Build your property money tree

In the vast range of choice available in the current property market, one of the best ways to obtain the biggest return by every measure is the multi-dwelling block.  Managed well, they are the closest thing to a money tree you can get.

Just like every other property strategy, this approach needs to match your goals, interests, risk tolerance, and budget.   However, within the multi-dwelling block classification, there’s a wide range of projects that can match most budgets, timelines and levels of involvement.


Before we get into more detail, our classification of multi-dwelling blocks includes the following:

  • Splitter blocks – where one house or duplex can be added to the back of an existing home
  • Duplex / semi-detached blocks – where an existing house can be replaced with a duplex or two semi-detached homes
  • Town house / villa blocks – where three or more properties can be built on a block

Anything more complex fits into the ‘high density’ classification that would include unit blocks and high rise developments.  Of course, these blocks can also be lucrative however they are best left to investors with a much higher level of experience and (hopefully) skill.


Multi-dwelling blocks can be a great addition to a general investor’s portfolio.  The main benefit is the flexibility to adjust your strategy as your situation changes –eg – starting with a minor renovation when the property is purchased, through to a partial or full development at a later stage.  While there are key issues that need to be considered, a multi-dwelling project is often no more complex than building a house.  Yes . .some houses can be complex to build, and similarly, some multi-dwelling blocks.

The way to mitigate risks is good due diligence, but the absolute base point is to purchase the right block.  If you already own a block that you know has development potential and you are considering selling, it may be worthwhile investigating the pros and cons as you may find it easier than you think to complete the project yourself.

Property treasures hidden amongst us

Blocks with development potential are available in many suburbs across Australia, and more emerge as councils rezone areas in a bid to provide for population growth.  Identifying quality blocks can be a very tricky process though.  Miss a step and you could be in for a nasty surprise further down the track.

Key items to consider in block selection include zoning, width, size, slope, flood and bushfire overlays, heritage issues, trees, surrounding infrastructure and neighbouring structures.  Next, consider what’s underground – items include easements, stormwater, sewer and other services such as NBN.  ‘Dial before you dig’ services along with property analysis systems can play a pivotal role in the ‘go – no go’ decision.

Alongside your block analysis, it is critical to undertake a quick feasibility.  The most effective way to do this is to work back from a realistic value for the completed development.  If there’s a trap for young players, this is where many go wrong.  Your local real estate agent may be of assistance here, as they can be the source of not only the price points for what’s selling in your area, but also the type of property the market attracts.

Your feasibility calculations should include rental returns for the completed property, as well as build costs, holding costs (interest and rates), acquisition costs, DA fees, council contributions and any related costs specific to your site such as tree removal.  There can also be an upside to this – for example, you may find your local garden centre will purchase your established trees as they can on-sell them to larger developers.


Included below is a very high level feasibility for a town house block.  The numbers are based on  a recent purchase, however details have been summarized in order to demonstrate the range of choices available with a multi-dwelling block.

Note that selling costs are not included in this example.  If you need to sell one or more of the properties, particularly during the pre-sales period (ie before the properties are built) you will need to add extra costs of approximately 2 – 3% or more.  For example, a $400,000 town house may incur a sales agent fee of $8,000 to $12,000.

Another approach

There are many jumping off points with multi-dwelling blocks – one of which is to complete the development application (DA) process and then sell the block with the DA in place.  Other approaches will be dependent upon the specifics of your block.

For example, the high level feasibility outlined above shows a profit of $560,000.  But the fun really isn’t in the selling.  If the property was sold, you would need to factor in selling costs and GST.  This could potentially eat away at your profit margin by at least 35% ($195,000) reducing your profit to approximately $365,000.  Although this still represents a 19% return, with six properties to consider your options open up.

In an ideal situation, the house on your development block will be built far enough to the front of the block that you will be able to leave it as is, while you build five town houses at the back.  If this is the case, the following scenario can be considered.

Don’t sell?

As demonstrated there is a significant benefit to keeping the original house and building new structures at the back.  While there are other considerations – such as block access, aesthetics versus yield, and market requirements (to name a few) – it is worthwhile considering all alternatives before bulldozing the house and flattening the block.

If you run the numbers on a range of scenarios, you will uncover other opportunities.  Work with a finance broker experienced in construction loans, as they should be able to guide you through the pros and cons for each option.  If they can’t or won’t help you do this, move on to a broker who will.

Specifically, compare interest rates alongside benefits from a range of lenders.  For example, a basic interest rate from one of the big four banks may require that you pre-sell three units, while a higher interest rate from a specialist lender may mean that you get to keep all your properties.  If the difference in interest payments is around $50,000, then the ability to retain an extra three properties may be the better option for you.

The key is is to run through your analysis all the way through to the completion scenario.  This should include how you will structure loans for each property after the townhouses have been built.  If we managed to keep all the properties in our current example, the funding would be as follows.

keep all six

After you have worked your way through to what your outgoings will be if you retain all properties, you will have a base point to see the difference if you sell one, or two etc.  Keep in mind that – barring any market changes – you will obtain a better price if you sell at completion rather than during pre-sales.

Build the tree

With your block and strategy selected, the next step is to actually manage the development application process and then construction.  As a developer, your job is to select the right team.  Once again, good due diligence is required to find professionals who specialize in your council area and building type.  Remember to check their credentials and view their work before appointing them to your project.

A small block of town houses can be managed with just two key specialists – a draftsmen or architect, and a builder – although an extensive range of other service providers will be involved along the way. Each project will have its own particular requirements, issues and complexities therefore, in some cases, it may be best to appoint a project manager to coordinate some or all components of the project.

More in depth information on the range of multi-dwelling project specialists will be covered in a future article.  For the moment though, consider adding a multi-dwelling project to your wealth strategy.  You may discover you actually can build your money tree.


Buy smarter = limitless ways to build lifetime income

Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property.  A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income. 

Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.

Follow us on for regular updates, or book in for a strategy session to discuss your property questions.

Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.

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