I have been looking at developing in the last few weeks and the funds required to purchase a large block, subdivide and build units are out of my price range for what the bank will allow me to borrow as a single salary earner.


I then started looking at smaller lots in good locations which have already been subdivided to see if there was still profit to be made.


Being on a salary with no rent coming in during the build meant that I would use a Line of Credit (LOC) on my own home to fund the interest payments until the property was built and rented. The LOC is claimable as a deduction as the intent is to build an income generating property within a short timeframe (you can't 'Landbank' for a few years, do nothing and still claim).


I hadn't previously looked at lot sizes as small as 250sqm as I didn't see much of a profit but then I started looking at what sort of build I could put up and the possible returns both in rent or by selling at completion. The goal would be to have my own PPOR property released as security once the build was complete meaning the new house needed to provide itself with equity from the completion date (not something you can forecast).


Selling prices of similar properties within walking distance to the beach were in the $600,000 price range and had shared driveways typical of a 3 unit development behind one another.

These properties were over five years old so my estimate was more in the medium to high $600,000s as the property I was interested in was on a green title with no common ground, and as it was on a side street, it stood alone more as a house than a townhouse.


With purchase costs of around $250,000 for the land, plus a base cost of $250,000 for a 2 storey build with upside down living to enable side ocean views.

Based on a conservative $550,000 build (includes contingency) to complete works meant a possible profit of around $100,000. This would provide the equity to refinance and pay off the LOC and possibly ‘go again’ in a shorter timeframe.


Risk Acceptability:

  • Rental Market values drop rather than rise - means I would need to cover more of the rental shortfall increasing my negative gearing.
  • Build time blow outs meaning longer out of pocket expenses via LOC – ensure enough funds in LOC to provide contingency.
  • Market values drop rather than rise - no intent to sell in a short time frame so can wait out market fluctuations.

Inability to buy other property during build- a possible 12 month stall time in getting the bank to approve another loan when there is no income coming in - High risk and one to be considered carefully.