Retain & Subdivide

Bryan and Ana

1.Client Brief

As a young family looking to increase their equity through property development, our clients sought both property investment and development advice to begin their search for the right property with Capital Property Advisory. New to developments, our clients were looking for a potential subdivision site with the ability to retain the existing dwelling, in an area local to the Perth CBD, with an approximate purchase price of around $650,000 – $700,000.

Property Purchase Saving $30,000
Potential Profit Margin $142,165
Margin on Development Cost 17.5%
Internal Rate of Return 22.8%
Project Timeline 12 months

2.Property Sourced & Negotiation

Within the month, our acquisitions team sourced and secured a fantastic subdivision site perfectly meeting the clients’ brief. Through our understanding of planning, we were able to secure a site with potential subdivision, where the agent and seller were unaware of the potential in the site. The property was a beautiful character cottage in a sought after area requiring minimal renovation and update with potential for a new street-facing lot at the rear. Continued negotiations saw the initial advertised price from offers between $665,000 to $685,000 expertly negotiated down to an agreed price of $650,000. After the due diligence period and relevant inspection reports reviewed, a further $5,000 was negotiated from the asking price, bringing the final purchase price down to $645,000. A saving of $30,000 off the median advertised price for this house.

3. Subdivision

As part of the negotiations, the seller agreed to sign approved subdivision forms to expedite the subdivision and reduce holding costs for our client, with subdivision applications submitted prior to final settlement (after all due diligence checks were reviewed).

4. Development outcome:

The clients are likely to have an excellent outcome of over 17.5% return on their initial investment in 12 months. This purchase has not only planted the seed for future development, but will provide our clients with the increased equity they are looking for to continue their property journey.

Land Purchase Price $645,000
Stam Duty & Settlement $28,382
Consultant Fees $40,153
Construction & Contigency $60,900
Rates & Taxes $3,663
Selling Fees & Settlement $25,770
Estimated Interest & Finance Costs $19,701
Less GST input Tax Credits $-11.643
Estimated Development Costs $811,926
Potential Development Sales $985,000
Less GST Collected in Income -$30,909
Potential Income $954,091