Small Lot Development – $107,000 Equity Inside 12 Months

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Investment Strategy At A Glance

  • Purchase of a block of land for $235,000. The land size is 1214m2.
  • Buy Land And Build 2 Duplexes
  • We have negotiated a client rebate of $30,000 on the build for the duplexes.
  • Subdivide 600m2 block and sell for profit
  • Hold Duplex for 12 Months
  • Sell one or both
  • Immediate Equity Gain of $107,000
  • No Capital Growth Factored In
  • 5% Rent Return

Land Location

Aitkenvale vacant block – 1214 sqm

Investment Highlights

  • Data and preliminary research show that Townsville is currently in its recovery phase but has much potential for growth in the near future
  • Mardent ran a few investment scenarios and found out that you could generate a sum total of $107,765 in equity over a 12-month period by employing this strategy in this recovering market
  • Based on our research, owners can expect a Rent Return of 5% from this opportunity, leveraging strong rental demand amidst dwindling housing supply in the area

Introduction – Townsville Duplexes

Located in Aitkenvale, Townsville, QLD, this rare gem consists of two duplexes that will go through two stages of development:

Stage One –  Construct Two 3 Bed Duplexes and Strata Title them

Stage Two – Sub-divide 600m2 Block and sell off for $150,000 to $180,000

In this article, we’ll discuss how unique this property is, the reasons why we think it’s a great investment opportunity, and how you can walk away (cash positive) from this investment with over $107,000 in equity in 12 months.

The Metrics That Matter

High DSR Increase In Aitkenvale From 56 – 62

The DSR (Demand Supply Ratio) is among the most important metrics that every property investor needs to know about. It’s a comprehensive metric that uses several factors of a property market to come up with a number on a scale of 0-100 (higher is better). 

As you may have read from our previous article the DSR score  encompasses 8 indicators that help mitigate property investment risk:

  1. Days on market 
  2. % vendor discount 
  3. Gross rental yield 
  4. Auction clearance rate 
  5. Market cycle timing
  6. Vacancy rate 
  7. % renters 
  8. Online Search Interest (OSI)

Based on Mardent’s research, the DSR in Aitkenvale jumped from 56 in March to 62 in April. 

Suggesting a growing market that has a very promising future, it’s the best time to invest when the rest of the market is still generally unaware of this uprising star.

Increasing Vacancy Rates And Strong Rental/Purchase Forecasted

A sign of the potential growth that this investment has is the notable decrease in the Vacancy Rate in Townsville, which currently stands at 2.4%

In addition, the recent precinct planned building of the North Queensland Stadium in Townsville is expected to bring new increased workforce for construction of said builds, which strengthens demand for home rentals in the area.

Natural causes like flooding has also caused skyrocketing prices for housing in the Townsville for “rapidly dwindling housing stock”, with forecasted increased rental demand for the next 15 months.

The Mardent Insight

Our research shows that the end rent is approximately $360 per side per week, with 5% yield on net purchase price not including the balance of land valuation ($150K+).  

Investment Numbers Breakdown

  • The total cost of the development is $767,235
  • After selling the land in stage 2 for $160,000 ($155,000 net after agent fees), the new cost basis lowered to $612,235.
  • The valuation of the duplexes comes out to $720,000, creating $107,765 in equity over a 12-month period

Bottom Line: Why We Think This Investment Is Gold

Assuming an end cost of  $612,235 against the valuation of $720,000 and with a Gross Rent of $720 per week, this property will be Cash Flow Positive, and ready to be sold in 12-18 months for a profit of $86,165  less tax or $107K equity if held.

Note: We’ve attached a simple chart below to show you the specific breakdown of this unit. Click on the button below to get the full report.

Stage One Build and Split
Buy Land $235,000 Build Two Duplexes
Stamp duties $7,235 3 Bed
Plans $5,000 2 Bathrooms
Construction Costs $550,000
Less Cash Back -$ 30,000 Rebate Negotiated by our Wholesale
Property Partners
Total Cost $767,235
Stage Two - Sell Land $160,000 Battle-axe Land of 600m2 to be Sold
Less Agents Fees -$ 5,000
Net Proceeds $155,000 Used to pay down debt
Net Cost Ater Land Settlement $612,235
Valuation of Duplex @ $360K per side $720,000
Equity Gain $107,765 Gain if held
Sales Cost of Selling Duplex -$ 21,600
Net Cash When Sold $86,165 Net Proceeds if sold

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