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SIMON HAMMER Real deal

SIMON HAMMER Real deal. Subdivision. Who Am I?. Past Experience. Brisbane Property Meetings Started Investing in 1999 (PPOR) By end 2006 Owned 3 properties Value $1.1M+ Debt $900K Sell up – pay down debt A dozen property transactions Typical Novice Investor. The Deal March 2011.

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SIMON HAMMER Real deal

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  1. SIMON HAMMERReal deal Subdivision

  2. Who Am I?

  3. Past Experience • Brisbane Property Meetings • Started Investing in 1999 (PPOR) • By end 2006 • Owned 3 properties • Value $1.1M+ • Debt $900K • Sell up – pay down debt • A dozen property transactions • Typical Novice Investor

  4. The Deal March 2011 • 809m2 block in Wynnum • 1 Lot • Zoned Residential (LR) • Demolition Control Precinct (DCP) • 3 bed Lowset Fibro House • Shed & Pool (above ground) • Gentle slope to rear ( < 1m ) • Desperate Seller • No Tenants

  5. How did I find the deal? • Realestate.com.au • Previously on market • Motivated seller • Asking $439,000 (originally $459K) • Offered $420,000 • Sight unseen • Cash Offer • Due Diligence period

  6. Strategy • Obtain Subdivision Approval (DA) • Rent to reduce holding costs • On-sell: • With approvals or • As individual blocks of land • Contingency Plan • Re-sell as is • Build

  7. Due Diligence CAN I SUBDIVIDE ? • Contact Town Planner • Online • pdonline.brisbane.qld.gov.au • 1100.com.au (dial before you dig) • Aerial Photos • Neighbourhood meet & greet

  8. PD Online - Contours

  9. PD Online - Zoning

  10. PD Online - Overlays

  11. 1946 Aerial Photo

  12. Dial Before You Dig 1100.com.au

  13. Due Diligence DO THE FIGURES WORK ? • Purchase & Holding Costs • Subdivision Costs • Rent income • End Sale Price • Exit Strategies • Worse case scenario • Inspection

  14. Due Diligence - Findings • House only partly on stumps • Sewer access from rear neighbours • DCP = Impact Assessable • Estimated 6 month turn-around on DA

  15. Renegotiated Purchase Price • Purchase price $401,000 • Unconditional immediately

  16. Let’s get to the numbers • How much does a subdivision cost? • BCC – around $3K • Get an estimate from a town planner • Typically $70K - $80K

  17. Subdivision Costs – Stage 1

  18. Subdivision Costs – Stage 2

  19. Subdivision Costs – Stage 3

  20. Subdivision Costs Summary

  21. Feasibility

  22. You make your money when you buy? The money is in the management Your buy price is your insurance policy

  23. We Got Lucky • Council Capped Contributions • Estimated Contributions were $35,425 • Actual Contributions $28,000 • Saving approx. $7,400

  24. We Got un-Lucky • Market dropped • Estimated land sale $300K - $305K • Market Value $260K - $280K • Effect on profit $60K

  25. Current Numbers

  26. So what now? • Primary / Secondary Dwelling? • Dual Key • 2 bed up • 3 bed down

  27. Dual Key Numbers X 2

  28. Dual Key Numbers (ctd) • Rent return = $750 / week • $410 for 3 bed • $340 for 2 bed • Yield • On cost ($550K) = 7.09% • On Valuation ($600K) = 6.50% • Depreciation • = POSITIVE CASHFLOW

  29. Simon’s Tips • Be an area specialist • Network • If you don’t know….ask • Buyers don’t have to buy but sellers may have to sell • Have an exit strategy • Are you comfortable with the worst case scenario?

  30. Questions Thank You

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