[madmungo]

Hi,

I like the idea of building my own house (too many episodes of Grand Designs probably) but don't have the first clue how to work out indicative costs regarding Step 1 - buying some land in NZ.

Note - this is not in Auckland, more a bach type scenario and I haven't even started on building costs yet!

When I'm looking at sections for sale many say 'by tender' and give no indication of what the seller wants/expects to get.

Some have capital value and land value figures shown but how does this compare with the possible sale price to the person submitting the highest tender?

Say if the both those figures are $1000 (nice easy to understand figure) does the owner expect you to offer $1000 or some multiple of that number based on the possible worth of the land once developed? I.e $5000 - 5 times the land value - or would they take 10% under that figure in the current market?

I don't quite get how to use the QV website to try and work out how much other sections have sold for recently or would be worth with a house on them.

Any help gratefully received. Must go to bed now and stop having such grandiose dreams!

[david1892]

A noble sentiment to build one's own home. Can't help you specifically on New Zealand but i've been involved in a number of land deals over the years.

The trick with this is not to get carried away by the dream but to look at each individual plot on a economic basis.

Never, ever, buy a plot of land based on what an estate agent tells you it is worth. The only way is to work backwards from the final value of the property.

1) Find out how much will the finished property be worth.
2) From this figure subtract how much will it cost to build. Be careful not to just cost the structure. Factor in the costs for any groundworks that are required to create a level site and the cost of any services (water, electric,gas) that you need connecting to the site. Add in an additional 15-20% to cover cock-ups and all those extra things that you and your architect forget to include in the original spec.
3) Subtract all your finance costs.
4)The figure you are left with is the land value plus any profit you may want on the property. If the site is to die for you may not care to have some profit, most people do want some profit in the house to compensate them for all the hassle in getting the job done.

e.g.

Final value of Property $500k
Less - Building Costs $300k
Less - Finance Costs $20k
Less - Desired Profit $50k
= Land Value $130k

Always, always, let your head rule your heart in purchasing land. The financial consequence of getting it wrong can be substantial. Don't follow other people's bids, they may either have got their figures wrong or be able to get the property constructed more cheaply than you.

Best of luck

David

[IanW99]

...
1) Find out how much will the finished property be worth.
...


Whilst very good advice given, it sort of still comes down to the initial problem of how much would the finished property be worth?

Some things to also consider when buying a section...

Check out what services are already connected to the site and if not, then what costs to get them there / provide alternatives.

Costs to develop the section so that you can build on it, some sections cost more than others to lay the ground work.

If you are looking for a view, are there any other sections availalbe in 'front' of yours that could later be built on i.e. that wonderful view may not be so good if there are other houses blocking it.

Worth checking on any covenants on the land to ensure that what you are proposing is acceptable e.g. some sections only allow single storey properties which may be an issue etc.

Check out any other proposed developments in the area, some may make the property more desirable in the future whilst others may not.

Ian

[hball]

[QUOTE=madmungo;281554]Hi,

When I'm looking at sections for sale many say 'by tender' and give no indication of what the seller wants/expects to get.

That is because the owner is hoping that someone somewhere will be so in love with the property that he will offer an extremely insane figure just to beat any other offer on the table!!!! Think about how it works - if you really want the property you immediately think that others do as well. You will then spend hours trying to second guess the limits others will go to and then add a bit more. Recently a property near here went to tender; 8 bids around the $350k one just over $400K and one at $430k. Guess who won the tender!!!

True value does not come into it.
:laugh