Webinar: How to pick house & land projects that deliver equity, growth and cashflow

Land & Construction

Introduction

• Positive Real Estate (PRE) has a long standing

relationship with REI

• PRE has now formed a strategic partnership with

REI combining its extensive property strategy and

acquisition experience with REI’s leading research

and analysis capabilities

The next 60 minutes

• Creating equity through construction

- House and land

- Dual living

- Duplex or dual occupancy

- Multi-unit

• Property Strategy

• Positive Real Estate Property Process

Creating Equity Through

Build

• Houses

• Dual Living Houses

• Duplex or Dual Occupancy

• Multi-unit

House Overview

• A purpose built single home on single lot

• Corner Stone of all Investment Property Portfolios

• Widely accepted by all Town Planning Schemes

• Building regulations are Code Assessable

• Finance up to 95% LVR

• Can be valuations issues if dwelling is too small

House Example Plans 1

House Example Plans 2

House Strategy

• Price point $350,000-$550,000

• Yields 5.0%+

• Some equity gain possible

• Entry point for first construction deal

• Important to buy in the right area and estate

House Example –

Wollongong NSW

4 bedroom, 2 bath, DLUG

Land: $259,000

Build: $259,100

Total: $518,100

Market Rent: Appraised at

$520pw

Gross Yield: 5.4%

Average yield in suburb is 5.0%

Total dwelling size 188m2

House Example – Melton VIC

4 bedroom, 2 bath, SLUG

153 m2

Land: $121,000

Build: $206,000

Total: $326,000

Market Rent: Appraised at $320pw

Gross Yield: 5%

Key Investment Indicators:• Within early stage of 4,000 lot Lend

Lease master-planned community• Within 35km of Melbourne’s CBD• 22,000 new jobs to be created in the

suburb.• Low vacancy rates at 2%• New train station to be built within

estate• Business precinct and shopping

precinct to be built

House Example – Greenvale

VIC4 bedroom, 2 bath, DLUG –

203 m2

Land: $250,000

Build: $220,000

Total: $470,000

Market Rent: Appraised at

$450pw

Gross Yield: 4.9% (approx.)

Key Investment Indicators

- 95% Owner Occupier Estate

- 8 min from Melbourne Airport

- $850m Tullamarine Freeway

Upgrade

House Example – Wyong

NSW4 bedroom, 2 bath, DLUG –

208 m2

Land: $229,700

Build: $278,550

Total: $508,250

Market Rent: Appraised at $470pw

Gross Yield: 4.7%

Key Investment Indicators

- 1% vacancy rate

- 90 min north of Sydney

- Wyong regional airport due 2020

- Wyong Employment Zone

- Northconnex Tunnel Project due

2019

Dual Living Overview

• A purpose built house with two separate dwellings internally

• Cannot strata

• Town planning limited

• Building regulations same as duplex

• Finance similar to a house but better cashflow up to 95%

LVR

• Valuations issues if too large

Dual Living Example Plans 1

Dual Living Example Plans 1

Dual Living Example Plans 1

Dual Living Example Plans 1

Dual Living Strategy

• Price point $400,000-$500,000

• Price 10-20% higher than a house

• Great cashflow with yields 30-40% higher

• Some equity gain possible

• Ideal to increase serviceability in existing portfolio

• Ideal for first home buyers who can rent out secondary

dwelling as an investment property

Dual Living Example –

Ipswich QLD3 bedroom house + attached

2 bedroom dwelling

Land: $154,000

Build: $266,900

Total: $420,900

Market Rent: Appraised at

$600pw

Gross Yield:7.4%

Average yield in suburb is 6.0%

Total dwelling size 200m2

Duplex or Dual Occupancy

Overview

• Purpose built two dwellings on one property

• Strata title upon completion to obtain 2 dwellings

• Attached or detached

• Higher density zoning required

• Finance up to 90% LVR (half 80% half 90%)

• DA or MCU as of right

Duplex Strategy

• Price point $500,000 +

• Advanced strategy for a client who has already done a dual

living or house package

• Strong yields and cashflow

• Flexibility of 2 properties in 1

• Manufactured equity

Duplex Examples

• All of these duplex examples have between a 14% - 21%

uplift in equity based on agent’s market appraisals

• Can be completed in well under 12 months for registered

land

Duplex Example 1 –

Toowoomba QLDAttached 2 x 3 bed, 2 bath

single garage

Land: $156,500

Build: $391,662

Total: $548,162

Market Rent: Appraised at $720pw

3 bed ($360pw) per side

Gross Yield: 6.8%

Market Value) Appraised at

$660,000

Total dwelling size 254m2 or approx

127m2 per side

Duplex Example 2 –

Townsville QLDAttached 2 x 3 bed, 2 bath

single garage

Land: From $164,500

Build: From $458,775

Total: From $623,325

Market Rent: Appraised at $720pw

3 bed ($360pw) per side

Gross Yield: 5.9%

Market Value) Appraised at

$720,000

Total dwelling size 269m2 or approx

135m2 per side

Multi-unit Overview

• Purpose built multiple dwellings on one property

• Strata title on completion

• Most often attached

• Councils town plans typically allow medium density

• Plans need to be submitted as a Development Approval

through local council

• Often more profitable than duplexes albeit higher

development costs

Townhouse Site–

Toowoomba QLD4 x 3 bed, 2 bath, single

garage

Land: $169,000

Build: $813,974

Total Development Costs:

