Would you build a house with a stranger?

What if you found your future neighbour and built a home together?

We all know the challenges of finding the right home in today's market. One option to solve this challenge is to build a duplex with your future neighbour.

If you find the right site, you can team up with another home buyer to purchase land and build. You can each live on one side of the new dwelling and, assuming the project is managed well, the homes will cost you less than if you bought them on the open market after they’ve been developed by a developer.

To give you an idea of what’s possible, take this site in Caringbah in Sydney’s southeast. An older home at this address sold in November 2019 for $1.57M and a beautiful set of duplexes was built in its place. Of these, one sold in November 2023 for $2.27M and the other sold for $2.6 million in September 2024.

That’s revenue of almost $5 million and, say it cost $2 million to build*, that’s a profit before tax of $1.4 million. Once you pay tax (GST or capital gains) and account for the time value of money, the profit is lower but still good.

Developers typically aim for a 20 per cent margin (profit over cost) in their feasibility study. They’ll often accept a bit less, like 15 per cent. In this example, they might have achieved a 20 per cent margin with a profit after tax of $700,000.

Imagine if you could take this margin off the cost of your future home by developing yourself.

You could build with a neighbour-partner and each take one of the new properties. The cost becomes $1.8 million each and you each get a home worth $2.2 million or more. With probably no tax to pay when you sell if it’s your principal place of residence.

[You can do better with investors (if you can't get a big enough loan) rather than a neighbour as partner but a partner shares more of the risk. A separate blog on this is coming].

This $1.8 million cost of your brand new duplex home compares with buying the old home ($1.6 million) and renovating (for how much??). Under that option, you’ll have a larger home (with more maintenance burden) but it will cost a lot more to get the same standard. Depends if you want a brand new home with all the mod cons and control over all the variables e.g. layout and number of rooms, smart and sustainable features.

There are lots of risks and complexities to manage when you develop but Flippable can help you to navigate this.

*This cost is based on lots of assumptions including a $4,500 per sqm cost to build, a 8% cost of debt, a 15% opportunity cost for equity investment, a two-year build period and inclusion of project management costs. There will be swings and roundabouts in all these figures depending on the individual circumstances of the developer or homeowner.

Flippable: Your Redevelopment Ally

Flippable wants to make it easier for homebuyers to develop duplexes and dual occupancies for themselves. We want to make the process as simple and risk-free as possible.

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