Forum Replies Created
Hi Aloha
We have just recently completed similar development in Brisbane. Does your TDC of $700 include Council contributions? They are very expensive here in Brisbane, for 3 townhouses we are talking some $70K. Ask your town planner about it! And choose your building designer/architect based on their design skills also, not the price only.
Good luck and have fun!
We have 4 townhouses in Camp Hill (close to Annerley), brand new, recently completed. We have researched property managers and have chosen RE/Max Property Centre Toowoong. So far we are very happy with them, from the beginning: they have secured a good tenants for us with a very good rent. They communicate with us on time and are avaliable all the time. They are not selling agents, as well, just property managers. If you want a name of their business manager, just e-mail me.
I have seen people developing wrong product for a market.
Have you checked what would be the best product for a market? Planning rules may let you to develop 3x3bed townhouses, or 330m2 gross floor area (terminology varies from council to coulcil). However, same allowed floor area may be distributed among 4x2bed townhouses or units. Or , maybe, the best product for your market would be 4 bed house on a small battle-axe block?
real estate agents+knowledge of your market is a first step.
When it comes to planning permit, I think it would be better to engage a town planner and a building designer. Architects are very expensive and more often than not not fully familiar with a council's operations.They can design, but pushing your way trough the conuncil is not their main game. Find a town planner who has fast track accreditation, meaning that , if your proposal is fully compliant, you get your DA out of council (approved) in 2-3 months, instead of 6-12 months. As far as I know, all councils have that system in place. You can still use an architect over building designer, if you wish. Obtain a quites from both, and see how you go.
If you have some already built project that you like, jump on local council's website and look up DA documents-on the drawings you will see who has designed it. then go there.
You will need also hydraulic, structural and civil engineers, surveyor. Best to use ones recomended by your chosen designer. However, aslo ask for at least two names so you can compare their quotes.In building contract do not forget to state liquidated damages: penalties builder has to pay to you in case he is late with competion. It is usually based on anticipated loss of rent/week.
Do not use a builder who does not have experience with building a multi unit development. House builders can not anticipate costs for multi unit development, neither the time frame. It is first hand experience-we have made that mistake!
Good luck and anjoy the ride!
Ballerina, B.Arch.
I am involved in a JV at the moment. How it is done:
new company was registered and company owns a land and has a loan. All JV partners are directors, however, different JV partners own different proportion of shares (based on percantage of $$$ contributed ). All cash contributied went into company's bank account. When project is completed, profit is distributed per share. That way all involved people are in control and it is simple for a lender. Aside we also have a detalied JV Agreement, prepared by solicitor.
Hope this helps-at least as an idea.
I agree with all comments so far. On top of that: banks are very reluctant to lend against anything smaller than 60m2. Have you checked with the lender (s)?
Going shopping is the best with loan preapproval in your pocket-gives you a barganing power and peace of mind.
Highrise apartments usually do not have satisfactory growth. You have to research past performance of the same product in the area.
Why don't you look at townhouses, in a smal complex, with much lower body corp?
Keep looking and consulting!
Also, you have to know your outcome. If you intend to sell new houses, GST would be applicable. If you keep them as a rental property, different taxation….
Hi NoviceInvestor
You should really put the whole feasibility together, prior to purchasing a block. We have recently completed 4 townhouse development in Camp Hill, so I know the area very well. If you intend to build, you have much more costs to cover then just a subdivision: certification, consultants, surveyor…I was looking at AG 18 months ago and couldn't find possibility for even neutral position, not to mention positive. Maybe things have changed in 18 months? Have you checked recent comparable sales in the area? If you have a servicability for a loan AND have enough deposit, banks would not refuse your a loan. It is normal residential area, developing one. Something is missing here?
Hi Buri
Thanks for your comment. We have researched the area quite a lot and are aware that at the moment Dalby is not even near as flash as Chinchilla, Miles etc. Rentals are still in 'normal' range and newer stock is renting harder then older, affordable dwellings.Development activity exists, but not in a excessive range. Question is: is it a time to enter a Dalby market NOW, when most of the heads are turned the other way? We have couple of more days to make our decision.
Development feasibility is good and 20% profits are to be made on the development, if townhouses are sold. If kept as a rentals, help of negative gearing would be required for neutral position. And that part is what I do not like. Current rentals do not support develop and hold strategy.
