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When considering buying a block of land to build your dream home on, it’s important to understand all the costs involved before you take the plunge. Failing to do so could turn a profitable project into a financial blunder.
Many first-time builders consider the land purchase price and construction costs, but there are other financial aspects to consider, including:
We spoke to Ray Chua, buyer’s agent and property acquisitions advisor at Momentum Wealth, about these costs and why you need to consider them before buying a block of land.
Ray advises local councils require landowners to abide by different requirements and regulations, depending on the locale and the type of land in the area. For example, some councils will request a landowner to pay for and arrange a storm water assessment report due to the nature of the soil in the locality before they build.
Other council requirements that may induce a cost include:
“There could also be costs to meet building compliance standards for specific areas, including areas near airports or those prone to bushfires, which also needs to be considered,” Ray said.
“Very commonly I see buyers simply assume that single storey buildings cost $200,000 – $250,000, without factoring in site works and building variations,” Ray said.
He recommends those looking to build a home should also consider civil works and engineering costs to prepare the block of land. This can include:
“A builder or building consultant would be able to advise you as to what costs you can expect to pay when developing a block of land. A buyer needs to factor in these costs when assessing the profitability of a block they are interested in,” Ray said.
In addition to the actual purchase price of a block of land, Ray advises those looking to buy should consider the additional costs involved including:
By factoring in these unexpected costs you can ensure your budget and expectations match, and further pave a smooth path to successfully buying and building on a block of land. Consider speaking to a buyer’s agent who is well versed in development sites in order to reduce your risk, avoid mistakes and achieve a positive outcome.
“Anyone can buy a property to develop, but it’s easy to make mistakes throughout the process. An experienced buyer’s agent can not only identify suitable sites, but also build contingencies and safeguards into the contract to double check and investigate all potential development issues.
“Expert buyer’s agents will also keep up-to-date with the latest building costs, and how these fluctuate with market demand and supply, as well as changing fees and charges,” said Ray.