Hi all,
First post on here, and new to investing.
I have been looking at a 1000sqm property with an existing dwelling in a small beach side city.
I would like to develop the property into 2 or possibly 3 townhouses?
Would you be able to get 3 town houses on a block this size comfortably?
Also, I believe I have enough income to carry the property comfortably, but may exceed my borrowing limit to complete the construction, or can I use potential future rental to increase my borrowing capacity, as I obviously won't be earning any rent during the demo and construction stages.
Any sort of guidance pricing for 3/2/2 townhouses.
What other costs will be incurred to change the property from single dwelling to multiple dwellings.
How long does this process normally take?
Cheers,
Ross
Hi Ross,
It depends on the zoning of the property, this will be what determines the density of what you are allowed to build. You need to check with the local council, or a town planner or architect/building designer who works in the area should be able to advise you.
You can definitely fit 3 x 2 storey townhouses, but single storey villas will be less expensive to build and appeal to a wider market. The zoning, setbacks, open spAce and parking requirements will determine if tHey will fit.
The future rental income can be considered by the bank for serviceability purposes. Are you planning to hold or sell the townhouses?
Also consider retaining the existing house and building a couple of townhouses behind it. Often this will provide a superior return on investment.
You want to make sure that you end up with the right bank that will treat this as a residential loan. It will allow a higher lvr. Shop around the banks and 2nd tier lenders or see a broker which has alot of experience in this type of development. Don't be a brokers test case though.
Allow 18-24 months for your first development.
Costs to include:
Turnkey build
stamp duty if purchasing the existing dwelling
surveying
engineering
building designer
council da and ba fees
council contributions
interest
Connections – water / gas / electricitypotentially gst – see an accountant who specialises in property development
legal fees
real estate agency if selling
rates
water
demolition
soil test
build permit
Construction cost varies greatly by location, build type and civil engineering costs.
Hope this helps.
Matt
Matt has hit the nail on the head. The development will hinge on the zoning that you have as well as what the DCP contains ie it may be zoned appropriately however may not meet the other site constraints in the local planning requirements. Speak to an independent town planner to see what they say.
Thanks, Matt and Scott.
that info helps heaps.
Will follow up a town planner asap and go from there.
The building is approx. $100k below the rest of the market as it requires a fair amount of work.
I would not imagine the costs involved in bringing the property up to the rest of the market would be half of the potential return.
Would it be better to demolish and build 3, or renovate and build 2.
Obviously all depends on town planning outcome.
Depending on total profit, and serviceability, I would like to retain all 3 townhouses and use the equity to move into the next project.
I was looking at doing this project at a LVR of 90%. Is this do able, or would a lower LVR be required?
Is it worth grabbing the property now and sitting on it for 6 months till I have the extra cash for a lower LVR?
Thanks again,
Ross
Hi Ross
Yes it is possible to do the loan at a 90% lvr although if it is done as a standalone deal the LMI might be fairly expensive.
If you are intending to keep the properties long term then might be an idea to do it as a residential loan rather than a Commercial loan as the rate and set up costs will be cheaper.
Have to remember many lenders will not allow multi units on the 1 Title so make sure your Mortgage Broker is au fait wiith funding such a project.
I have just settled a couple of similar deals with other forum members and the original lenders they were intending to use would not have done more than 2 units.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
I have my current property with westpac and have a good relationship with them.
I have spoken to them about using a DT for my future investments and they are fine with that, they will lend to the same LVR as long as I guarantee the loans.
Would westpac do this project for me as a straight forward package?
Or will they require a lot more paperwork?
Obviously I will need, DA, BA, building plans, fully costed and quoted.
But I can do all this after I have had the offer accepted by the vendor, as I can service the property without requiring any additional income from it.
I am also looking at purchasing an industrial property with my business partner through a unit trust and leasing it back to our company. Can you help with financing this?
What is the max LVR for the above type of property?
We are looking at approx $350,000 in Pakenham, Victoria.
We have put a proposal to the vendor that we lease the building off him for the agreed lease rate with an option to buy it for $350,000 within the next 2 years.
If the vendor agrees to this are we better to purchase it asap, or sit on it, hopefully get some capital growth and purchase it towards the end of the 2 year clause?
Basically the lease costs will cover the repayments anyway.
Thanks,
Ross
Hi Richard,
when are you back at work?
would like to give you a call and discuss my plans and options
Thanks,
Ross
Hi Ross
Hard to know what Westpac will do as it is not their normal policy.
Normally i would say No but push them for a rate discount under the Pro pack using a DFT.
If not we can do it elsewhere.
Yes we can do an Industrial unit and the lvr will depend on whether it is owner occupied or investment.
Certainly for a cheaper rate of interest and set up costs you would want to try and keep the lvr to 70%.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Purely depends on zoning and the council restrictions. Each council conditions vary enormously.
Have you consider Sepp 5 development?
Re finance too many questions before an definitive answer could be given but I would be looking at the lowest possible LVR to leave you with the fat needed on a multi dwelling dev site.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Ross.Poulter wrote:Hi Richard,I have my current property with westpac and have a good relationship with them.
I have spoken to them about using a DT for my future investments and they are fine with that, they will lend to the same LVR as long as I guarantee the loans.