So, we are closer to develop and take profits out approach.<moderator: delete advertising>
Hi Crusty
You have just described at a length how I see Metropoles project development advice, based on many other people's experience. As an architect/developer, I got in contact with people who wanted to develop their development sites, chosen by Metropole as an buyer's agents/advisers. Most of the sites in question didn't stack-up! By developing people would make little, or even lose $$$, meaning that no bank would lend them for a nonprofitable development. When we used Metropole as a buyer's agents, we actually had enough knowledge to check their recommendations ourselves, and guy who was allocated to us happened to be á very knowledgeable. He left Metropole shortly after.Anyway, learning from this Forum/topic is to stay away from Metropole. They do not know the numbers and their advice is not good, at least in too many cases.
Hi Key Strategist
Thanks a lot for your comment. I am definitely going to do that.
It is not all in size. Good design is what matters, a good colour scheme and nice site layout. Too many developers use draftsmen with sub or no design qualifications, as a cost saving (though minimal, when we look at overall development cost!). Then they end up with really horribly looking developments. Plus cheap finishes… I regulary get bad design, already DA approved, for a ''repair'', when developers can not make a presales because of the ugliness of the design. (I am architect/developer)
Out of our personal learning, best tax savings happen if you keep new properties as an buy and hold investment. It may work for your as well, since you are both PAYG professionals, paying regular tax. Your investment wouldn't be for you gusys to cover a living expenses, at least not in the short term
Answer to Luke:
When project is done, you approach a bank for a new loan, based on the new value created. You get more money out since LVR is higher then for construction/development finance. If project works (stacks up from the beginning), you should have enough to pay yourself out. If project has a very low margin, then you may not have enough. Your feasibility is the first point to show whether you would be able to get your initial investment out.Who is the borrower, depends on the initial structure and where initial investment came from (cash, loan to trust, loan to the person). For that one you have to talk to your accontant first, then to a mortgage broker. Every situation is very personal and one size do not fit all. That particular project I was talking about was done in personal name, so all loans were to the same people/names. We have others, which are set up differently.
Answer to Kosta:
Glad to help. I am an architect, with an engineer husband, and not a big developer. More like extended Mum & Dad investor.
I also needed lots of good advice couple of years ago. And still do.
However, to talk further, send me an e-mail.
Go and see a good property accountant ASAP. Intention is what makes a difference: if you develop with the intention to hold and rent out (for at least couple of years), it is one story… If you develop with intention to sell for a profit, another…. However, I am not an accountant-just sharing what I have learned. Do not do anything without a solid proffessional advice, and your personal plan.
crusty wrote:Hi Landt
We have used them on two accounts: as a buyers agents (in2008) and as a property managers (2009/10). As a buyers agents they have done a great job for us. As a propert managers-we changed them recently. We werent happy. they change staff in property management section too often, employing very junior personel, who did not deliver, as far as we are concerned. We are experienced property developers and know what to expect. they rental estimate was wrong (under the real value). Which was proven shortly, when we secured tenants easily for a 10-20 % higher rent then their estimate.
Are you looking for a JV partner? If so, we may be able to connect you to someexperienced people.
Hi Ballerina would you like to give an indication of the yeild and holding cost of the property? All the staff seem to change Eddie the strategist left and catherine the BA left. I think they may have found some morals. I was not impressed with the <moderator: delete language> spin and attiude of the new strategist. I also find it strange how negative comments about the above are removed from sommersoft forum.[/quote]
Hi Crusty
Properties in question are three new townhouses, developed by us. old house demolished, three new ones built. Rental yield achieved: 5.7%, thanks to horrible low valuation. Location: Brisbane inner suburb. Rented out for $440/week and $470/week. Metropole's rental estimate was $380-$400. We got our investment out (by refinancing) and are left with 20% equity in it.
(I wouldn't waste our time on Metropole any more).As for a holding costs, it is not so simple answer. It depends on many things: entity (who owns a property), tax breaks/if applicable, interest rate, LVR (how much is borrowed against the property)…
For us this properties are neutral, at the moment, since we are using funds to acquire more properties at this point of time, rather than being taxed on the profits made. For now, at this stage of our investment plan.Where would you like to develop? Being part of the group is safer way to go. However, with 1 mil equity, you can do a lot. Just make sure to really know who you may be working with.
Sorry all because I have addressed the wrong person: I meant to address Patcon.
Hi Landt
We have used them on two accounts: as a buyers agents (in2008) and as a property managers (2009/10). As a buyers agents they have done a great job for us. As a propert managers-we changed them recently. We werent happy. they change staff in property management section too often, employing very junior personel, who did not deliver, as far as we are concerned. We are experienced property developers and know what to expect. they rental estimate was wrong (under the real value). Which was proven shortly, when we secured tenants easily for a 10-20 % higher rent then their estimate.
Are you looking for a JV partner? If so, we may be able to connect you to someexperienced people.
It depends where it is. Different local authorities/councils have different rules. Check local council for planning rules (zoning etc) and definitely ask for copy of all approvals.
