The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK PROPERTIES CREW and PROPERTY LEGENDS in the industry share their experiences and knowledge. Hacks and tips to make you a smarter property GURU :) Learn with exclusive content, advice, insider info and HOT real estate industry PRO SECRETS. For sale, for lease, residential, commercial, buying off the plan, finance, mortgages, interest rates, first home buyer, investments - all topics covered. The untold real estate info you've been waiting for.
The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1287 BUY THE LAND, BUILD THE HOUSE, WATCH YOUR MILLIONAIRE DREAMS TAKE OFF!
Ever wondered if building your dream home on a block of land is truly worth the investment? Join us as we uncover the essential considerations and common questions potential homeowners face in the Australian real estate market. From understanding land costs to evaluating building expenses and the potential market value of your finished property, we’ll provide a comprehensive guide to help you make informed decisions. This episode shines a spotlight on the unique opportunities that exist between high-end apartments and older houses, making it an ideal transition for those moving from apartment living to homeownership.
Managing build costs can be a complex endeavor, but we break it down for you with practical advice and real-world examples. Learn how strategic planning and minor adjustments can significantly impact your overall build cost when dealing with land packages, house and land packages, and spec homes. We'll share insights from real estate professionals to guide you through the financial modeling and strategic planning required to build effectively and profitably. Whether you're dreaming of your own custom home or looking to maximize cost efficiency, this episode is packed with actionable insights to help you navigate this significant investment.
Guys and girls, I'm building a house on a block of land. Thought about it, dreamt about it. Good idea, bad idea. We're going to talk about it right now. Thank you, I'm the ringleader, so I'ma kill it. Oh, billy Bob, the great Australian dream building your home on a block of land. Building your dream. It really is.
Speaker 2:But I don't know if it's as dreamy the process is, as dreamy as people remember it to be. Everything I hear is stressful.
Speaker 1:Yeah, and look, I think it's attractive. You know the floor plan. You want the colour scheme that you want the. You know there's the potential for big profits. You know when you do it as well, so you know when there's an element of risk there. Like you know, sometimes buying off the plan or building a house, there's often good profit behind it. So today, very quickly, we're going to unpack. Why? Because we've got some land packages available for people and people are asking us a lot about it. Packages available for people and people are asking us a lot about it. Now, the great thing about talking with a real estate agent is we've got the experience of seeing people doing it before. So people may have a friend or family that's done it one or two, but we've got hundreds of people that have done it so we can report back on how they win yeah, so true, there's a little property link there for you as well.
Speaker 2:If you want to just screenshot that, copy and paste it, go back to the property link. That's everything we're talking about today and it's all local. I love, I love local stuff. This is in Moriwood, right? Okay, thick, thick my what, what, what's the three most common questions before people, even you know, get to the, get to the idea of how we're gonna make this work. Happy is the block.
Speaker 1:Okay, so these cases how much is it to build this house? Yep.
Speaker 2:What would it be worth? Okay, and then, depending on those three answers, then I guess they get interested or they put a line through it.
Speaker 1:That's it. That's it, and I think it's got to feel it's got to. People are quite traditionalists still, where they've got to sort of logically be able to get those answers and plug them into their brain. Spreadsheet of a brain ago. Yeah, this is a real winner. Yeah, um, and I look something. I find that particularly like these ones that we have in Worrywood, where it becomes attractive for people, is it? There's this gray price. Okay, let's just look at our area, for instance. There's this price range where you're getting a nice two-bedroom unit, three-bedroom unit, for sort of $14,000 to $18,000. Then you've got houses starting at $2 million, $2.1 million old and there's sort of a $400,000 price band where there's almost no properties in there. What I love is something like this here, and you may find in any part of Sydney. You may find that when you finish your house you're sitting in this price range that's super, super sought after and there's not a lot of stock in that price range at all. That's when you're on a winner.
Speaker 2:Yeah, right, okay. So these guys are coming out of an apartment you know, two to three beds, often trying to transition into something, uh, bigger. But I think you're right. The number one, um, the number one thing stopping them at that point is they can't find the stock.
Speaker 1:To begin with it's just a no man's land. And I like, I think, when you're coming out of a two-bedroom unit and you've probably been there maybe 10 years, five years, probably 10 years, and you've probably paid off a little bit of the loan, um, and the equity's probably gone up, so you've probably got, you've got a fair chunk of money there and you're thinking, oh, that's great, but I can't do anything with it. I can't go into that 2.1 price range this is in the northern beaches in our area, for instance but I can't get into that next price range because I've got this water of cash. But it's just too. It's too much of a stretch, can't afford the repayments, can't get the loan. So, okay, not a bad idea. Not a bad idea build a house bad idea, not a bad idea.
Speaker 2:Build a house. Tell us more. Then, if the apartments say worth 1.5 round numbers, there might be a mortgage there of 500 000. So you're sitting on a million dollars worth of equity how do you build a house?
Speaker 1:were you there when we were modeling with the sales team the numbers the other day?
Speaker 2:I was. I just thought it was so brilliant.
Speaker 1:The viewers should get a listen. Okay, so look, I think the main thing here is I was modelling and look, everyone watching is going to be different, but the principle stays the same, but the numbers may change. So you know, out west in Sydney, you know you may be able to build a house, buy a block of land for I don't know one, two to one, four Eastern suburbs may be more, around three or four or five million. But I think the principles that we're going to talk about or I know the principles we're going to talk about I know the principles we're going to talk about the same. The modeling we're doing is the same. So forgive me on the numbers, but please listen closely on.
