Worth building to sell???

D

dheath

Hi all,

I was just wondering if it is any longer worthwhile buying a block of land to
build on to sell (spec home I guess)?

Is there still a profit margin after all costs? Do people still pay a premium to buy a new home as opposed to the hassles of building?

I did this in 2003 and cleared over 100k on a nice home in a nice estate, moved into it so no GCT (Sunny Coast). However I have been a buy/holder for a few years, so out of touch.

Anyone current on this approach in QLD?

Regards.
Duane.
 
Hi

We have 4 new houses being built at the moment, one is almost done (the light bulbs are in). The others are having their slabs build in the next week.

We are planning on doing more, I think currently it will be hard to clear $100k just because of the cost of land at the moment.

Although there si definatley some money to be made, my approach to it is that if you can build in an area were you can easily sell your house, and are able to turn them over quickly 2-3 a year then you can make a good profit, say $50k a block.

I think people do want new homes with out the hassell of building, due to a number of factors such as costs of repayments and rent during construction and a lot of the other difficulties that come with building.
 
This must be very dependent on locality. The only house I've built I could never have sold at a profit till general rises put it in the black after a few years. It never was a "project" home though, but it was CF +ve so OK. I doubt I was ripped off on the price either, in fact I think my builder did poorly on the deal too.

I am not a keen student of house prices but it seems near new houses usually sell below replacement cost. I'm not suggesting sellers (the retail buyers) take a loss, new prices are rising too fast for that. But if it is just general rises which give your profit, why go through the hassle of building?

I would not be brave enough to tackle the task here (Townsville) because the critical shortage of tradies could blow your costs through the roof.
 
definately....I think the only thing you can sort of control is the costs so I try to keep it as low as possible without sacrificing too much on the size and quality.

I have cleared over $100k CG on completion on every project, more after a year or two. But try to be more conservative...even $50k is still worth doing because it's sort of guaranteed CG...a bit more work involved but you get used to it. Anything more than $50k is a bonus.

The thing is that there's just so much variation in building costs that if you do a bit of leg work and shop around...you can save $20 to $30k just by choosing a cheaper builder. To me, the end quality is still the same and I don't understand why some builders can get away with charging so much more....yes the display homes may look great but it's all upgrades. It's unneccessary to over capitalize. I've built with these expensive builders before they inflated their prices so I am sort of qualified to compare.

I am very excited about a couple of projects in the new year...the packages will cost around $300k turn key with rental at a min $420 p/w. I don't know where you could buy a brand new 25sq house in Brisbane for that price.

I am so comfortable with building now that I actually have a fear of buying an established house. :eek:
 
sue78 said:
I am very excited about a couple of projects in the new year...the packages will cost around $300k turn key with rental at a min $420 p/w. I don't know where you could buy a brand new 25sq house in Brisbane for that price.
Click to expand...

Does the 300k involve the land price? And by turn key, do you mean the price includes project management? Can you elaborate.

cheers
 
sue78 said:
...the packages will cost around $300k turn key with rental at a min $420 p/w.
Click to expand...
Hi Sue78. I believe $300K is land plus house?
$420p/w on rental is awesome. Positive Cash Flow. Could you please elaborate more on the type of dwellings as in number of bedrooms, land size, landscaping, fittings etc. And also, Capital Gains?
 
It's a very difficult prospect at the moment in Perth as land prices have pretty much reached their peak due to affordability in the outer areas where most of this block and build stuff goes on. After my 5th project my profit for that particular house was only around 15k...hardly worth the time and effort (and risk), will probably have to change strategy and rent it out for a while. It doesnt help either when the developer sells you a block for 250k and then three months later reduces all their blocks to around the 235k mark...and offer purchasers a 10k rear landscaping package! This is what we are up against!
Not to worry, have done ok out of it so far but will need to look further afield for next project.
 
235 + 200 for the house plus some costs = 450k. those places out there still seem to be getting 500k no problems so i thought you could still squeeze 50k out? skinny i admit. any cap growth will be a bonus on top.

boods99 are you talking about seascapes?
 
I bought land in Bracken Ridge (Nth Brisbane) in May 2006 and built a Dixon house on it. Total costs including interest, stamp duty, landscaping, airconditioning etc was $330,000. Now worth at least $400,000.

Very happy with result but it's a slow process and not for the impatient. Much prefer this method than buying an established home.
 
