Making Money on House & Land Packages

I get asked questions around the House and Land packages a lot. So I thought I would put my thoughts down in a post.

What do I look for when selecting a house and land package?

1. Good rent demand and reasonable vacancy..ideally less than 2.5%
2. I like to get into the first 10-20% of stages..so get in early land prices rise rapidly once the parks and other infrastructure in the estate get built. Buying land off the plan has advantages but carries the risk of not being able to settle if you circumstances.
3. I am small lot and house specialist. Most people tend to build the biggest house and land package they can. Typically they will want land more than 400 sqm and a 4x2x2 home (2 living area and baths). I tend to build on 260-300 sqm lots..mostly 3x2x2 (one living) approximately 17 sqm. Why? There is a huge demand for this product from downsizers, single moms, and downsizers. The demand is not being met...people still think traditional families.
4. My build price point so far in Melbourne has not exceeded 177k for a single storey home fully complete
5. I trick up the house - 2590 ceilings, A/C, stone benchnchtops, 900mm appliances, downlights, blinds, paved out door areas or alfresco, BIR, and plenty of storage, niches in baths, etc. This is what people are looking for.
6. Look for areas within 15-50 klms from the city. Will vary by city on distance. Further distances are more accepted in Melbourne and Sydney.

Now here is the real rewards:

1. If you pick well ....you should be able to make a 15-30% profit on the house on completion
2. Rental returns if you picked well should be Neutral or Positive. For example one of my houses goes to site...and the val on completion will be 360k...total cost for the build is 301k.
3. The icing on the cake is depreciation. I have a high income...this equates to something like the equivalent of 2% growth just based on this.
4. Minimal maintenance assuming you have a builder who as done a quality job. I do inspections via and independent company thoughout the build.

 

This is how I started making money in real estate years ago in UK. Did it several times and made good money. The market then stalled and luckily I was just left holding one. Can work very well dependant obviously on location and timing.

 

@sash
What selection criteria do you have for a particular estate over another?

 

I compare the estate amenities, price point and developer reputation.

Sometime you will find htat 3 minutes down the road the land is 40k cheaper in a newer estate in the early stages than a more established estate.

I always look for what is planned...in the future - ie. shops, rail, hospitals etc. That will give you another boost on CG when this is in. Just requires a lot of shifting through the various estates and talking to agents. Kind of like Gold prospecting...

 

Seems like a great way to make equity when the finished product is worth more than the combined cost of land and construction.

Being that they're generally on the outer fringes of metro area, I doubt their ability to generate ongoing capital growth.

If I was to do it, I'd probably choose infill estates.

 

If you are doing these on the edges of Melbourne you are easily making the coin. The window of opportunity has pretty much closed as price of land is getting to expensive.

Just on land on one I have made 50k....the build costs have also gone up by 10k. I have locked in the price on both. The H&L is in Officer....land was 144k for 294sqm...total build cost is 172k. I expect land to go up another 10k and build another 10k by time I complete it.

Try to find a fully complete H&L there now for less than 360k.

 

This is me to a tee!

1+1=3

Except I am always trying to get the 4th bed in by building 18.5-21sq.

Haters gonna hate, but the fact is your making 15-30% CG in year 1 and then an avg of 5-6% CG for years 2-10. That's pretty much doubling in 10 years and CF+ from first remnant.

 

Awesome tips @sash . Thanks.

 

If you price a brand new H&L in the SE for sub $400k it will sell pretty easily

 

294m2 so it's 10.5 X 28? I put 4 bed on this 19sq. Boundary to boundary for garrage and first two bedrooms at front of house then step in.

 

Yep...a lot don't get it...it is in the numbers..and if you have a really good income...it becomes turbo charged...

 

No mate it is a 14x21 corner facing a park. So it has to have 2m from corner. Backyard is only 3.1 but will pave off the back sliding door.

I like access to back from one side ..I find that boundary to boundary will be an issue for some so will avoid it where possible.

 

Yes the depreciation is nice. And so is the free equity carry on the investment if you pick up 10-20% uplift in the land alone waiting for titles.

 

Fair but if you have a door from garage to back yard it's passable IMO.
Also most of mine only have 3-5m backyards, but I don't think this is a big issue if you have an alfresco as well.

 

That is where the cash is...the land prices are rocketing potentially the gain on just land will be 30-40%...but builders also can't keep up so they are also putting up prices a lot.

 

True....but people today are picky bunch!

How many have you built...looks like we have identical strategies. Would love to hear what you have done.

PM me if you don't want to go public.

 

Yes some builders are putting their base prices up $3k every 3 months minimum.

 

Holy sheep ******!!!

I was thinking more like 1-2k. That would be great I have already locked in my prices fully complete for a lot less.

 

Yes they are squeezing back so the developers don't enjoy all the joy. But then they come out with their promos to make it harder to follow their true value proposition.

 

I think you are correct, areas such Croydon, Ringwood Melb market, developers can not source land at the right price because prices have soared over the last 6-12 months.

I really like land and house packages in a rising market very attractive.

Not sure about other States - however if you can source land that Government is developing, these can make good $ and usually well located. I am talking also about land where a State school has been demolished and now lots being sold off where infrastructure is already in place. In WA its Landcorp, I have not checked out their site lately.

MTR