Speaker 1:On the, the structure, so what we spoke about. The other day we had a bit of a chinwag with all the sales reps because we've got, um, some beautiful land, and what I said to the sales people. I said this isn't a, this isn't a real estate salesperson function that we're doing. This is almost like a mortgage broker function we're doing, where we can hold people's hand, explain how the structure works, and then they take that to their accountant and they take that to their mortgage broker and say this is what I'm thinking you're doing and this is how it goes. So when you buy a block of land, you're paying stamp duty on the block of land only. You're not paying, obviously, on the whole thing. And when that's right at the beginning, right at the end, we call that the, the, the, the, the gross, the GR, the gross realization, the effect of the gross of value out of the property. So when you finish the build house in in this working example I'm going to give you it's worth 2.5, okay, as an example, that's where we think it should sit in the market, given what's selling. Then you have the land sitting at 1.295. The next question you ask well, how long will that take, and whom am I going to build with? The next question you ask well, how long will it take and what's the, what? You know, who am I going to build with? Now we've got some great builders that we're working with at the moment.
Speaker 1:So anywhere you are in Sydney, australia, wherever you are in australia, you'll look at your builders and what I would suggest to do is to use a good, a larger, quality, reputable building company. So gj garden has been around a very, very long time. They've done a lot of stuff in warriwood, where we are, and then we've got these housing packages from these guys that you know. You can do a one level home for circa that. You can do a one-level home for circa $600,000. You can do a four-bed, four-bath, almost three-living room home for circa a bit over $700,000. So there's these different styles of homes that you can design on these blocks.
Speaker 1:So you buy the land, you build the house and when we were doing our modelling it was coming in at less than $1.9 million after you've bought the house and bought the land and all built. Now what I loved is when a place is worth $2.5, there's $500,000 or $600,000 potentially there of value, if it's worth that when you're finished. Where we came undone as a sales team is with buyers. How do buyers actually get there? So they've got their unit. Potentially that's worth one, one, two, one, three, and then they've got maybe half of the equity in there, so they've got six or 700,000. How do they actually get? You know the finance and get it all happening.
Speaker 2:That's right yeah, it's just just transition, moving sort of those chess pieces around is what would be, what would be people's number one sort of worry then at that point is it trying to find a place to rent in the middle, or, you know, trying to find a place to rent in the middle, or you know, trying to find a place to move in with family or friends for that 6 to 12 months if they're building, what do you find the most sort of common hurdle is at that point?
Speaker 1:In today's market with when buying land. I think people's hardest issue is cash flow to cash. They know when they're in the house they clearly afford it. Um, they know the numbers look really good, but how do they cash flow it from? From? You know, when they move out of their unit, where they are, to when they move into the house, the cash to pay the mortgage and also the. The even bigger thing would be how do they get the loan? Um, what do they say to the bank? How do they structure that?
Speaker 2:Yeah right, and in this case three blocks we've got for sale with Meritan. So you found clients in the past have used that to their benefit because they're not having to go direct to the bank. If they can partner with Meritan, they're actually getting a pretty attractive rate for two years.
Speaker 1:Yeah, I like Meriton, some of the land we sell on behalf of Meriton. They'll fund it at 3.75% fixed rate for two years, which is nice for the land because you can go okay, I'm going to use the cash out of my unit to build the house and I'm going to use Meriton to fund the land Pretty attractive, you know, when you're doing something like that. I think we modelled the repayments at $45,000 a year for the land. Yeah, you know. So you know you've got that there. But yeah, I think it's a funding exercise. You've got to be super. And look, I think sometimes, if you're not that acumen with you know you can't get your head around the numbers. And you've got the money, you've got the job, you've got the cash. You still won't do this land thing because it just bamboozles you, it spins you out.
Speaker 2:Yeah, yeah, but there's been some really good success stories.
Speaker 1:It's exciting Local stuff we sold 30, yeah, 30 blocks of land. Uh, in bublo street in warrywood we had um clients, even friends and family, buying there. They it was an amazing story because people coming through were saying you know, the block of land's not that big. I'm used to like 700 meters squared and these are under 300 meters squared. We had some people, we had bold people purchase go, you know what. We can still see that it's better than a townhouse. Um, and it's big. It's a spacious property. I've got my, I've got my second and third living room. I've got my ensuite bathroom. I've got, you know, four bedrooms. This is still a good buy.
Speaker 1:Those guys that bought air there, oh my God, after they finished building and this was they moved in. But when we were selling them, it was was it 2016, 18, around there? No, probably 18. The year later the people had moved in and the years later they'd moved in, their property values doubled. So they were thinking, oh, look at the land plus the house we should be in at about 1.5, 1.4. And straight away since they moved in, they built for a little bit cheaper and their property values were well over 2. So those guys made a fortune and straight away since they moved in, they built for a little bit cheaper, um, and you know their property values were well over two. So those guys made a fortune.
Speaker 2:I've only seen really good examples out of it and the key takeaway is maybe bigger is better, not your bespoke, real bespoke builders could be a bit more expensive yeah, I wouldn't get caught up in.
Speaker 1:Uh, I think it's. It's a bit like a car when you go to buy the base model and you end up buying the top of the range, like you know the idea. I built a house in narra, wiener and um lisa and I made a promise before we went into the showroom that we anything that was not base we wouldn't buy um and it worked. So we bought basically the, the base of everything um, but chose funky colors and finishes and stuff like that and it was base. All of that stuff and the ex. It actually came out really good. But when you start adding up, adding up, adding up, you can add% to your build cost.
Speaker 2:Yeah, just in the little tweaks. There you go. That's a good little episode, yeah.
Speaker 1:Thank you, I hope we helped you with land packages, house and land packages building a house, spec homes. Go get it, go do it, make some money.
Speaker 2:See you later. See you, man. Have a good day. Have a good day. Have a good day, man.