$1,141,661

Market Rent: Appraised at $1,520pw

3 bed ($380pw each)

Gross Yield:7.4%

Average yield in suburb is 5.5%

Market Value: Appraised at

$1,400,000

Equity: $258,339 23% RTDC

Unit Site – Waterford QLD

4 x 3 bed, 2 bath, single

garage

Land: $260,000

Build: $570,000

Total Development Costs: $914,598

Market Rent: Appraised at $1,320pw

3 bed ($330pw each)

Gross Yield:7.5%

Average yield in suburb is 5.5%

Market Value: Appraised at

$1,100,000

Profit: $185,401 20% RTDC

Land & Construction Strategy

H&L Dual Living Duplex

Price $400,000 $460,000 $600,000

LVR 95% 90% 80%

Deposit $20,000 $46,000 $120,00

Rent pw $420 $600 $660

Rental Yield 5.5% 6.8% 5.7%

Equity $60,000

Approval time 7-9 weeks 7-9 weeks 12 weeks

Area Capital City

Major Regional

Capital City

Major Regional

NSW

Major Regional

Regional

Product Comparison

Type of Investor

H&L Dual Living Duplex/Multi unit

- Low deposit looking to get

into a deal

- Looking for med to long term

capital gain

- First land and construction

deal

- Low income with minimal

serviceability

- First home buyer to rent out

secondary dwelling to an

investor

- Negative geared property

portfolio

- High income looking for equity

not cashflow

- Turbo charge portfolio with 2

strata titled properties

- High income needing

deductions

- High borrowing capacity

- High deposit required up to

20%

- More experienced property

investor who has done a land

and construction deal

- Looking to recycle deposit and

move onto another deal on

completion

PRE Property Process

Property Process

Positive Real Estate manage the property process all the way

through from acquisitions to handover

• Acquisitions

• Contracts Management

• Construction Management

Property Process

Acquisitions

• Confirm Macro and Micro location of city and estate is inline with company strategy

• Drill down on estate to confirm growth drivers and owner occupier ratio etc (this is usually done by a personal visit)

• Confirm lot allocations with builder and developer

• Obtain all estate and lot information ie master plan, stage plan, disclosure plans, contour plans and cut and fill reports

• Mock up tender packages inline of product type and estate covenants

Property Process

• Order mortgage valuation

• Obtain both rental and market appraisals from affiliate real

estate offices

• Send land contract to be checked by our solicitor

• Negotiate land contract terms

• Obtain all relevant town planning advice letters

• Confirm all tender packages, floor plans and final price

Property Process

Contracts Management

Our own internal contracts management team specialises in managing all construction builds

• Confirms buyer details and sends sales advise to land developer and builder

• Sends your finance broker the signed land and build contract

• Sends your solicitor the finance approval letter from your finance broker

• Shadows the builder to resolve any unforeseen delays

• Our Salesforce contracts management system will send you a number of automated reminders during throughout the property process

Property Process

Construction Management

All our builders have their own professional construction management

team that will manage the construction of your dwelling

• Obtain all development and construction approvals on your behalf

• Advise you of a construction commencement date

• Each time you dwelling reaches each stage of construction you will

receive a progress draw to be sent to your bank along with photos so

you can track its progress

• Send you a handover package on completion

‘Wholesale’ Builders

• 3-5 builders to cover key areas Australia wide

• Have proven themselves to be reliable, quality builders

• Standard pre-negotiated build contract terms

• Have proven in-house construction management system

• Building Contract standard for H&L, dual living and duplex

• 16 weeks, 18 weeks and 20 weeks

• Liquidated damages

• Fixed price

• Turnkey

Wholesale Advantage

Retail Wholesale

Build Period (House) 26 weeks 16 weeks

Build Period (Duplex) 32 weeks 20 weeks

Liquidated Damages $20 per day = appraised rent

Builder variations Often None

Turnkey Rarely Yes

Build Commencement 6-12 months 3-4 months

Contracts Mgt No Yes

Construction Mgt Sometimes Yes

Handovers.com Sometimes Yes

Acquisitions Checklist

Acquisitions Checklist

Acquisitions Checklist

Next Step…

Request a free call to discuss;

• What’s holding you back

• How to get you started

• A strategy to suit your personal situation

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