Land Purchase – Planned Duplex construction & sale

​

In high growth areas there are times in a market cycle when land is hard to get. Of course, this is simple ‘supply and demand’ economics where the supply chain isn’t ahead of the take up. As such, when an agent called me in a tight market and said they had a client who was a local long-time owner and had subdivided their rural home into four blocks and wanted some pre-sales, I was happy to oblige. I selected a flat 900m2 parcel with good road frontage, designed a duplex for the site and engaged a builder. A standard process I had undertaken many times before.

​

The approximate project numbers were: land cost of $250,000; construction and on costs of $450,000, totalling $700,000 with end selling prices of $840,000 forecast. We expected to net $100,000 of profit. Some nine months later when the subdivision was completed, we settled the site, and paid the builder the contract deposit who commenced soil tests and engineering before we sought a building and development approval (all in one in this case). This all occurred just as I went on a planned surfing trip for a month. While away, I was contacted by a land developer who had just bought a new parcel ‘upstream’ planning 30 lots and wanted access to my lot for a sewer connection for their estate. I wasn’t overly keen, as it meant changes to my plans and product outcome, but I had been in the situation before of being blocked by a neighbour for services access and I didn’t want to be that guy.

​

By the time I got back from my trip they had offered $10,000 for an access easement before we had even spoken. As such, I explained my plans and status before the offer was increased again. As mentioned, I didn’t want to be the roadblock in the supply of 30 new homes, but this was going to cause delay, change, and an outcome beyond $20,000 worth of compensation. As such, I proposed to sell my land to them for $350,000 (equalling our land cost plus the projected profit). They would also agree on a handshake to sell me a block in their estate to replace the one I sold them, plus some other items irrelevant to the story here. Financially, the project was a success with us banking our projected $100,000 profit less some transaction costs in less time than forecast; a free win you might say.

​

On the downside though, I take great pride in creating homes for people to live in, and enjoy the satisfaction long after the money is spent that you can ‘hang your hat’ on homes you have conceived and delivered. Oh, and then there’s pointing these out to my kids as a selfish delight when we drive past, which really, I know will turn into lessons for them in their lives. Right now, the land still sits vacant. As a footnote, the buyer has since reneged on the other terms and I’m reminded of an early saying taught to me in business: ‘Son, just run down the road to the newsagent and ask them for a template copy of a verbal contract please...’ Just remember some people play by different rules.