Hi there Sydneyboy,

I am looking to do a similar thing in Perth, so I am not looking at being your investor, but did have a few questions to ask you and some suggestions that may help you.

Do you already have a DA approved on the site you are planning to develop? Have you done a full feasibility study? The reason I ask is that you should be able to give the investors an idea of the amount they should expect to put into the development already. Providing them with more information (ie how many bed and bathroom, an idea of the quality etc) gives them more confidence as to what they are investing into.

If you are offering the investors the house/unit at 20-25% below market value then you may have difficulty getting finance from the bank for the developing. The bank wants to see that the town houses / units are going to sell for market value.  Additionally when you try to sell the other town houses/ units (not the investor ones), if a buyer wants to know what the others sold for then you are at risk of them wanting to purchase it at the same low price.

An alternative is that you offer a cash back to your investors. The house/unit is valued at current market, the investors pay market price but you include a cash back on settlement in the contract. With this sort of investment you would usually have the investors release their deposits to you so you can get started on the development. At least that is how I understand is the best way to do it I am no expert, but I hope this helps. 
 

I'm fairly new to this forum, so I am not sure how helpful my comment is, but I do live in Perth and do have some info that may help from the rental aspect of things.

I concur with Tony13 on the amount of apartments that are going up in the City –  However I also have a number of contacts who have been looking for rental properties across East Perth, South Perth, Subiaco and Leederville due to wanting to live close to the city, but not in the city. I spoke to one of these contacts yesterday and she has viewed over 5 properties over the last 2 weeks and has said that there was overwhelming response of hopeful tenants wanting to secure living in these locations. 

At one of the viewings in Subiaco, she said tenants were bidding how much rent they would pay to secure the location, Rent was set above $500pw  already. My contact has finally secured a 6 month contract renting in Subiaco for $500pw, and that is at the lower end of the market because it is such a short lease (owners moving there in 6 months). Her apartment is reasonably new, secure and right near the Subi markets/ subi station and close to night life.

I hope this is somewhat helpful to you.