Subdivide, Sell the Front, Build Two

Dylan and Lewis are both young Carpenters who have a real passion for property. They’ve combined savings and established a development business with a mind to scaling up over time.

The main parameter to consider when formulating a strategy was the limited savings of $0.250m. This would be deployed to the purchase price, including stamp duty, professional fees, and 10% of the purchase (incurring Lender Mortgage Insurance associated with a 90% Loan to Value Ratio). This would also go towards Planning and Renovations. Not a lot of funds would have to stretch a long ways.

Before formally taking on any client, we sense check their parameters and provide honest feedback about what’s possible and what’s not. This one would be tough but doable.

We shortlisted a dozen suburbs, scoured online listings, and reached out to dozens of agents for off-market opportunities. A few weeks in, we found a ripper. Everything stacked up well but the listing agent repeatedly failed to provide the Contract of Sale and Vendor Statement. Two days before auction, we finally received it.. a Single Dwelling Covenant meant that all of our work went out the window – the property couldn’t be developed.

Back to the drawing board.. Wait a minute, one we really liked but were sure would sell above the $0.75m max purchase price Passed In At Auction. The vendor was initially pretty cagey with listing an asking price, but eventually listed for $0.730m – $0.750m. A near identical block and dwelling sold two weeks prior for $0.785m, so we saw good value.

The best bit about this block wasn’t that it sits at the very end of a quiet dead end street. The best bit was that the ‘bike path’ along its side is actually classified as a Road. We identified this in the Vendor Statement and uncovered two recent developments along it that provided precedent for what we wanted to do – retain the existing dwelling and build two townhouses off the bike path looking Road.

A lot of further analyses was needed, we consulted with Council Planning and others, and the development potential became really clear – one renovated standalone house plus two semi-detached double story townhouses – all on their own title and with their own street frontage.

What made this project so unique was the sequence that Dylan and Lewis could follow to limit maximum Equity Requirements at all times to around $0.250m:

1. Renovate the existing dwelling and rent it out
2. Get planning permission to build two townhouses in the rear
3. Subdivide prior to building
4. Sell the existing dwelling after running all required services (including paving and draining the new Road)
5. Redeploy the proceeds from selling the existing dwelling into building the two townohuses

This definitely isn’t your standard development. It involves a lot of moving parts and requires a deep understanding of planning and subdivision requirements. But, importantly, it dramatically limits the amount of Equity required.

Who said you need millions to develop!! These blokes will finish a 3 unit development with just $0.250m in savings. And then they will take the profits from this project and roll it into the next.

We’re so happy to help young, ambitious, entrepreneurial fellas.