When completing a subdivision there are only three alternatives approaches which can be adopted. Let's discuss them here
Blogger: Darren Standish, Property Prosperity
1. Land Only
2. House & Land
3. Completed House
In practice it may be difficult to sell a vacant block of land because many potential purchasers may not be experienced with the building process. They may have concerns about what type of house they can fit on the block, which builder they should use to build the house and how much it will cost for their completed home. As a result of these concerns many potential purchasers may consider it too risky and may decide to buy an existing house.
To alleviate these concerns your Real Estate Agent may suggest that you market the block of land as a House & Land Package. A House and Land Package involves 2 contracts, one for the house and one for the land. These contracts can be signed at the same time or separately.
The advantage of this for the purchaser is that plans will have already been drawn up to suit that block and an indicative price will give the purchaser an idea of whether their new home will fit within their budget. The purchaser then has the flexibility of changing the plans and renegotiating the price directly with the builder.
The advantage of this method for the property owner is that they are still only selling the block and do not have any involvement with the house contract. The prospective purchaser deals directly with the builder regarding any changes required to the building plans. This method is likely to result in a much quicker sale of the block as the purchaser will be much more informed and more likely to make the decision to purchase the block and build at a later stage.
The final option is for the property owner to build the house and then sell as a completed home. This is the most desirable option for the purchaser as they can see exactly what they are getting and as a result they are likely to pay the highest purchase price.
However the downside for the property owner is that the risk of the project may increase as there will be significant costs associated with building and the timeline of the project will be much longer. This exposes the property owner to the possibility that the market adversely changes during this time or the property owners financial position may change resulting in the possibility that they cannot complete the project.
About Darren Standish
Darren Standish established Property Prosperity in 2004 initially as a property development company, however after repeated requests for assistance the business evolved into a development consulting business.
Property Prosperity was initially focused on assisting clients with subdivisions and negotiating with councils to ensure that clients maximized their return on investment. Over the years additional services were gradually added to ensure the development process was as seamless as possible for its clients. We expanded into offering individually tailored finance solutions and then added Property Development Analysis, Property Sales and a Builder Broker Services.
Darren is the overachiever of the team and has more qualifications than your average university graduate. As well as completing a Bachelor in Economics, Bachelor in Commerce and post graduate in Accounting he subsequently went on to complete a Diploma in Financial Service, Diploma in Real Estate and Certificate IV in Building. He is a qualified Certified Practicing Accountant (CPA), a licensed Real Estate Agent, licensed Mortgage Broker and holds a Builders License.
Your enquiry has been sent to a local Aussie Mortgage Broker.
We will be in contact with you shortly.
- Give expert mortgage advice to help you find great investment loan deals
- Help you maximise return by lowering financing costs
- Save you time and effort by helping with the paperwork