​Creating equity comes down to number crunching and location

By Jo Chivers
I often get asked whether you can make some equity in a single house build or a house and land package. It’s a good question and the answer is yes...and no.

Typically a dual occupancy development where two dwellings are built on one lot can create some pretty good equity. You see it’s fairly simple to understand that if you take one piece of land and get two dwellings on it, each dwelling is basically benefiting from half the cost of the land and this is where a lot of the equity is created, plus the economies of scale building two dwellings at once also contributes. 

Lately I started studying some suburbs of the Hunter Region in NSW where Property Bloom manages developments for our clients that we would not normally target for dual occupancies or medium density development. Mainly because there are usually covenants on the land in these new estates so this type of development is not permissible. I watched the sales on the more premium houses and amazed at some of the results.  Some of these suburbs we were seeing house sales exceeding the median price for the LGA by around $150-$200,000.

For a single house, the land price may be lower than that of a dual occupancy site as you don’t need such a large block (although a larger block will add to the end value in some locations so needs to be considered). You must find a location where homes are selling at a premium and there is good demand then find a way to build them as cost effectively as possible to create your margin. 

You need to make your profit from low construction costs and you need to be very clever with your design, fittings, decoration and landscaping – all areas you can cost effectively add value with.  

The key to this strategy working is also location. Find land within a short distance to strong sales references and build something similar. Then you have a good idea of what your house should be worth and you can work back from there as you get your construction quotes in. 

It’s all in the numbers, if you get the land at a good price in a good location with strong comparable sales and the build cost is right then there is equity to be created. It won’t work in all areas but it is working in the Hunter and that’s why we’ve just launched our new single house build strategy. A project management service from finding the right land, using discounted rates with our local builder to finding tenants on completion. The depreciation benefits are good too. This strategy allows clients on a budget to dip their toe into development on a single house build and reap some of the rewards of a larger development project. 

For around the same cost of a one bedroom unit in Sydney you can build a four bedroom house in the Hunter, is that worth thinking about? 

“I was bitten by the property bug, there was no turning back.”

Jo Chivers proves that women can indeed have it all- a career that you are passionate about and a family.  While all of this sounds great, it does require hard work, dedication, perseverance and a bit of risk-taking.

Jo’s love of property development inspired her to leave her corporate career and pursue her true passion. After educating herself in property investing, she started building up her own property portfolio. After purchasing a few blue chip properties in Sydney, she soon realised how negatively geared they were and began researching outside of Sydney. She discovered a more affordable, large region of NSW where she completed her first property development.  Soon her friends were asking her to find them sites and manage their developments. 

She realised there was a need for an all encompassing project management service and her business Property Bloom™ was born.  Ten years down the track, she has developed over 60 properties for clients, creating literally hundreds of thousands of dollars in equity and high end yields.