Home' API Magazine : October 2014 Contents 52 n APIMAGAZINE.COM.AU n OCTOBER 2014
“ This led to an oversupply of land in my
opinion, which led to no demand for a
townhouse/units when you can buy a house
and land package down the road,” he says.
He’d built a block of four units on the
site but was disappointed when, due to the
neighbouring suburb’s development, the
units were difficult to sell. Upon completion
he decided to keep one of the four units,
using the profits of the development’s sale to
pay down its holding costs.
Subsequently Officer’s development has had
a positive impact on the property’s value.
“Pakenham has increased a great deal in
value. But because it’s cash flow neutral, I
believe it’s more prudent for me to let a part
of my portfolio until market conditions
justify its sale,” he says.
Vidu likes to use the equity of each
property he holds to acquire new
investments. Using this equity he prefers to
purchase sites with potential to develop, or
ones with high capital appreciation potential.
“I try to acquire sites with development
potential and use the development proceeds
to create a cash flow neutral portfolio,”
“ Therefore any site with a home that can be
demolished and redeveloped, I believe has a
huge potential for capital appreciation. Even
if it was decided to hold and rent a newly
constructed home, tenants always pay higher
for a brand new home. I believe it’s more tax
effective as higher depreciation costs can be
claimed, thereby increasing the overall yield
in the property.
“In locations where subdivision isn’t an
option, I prefer to attain sites where capital
appreciations are strong.”
For his next three investments Vidu is
adopting a strategy of extended acquisition
and settlement terms.
“I always believe when acquiring a site,
sometimes paying a premium for a lot in
exchange for better settlement terms yield a
higher return at the end,” he says.
While we haven’t really heard much of
this strategy before, Vidu breaks down the
process for us.
“Consider the holding costs of land worth
$1 million for one and a half years, while
a town planning permit and its design
documentations are completed. Such holding
costs would be at least $75,000,” he says.
“ These costs could increase significantly
if there are any delays with the council, and
delays with council are unfortunately more
often than not.
“ Therefore, instead of negotiating a site
offered for sale at $1 million to $950,000
or $900,000, I prefer to negotiate better
“ The vendor will be offered a premium
price for the block in exchange for more
favourable settlement terms.
“I’ve sometimes received settlement terms
where the settlement of the lot is subject to
receiving a planning permit or an extended
settlement on or before one year.
“Doing this ensures the vendor receives
their asking price and by paying the asking
price I’ve also mitigated my development
risks and excessive holding costs with more
flexible settlement terms.”
He’s already put down deposits for his next
three property sites using this strategy. The
first of which is a townhouse in Melbourne’s
Burwood, which Vidu says will settle
by February 2015 and is already under
construction. This property is also set to be
his principal place of residence (PPOR).
A property located in Glen Waverley
is planned for settlement by December
of 2015. And the third property located
THE NUMBERS | VIDU UDAYA
2-bed, 1-bath, unit
$300 per week
Caroline Springs, Vic
4-bed, 2-bath unit
$450 per week
6-bed, 3-bath, house
$600 per week
2-bed, 1-bath unit
Est Jan 2016
$300 per week
Glen Waverley, Vic
3-bed, 2-bath penthouse
Est Dec 2015
$550 per week
4-bed, 2-bath townhome
Est Feb 2015
PPOR: Principal place of residence
INVESTOR PROFILE n Vidu Udaya
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