House & Land Package Purchase 1+1 = 2.2

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I have built most of the homes I have owned following the 1+1 = 2.2 theory. If it doesn’t add value, then I don’t do it; I wait and find one that does. Why 2.2? Well, typical financing rules require a 20% deposit, so the 2.2 allows the opportunity to extract the 20% capital (deposit) we injected into the property should we wish to use it again for another project, pay down non-tax deductable debt or go surfing! (Now hang on, there’s taxation, banking & other rules that apply here, so please don’t take this carte blanch). Disclaimer over, so back to the project. This package was put together by a builder I knew, not to make the 2.2, but to generate building work for their construction business. You see, they bought a block of land, subdivided it and created H&L’s to sell their land on which they would make a profit then do their building thing. Clever guys who are now large developers and have a win-win situation by leaving something on the table for the buyer to encourage the transaction. The result is this home is still held and worth four times the purchase price in >20 years. Home builders can be a great source of these value add propositions, but the numbers are the first gate, second gate their reputation and build quality.