Would westpac do this project for me as a straight forward package?
Or will they require a lot more paperwork?
Obviously I will need, DA, BA, building plans, fully costed and quoted.
But I can do all this after I have had the offer accepted by the vendor, as I can service the property without requiring any additional income from it.
I am also looking at purchasing an industrial property with my business partner through a unit trust and leasing it back to our company. Can you help with financing this?
What is the max LVR for the above type of property?
We are looking at approx $350,000 in Pakenham, Victoria.
We have put a proposal to the vendor that we lease the building off him for the agreed lease rate with an option to buy it for $350,000 within the next 2 years.
If the vendor agrees to this are we better to purchase it asap, or sit on it, hopefully get some capital growth and purchase it towards the end of the 2 year clause?
Basically the lease costs will cover the repayments anyway.
Thanks,
Ross
Hi Ross,
Is the development site in Victoria. If this is the case then you will be able to work out very little by just looking at the zoning. It will almost definitely be Res 1 or Low Density Residential. If its not Res 1 or on of the Business zones that allows residential construction or Mixed Use, then you can't develop. If it is one of these you then need to have a look at whether there are any overlays that might restrict development and also the local planning scheme.
With regard to your comments re Westpac, no customer has a "good relationship" with the credit people in the bank, and these are the ones who make the decisions in the end. Westpac is probably the worst option of the big three, especially if they end up pushing you into the business bank, as the credit will be done in India for a small business deal. I suggest you keep your mind open with regard to lenders.
APerry wrote:I suggest you keep your mind open with regard to lenders.A really good piece of advice when it comes to investing. Definitely best to speak with a mortgage broker and let them find the best deal for your situation.
TheFinanceShop wrote:Purely depends on zoning and the council restrictions. Each council conditions vary enormously.Shahin,
This same advice has been given by several posters and it is just not correct. Zoning obviously matters, in all probability the land is Res1 if its in Victoria, but this in itself tells you little. The zoning and overlays dictate which part of the local planning scheme applies to the specific property.
Council doesn't place restrictions, the State Government does, council is supposed to make sure developments are within the confines of what is allowed under the planning scheme, which includes common and local provisions. If they fail to do so they may have their decision overturned in VCAT.
It really depends on where the development is. In gladstone where I am developing, zoning tells you everything and there are massive differences depending on what density it is. 1600 sqm could allow anything from just 1 house to 16 units.
While there are some overlays for things like wetlands, the process that council has been through to determine the zonings nominated as high density, has ensured that they are appropriate for this purpose.
There are other restrictions that you will face in VIC, like large trees, that aren't an issue where I develop, so it really is location specific. A good town planner or architect will know what the appropriate rules are, as well as how they are interpreted and under what conditions council are willing to relax what is officially written in the zoning rules. This kind of knowledge comes with their experience dealing with the council on a regular basis.
This may be correct in Victoria but its simply incorrect when it comes to NSW. Zoning is paramount. You can just go and build units on a block of land zoned 2a in Kuring gai council or any other council for that matter. In NSW each council has specific rules and policies that must be adhered to. The exception is the Sepp's.
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Hi guys.
Thanks for the feed back.
I am looking at doing this project in whyalla SA.
I don't seem to be able to find a town planner there though.
Can anyone recommend a good architect in the whyalla area?
Cheers
Ross.
I think before getting too far down the development path and getting planning advice, do a quick back of the envelope estimate of the development cost vs end valuation.
In remote smaller towns, construction costs are often high and i would be surprised if the end valuation would justify the cost at current market prices and get enough profit margin to make it worth your time.
What are you hoping to sell a 3/2 townhouse for?
Hi Shahin,
Do you have a link to the NSW planning website, or a site where it gives you this specific information. Thanks in advance.
And yes every state is different which is why it is sooo important to have the right people doing the work for you.
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeGreat point Mattnz.
It's not worth any of the preliminary work if you are not going to make any money!
Have you looked at any sites currently being developed and talked to architects etc who are working on those sites? They may be able to give you more information on the block you are looking at.
In Vic (and Alistair will laugh) I can vouch for it not being just about the zoning, but about overlays, setbacks, trees etc etc.
I can build 10 apartments, my next door neighbor can have only have 2-3 units, zoning is exactly the same. My block has a design and development overlay. There is also a height restriction of 7.5 mts (2 storey), two streets away it's 4 storey 14 mts. You really need to find an expert who deals regularly with that council, knows all the ins and outs, what's getting approved and what's a no go.
Good luck, let us know how you get on with it!
Cheers
D
DWolfe | www.homestagers.com.au
http://www.homestagers.com.au
Email MeHi Ross,
Might be worth taking a look at the Development Plan for Whyalla, so that you can see what zoning your block of land is in, as well as all of the requirements around what can and can't be built, how small an allotment they will let you create in that zone, etc.
I know from experience that various parts of the Mannum township are zoned differently, which can restrict your ability to subdivide, etc.
You can find the Whyalla development plan here.
Hope that helps.
Kevin.
Hi Mate,
Here is the website for the NSW Planning Policies however remember if it doesn't fit these policies (and in most development scenarios it doesnt) then you need to refer to each of the council's DA guides.
http://www.planning.nsw.gov.au/list-of-state-policies
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
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