Strategy going forward with running into serviceability issues..

[Nick G]

That is precisely what you should do, it would massively increase your equity position as well. Good thinking, Batman.

[Nick G]

Also, speak with your bank about funding the whole project based on future valuation, I did this recently via a set of working drawings, rental appraisal and a registered valuation. Bank is now funding a $500 pw cashflow uptick. Thanks Bank.

[Murph]

Also, speak with your bank about funding the whole project based on future valuation, I did this recently via a set of working drawings, rental appraisal and a registered valuation. Bank is now funding a $500 pw cashflow uptick. Thanks Bank.

Thanks Nick!!

What would the first step be with something like this?

Would you go into council and talk to a planner or find a draftsmen who is familiar with planning permission and get him to liaise with council and draw something up?

I can sort out the valuation, bank via my broker and rental appraisal but just not sure the first steps to start a project like this?

Alternatively I could just use a building company to sort the whole project out etc

Thanks

Murph

[Nick G]

A draughtsman or what I did was consult him and the builder together. Hiring them independently gives you a bit more control over scope and two potentially different viewpoints. It will cost a bit but it is well worth doing this properly.

[Murph]

Would anyone happen to know how much the bank might be willing to cough up to help with a development?
I mean if serviceability was not really an issue for them would they let you borrow back up to 80/20?
Or has it changed now as its an investment property back to 60/40?
Ive owned the property for 4 years, not sure if the 60/40 is back dated? or only on new purchases etc?
If it took a year to get all the planning and approvals in place we would have about 100k to tip in..

Thanks,

Murph

[Nick G]

60/40 based on final value. So find out what net yield valuers are using for that sort of property and go from there.

[Murph]

60/40 based on final value. So find out what net yield valuers are using for that sort of property and go from there.

Awesome Thanks!!

ok so just so I have this in the right order so not to spend money unnecessarily...

Would this be the right order:

1.Draftsmen meeting to go overs ideas? He can then go to council to see what can be done on the site?
2. Take drawings into council to get consent?
3.Registered valuation (letting them know future planning intentions)
4. Go to bank with all the above
5. Select a builder or building company
6. start the build and then pray...

Or go to council first and let them know what Im thinking and the draftsmen, valuation, banks etc etc

Thank you,

Murph

[Nick G]

Builder earlier, before you chat with council or valuer. Make sure your charted course to prosperity doesn't cost too much! Builder and architect can work through compromises with you. Big thing is engineering or services costs.

[Murph]

So I meet with a local agent today..
They say I would be crazy to sell unless i needed the money, if I did want to quit they could sell it to someone interested in future development very quickly and it would be a multi offer for sure!
Ive know this agent for years and they have sold other property for us...
They say I should consider building two flats down stairs with resource consent and potentially updating the 3 bed, one bathroom flat upstairs.
They tell me this would be a 3 separate unit home on Queenstown hill that would bring in about 1600pw to long term tanants
The other option is to short term let the entire 3 units which would be much more lucrative but the upstairs flat would need to be refurbished to a very high standard.. Each downstairs flat would be let at $350 per night and the upstairs flat would be let at $450. These rates would increase over peak dates but Im sure I would get 90 room nights per flat per year.
They say which ever way I go long term vs short term I should hold for 10 years, be a fair landlord but just take in as much money as possible in rents etc etc.

Meeting the builder in the next two days for pricing..

Thoughts

[Minz]

Agree, you should hold...easier to do long term tenants if you want a more set and forget situation. Yes more money doing short-term but you will have to be a tad more active - although living in Queenstown will make it not too much of a challenge.

[Nick G]

YES. Hold and improve your better properties. If your business ever goes backwards live off the rents. I've created a 75-85K income stream in the last 18 months and sleep pretty well at night.

[Murph]

Ok so Ive got the first draft of consent drawings and we are now going ahead with the construction drawings for converting a 256 sm house to 4- 2 bedroom two bathroom flats.

Council is all ok with it thus far..

A question the wife and I have been thinking about today arounds costs are:

Renovating costs are roughly $1800 (depending what you want etc) per sq which puts the total reno cost at "ball park" -460k

The house was moved to site from Invers in 1990 and is in good shape but obviously a bit old...

Would the property be more valuable to maybe knock it down and rebuild the above which would roughly $2500 per sq for a ball park of $640k + 50k demolition? We would expand a little bit from the existing 256 sqm so the rebuild cost would be a bit higher but they would be spacious units 500 m to down town queenstown.

The reno option rents would be around $650 per week x four units
The build option would not be much more rent wise but the thinking is the capital value will be much higher.
We will hold either way long term and pay down debt until we can live off the rents.

So if you had the opportunity to renovate would you do that or rebuild?
The site zoning is also changing in the next year if all goes to plan which means we could also increase the height up to 12m (add another level)
So lots of options to consider here!!
Just need to figure out how to maximise the capital valuation and yield over the next 10 years.

Thanks

Murph

[Nick G]

Oh nice. I would wait for the zoning and look at the build 2 level option then. You can depreciate chattels when you build new so that will offset the cashflow issue from higher costs. Double check your construction costs however. $2500 might be light in that market.

[ybbest]

Invest youself into a property mentoring program.

[Wayne]

Invest youself into a property mentoring program.

Is that relevant in this specific instance?