Ausprop...
not Seascapes (but I did have my name down with Mirvac for about 8 months to get a block in Seascapes, but by the time they came to offer me one, the market was a bit iffy...especially in Seascapes.) I was talking about Settlers Hills in Baldivis.
Also the costings for my last one in settlers went something along the lines of
Block - $249,000
Build - $180,000
holding/SD/other - $20,000
finishing off including rear lanscaping/retic/blinds/carpet/flooring/lights/air con/internal wall painting/brick paving - $30,000
Total = $479,000
Was on the market for 9 months for $495k and have just recieved an offer for $480k with conditions(subject sale of a block of land)
There are a heap of houses for sale in the area for between 430k and 480k most of which are smaller and less spec'd than mine, but its hard to tell that to a buyer who has so much to choose from.
Duane, not meaning to sound all negative about the whole deal, but just be careful on how much you pay for land, and check the numbers add up. Im sure there are areas in Aus that this is still a viable strategy.
 
pi2012 said:
Hi Sue78. I believe $300K is land plus house?
$420p/w on rental is awesome. Positive Cash Flow. Could you please elaborate more on the type of dwellings as in number of bedrooms, land size, landscaping, fittings etc. And also, Capital Gains?
Click to expand...

yes that's everything ready to move in. At $300k it's likely a 22 sq house on a 500sqm block with typical 4/5 brs, 2 separate living areas and separate dining, double grg. Capital gains is anywhere from $80k to $200k.

Nth Brisbanite- I just received my tender from Dixon. Comes to $148k inc site costs for 29 square house. This is after the recent price increase so I am really pleased and the design is lovely. Plan to spend another $20k to finish it off with engineered wooden flooraboards, carpets, security screen, decking, driveway, landscaping etc What annoys me is that they dont do rendering anymore...so another hassle I have to deal with at completion.

My budget is $380k. Guess where the land is at? :)

The CG isn't as good as my other projects..margin's tightening. Should be worth at least $480k in 6 mths time ($60k CG in land already and another $40k in building). I've never actually researched the area to compare new house and sales...you only need to take a drive in Nth lakes to know that it's a quality estate.

But I do need to find out about the rental market there...need to apply for construction loan soon. I am guessing $450 p/w.
 
sue78 said:
yes that's everything ready to move in. At $300k it's likely a 22 sq house on a 500sqm block with typical 4/5 brs, 2 separate living areas and separate dining, double grg. Capital gains is anywhere from $80k to $200k.

Nth Brisbanite- I just received my tender from Dixon. Comes to $148k inc site costs for 29 square house. This is after the recent price increase so I am really pleased and the design is lovely. Plan to spend another $20k to finish it off with engineered wooden flooraboards, carpets, security screen, decking, driveway, landscaping etc What annoys me is that they dont do rendering anymore...so another hassle I have to deal with at completion.

My budget is $380k. Guess where the land is at? :)

The CG isn't as good as my other projects..margin's tightening. Should be worth at least $480k in 6 mths time ($60k CG in land already and another $40k in building). I've never actually researched the area to compare new house and sales...you only need to take a drive in Nth lakes to know that it's a quality estate.

But I do need to find out about the rental market there...need to apply for construction loan soon. I am guessing $450 p/w.
Click to expand...

Thanks Sue78.
The figures are really amazing. Great rental yeild and excellent CGs.
 
boods99 said:
Ausprop...
not Seascapes (but I did have my name down with Mirvac for about 8 months to get a block in Seascapes, but by the time they came to offer me one, the market was a bit iffy...especially in Seascapes.) I was talking about Settlers Hills in Baldivis.
Also the costings for my last one in settlers went something along the lines of
Block - $249,000
Build - $180,000
holding/SD/other - $20,000
finishing off including rear lanscaping/retic/blinds/carpet/flooring/lights/air con/internal wall painting/brick paving - $30,000
Total = $479,000
Was on the market for 9 months for $495k and have just recieved an offer for $480k with conditions(subject sale of a block of land)
There are a heap of houses for sale in the area for between 430k and 480k most of which are smaller and less spec'd than mine, but its hard to tell that to a buyer who has so much to choose from.
Duane, not meaning to sound all negative about the whole deal, but just be careful on how much you pay for land, and check the numbers add up. Im sure there are areas in Aus that this is still a viable strategy.
Click to expand...

that's rough. I did do some stuff in baldivis but i got out before it got really hot because it was abundantly clear that investors were the primary buyers and to my mind there is no single attraction about the place e.g. train, ocean etc. It had nothing going for it other than being cheap.

the whole ripple has been such an education over the past 7 or so years - I have swum the whole pool and think I know where the best waves are now!
 
you guys in WA need to subscribe to the ComFree magazine - www.comfree.com.au 9408 1994

there's a house in Craigie with block next door for $390k - last issue was a pair of houses right next to each other in Balga, on corner opposite park, both were duplexes but amalgamated was a comfortable 5 unit site at R40. price was about 750k for the pair IIRC.

look towards the bigger sites, not the single build and sells. less overheads, more profit.
 
i know there was a time when it was the other way round - i was slogging it out with numhead local councillors doing units and everyone around me was just slapping a 4x2 on a block and collecting 100 or 200k. it's all cyclical
 
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