and controlling site issues and I missed other opportunities presented to me that I didn’t act on quickly enough. Lesson: Leverage. Use your team and keep looking for the next deal
Tips For Subdivision Conservative Numbers Under Sell & Over deliver! Make sure you do all searches early on in the DD Period. Have a List of what is necessary. Leverage From Your Team (town planner etc) Act Quickly Continually assess the project with multiple exit strategies. Watch the Market closely.
RUSSEL GRAY RUSSEL@OJPIPPIN.COM.AU 0408 017 357 Thank You
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