Forum Replies Created
Project home builders are cheaper than small builders. That's not so much an opinion as an understanding.
The reasons are manifold and have little to do with quality of finishes.
In my opinion, these are the two main reasons:- There is less risk, and therefore less margin when building the same thing many times. Think of it this way; there is no doubt that the second time you built from the same set of plans you would do it quicker, cheaper and better than the first time. Imagine then how efficient you would be the twentieth time.
- The materials and labour charges are quantified through repetition. That is to say, the suppliers and tradesmen know what they have to do or supply and compete on efficiency and cost.
I am currently doing some work on developing a "project home" type of offering for dual occupancy or duplex development, but it's not that easy. There are issues with the levels of sophistication required for something that needs to meet town planning standards that otherwise does not come into play for single dwellings.
Sash,
Have you solved the problem?
If not, do you need some help?Figuringitout,
I like the tag!
You already have a lot of good information so I won't burden the thread unnecessarily, but I will make a couple of points that may be of some use.
- You will almost certainly need a full Town Planning Permit (TPP) application to subdivide the land, regardless of whether you intend to build or not.
- 1,000 m2 or more (the old 1/4 acre block) may give you enough room to subdivide into three or more. This may be worth considering as it costs much the same to subdivide into three as it does two.
- I do a lot of these proposals and the maths is tied to the risk. I'll expand on that further below.
- The cost to land a TPP will be in the vicinity of $25,000.
The risk/reward scenario (why build when you can just subdivide?)
- The first risk/reward hurdle is permits. Once you have the permit you have the ability to make a decision.
- The second hurdle is subdivision. It costs money to subdivide – provision of services and conforming with regulations.
- The third hurdle is building. This is taking on all the risk, and there is an expectation of commensurate profit.
At each of these hurdle points you should – assuming your advice has been sound – be able to make a profit.
Selling land with a TPP is the least risk, and often the least reward.
Selling part of the land "with plans and permits", after subdividing, is a moderate risk (in my opinion) for the reward.
The construction is where most of the risk appears to reside.
A prudent approach is not just to calculate the potential profit, but also the potential risk. And when calculating that proential profit do so as a percentage, rather than a dollar amount.
Good luck with your endeavours
Anand, thanks for the property details.
And, for the benefit of others, Anand is happy for me to publish the advice.
It may be of interest to others considering the same sort of project.
I have omitted any identifying details.
Thanks Anand, for allowing me to share the information.
Anand,
I have received your email and note you have previously approached us about another property.
I will, as promised, give you my opinion, however, my advice now will be the same as the advice I gave you then.
The property will be able to accommodate three dwellings.
These dwellings would be small, perhaps too small to make the project viable.
For a dwelling of two bedrooms or less, one car space is required, and for a dwelling of three bedrooms or more, two spaces are required.
Along with this, there are private open space requirements to meet.
So, mathematically, there is only so much that can fit into any given space.That's my opinion.
My advice is to carry out a more thorough assessment of the feasibility of the proposal, in the context of the site's opportunities and constraints.
The way we do that is by carrying out a Property Development Assessment.
This assessment gives us the information we need to give you the qualified advice you, as the investor, must have in order to make informed decisions.
One last issue, Anand. Would you be prepared for me to publish the advice on PI.com for the benefit of others?
Above is the opinion I gave Anand.
It is the usual sort of stuff we deal with, and it is not always straightforward.
So the short answer to the original question is yes, three units can be accommodated.
However, this may not be the best outcome for the project.
The frontage is unusually wide (the most common frontage is 15m (50')) and this is an advantage.
There is not a lot of precedent in the area, and that can be a disadvantage.
I have not researched the planning scheme or overlays for the property, nor have I sought advice from the municipal planners at Whitehorse on the particular or strategic planning issues affecting the property or its surrounds.
The less formal feedback is that it's "touch and go" and there may be other options worth exploring.
Are two four-bedroom dwellings more feasible than say three two-bedroom dwellings?
Is an apartment typology more appropriate?
Can all or part of the existing building be incorporated into the proposal?
What strategic needs does the council have?
The advice received and the decisions made early in the process will have a profound effect on the final outcomes. Anand seems to me to be a sophisticated investor, and should he go ahead with this sort of project his exposure will be greater than $1m, and that's a lot of money. Decisions about typology, yield, size and complexity need to be made early in the process, and the implications need to be understood.
My closing comment here is in no way a reflection on my dealings with Anand. I don't know Anand well, but he is polite, does his research and seems to be well on his way.
But here goes.
Most people I deal with are happy to spend say $20,000, late in a project, to upgrade finishes to a property. The investment/expense seems less consequential in the context of say a $600,000 building contract.
Many people however recoil at the idea of spending say $500 commissioning an assessment. This always surprises me.
Perhaps I can give some feedback on the broader subdivision concepts.
- Land is usually more valuable in its parts than as a whole. In that regard, development approval (DA or TPP) is currency.
- If there is an existing dwelling that is in good condition, try to keep it. It may not always be possible, but it's cheaper than replacing it.
- Seek funding with a clear plan. This should be around what is there now, how you intend to develop, and what the exit positions are – for you and the potential financier.
- If you are considering the redevelopment or subdivision of more than one property, then put them in a line and establish a timeline with some overlap, to reduce exposure.
- Base you decisions on the feasibility of the project. What it will cost, the time it will take, the end values and the risk along the way.
- The margin as a percentage is at least as compelling as the profit projected. That is to say, it may be more prudent to invest $500,000 to make $100,000 (20%), than spending say $900,000 to make $150,000 (17%).
Much of this has been touched on in the responses above, but the critical issue that I generally come across when helping clients is the need to have a plan – to understand what you are doing – right from the start.
Good luck with your plan.
Of course.
Send it to the enquiries email at my website and it will find its way to me.
Just mark it "attention Christian".
I like the website DWolfe. Sharp.
Town planning seems to be a little about what you know, a little about who you know.
And a lot about how you put the knowledge into practice.And yes, a back-flip is not unheard of!
Municipal planning schemes are complex and often overlaid with strategic planning objectives that can vary widely within a small area. Understanding not only the zoning, but the strategic goals that underpin that zoning, can be the key to delivering the best possible outcome for any given allotment.
On the face of it, 3 town houses on 650m2 is "tight" however a 20m frontage is generous and allows for more that one typology for the land use. The orientation of the land will also have an impact on the design opportunities.
In very broad terms, most councils will encourage higher densities where one or more of the following occurs:
- Close proximity to quality public transport.
- Close proximity to shops and employment.
- A land size of greater than 1,000m2 within a R1Z.
- A corner allotment, or dual street frontages.
- Location within an activity centre.
Or are these stories stretching the truth and coucils generally have sets of rules that can not be bent or broken no matter what?
Luke, the councils certainly have rules that cannot be broken, but there are a number of subjective controls that can be manipulated to help get a proposal over the line. As for bending rules, this has as much to do with understanding why rather than how a council will grant approval for an application.
I think that is a bit of hooey, the planning scheme is in place for guidelines.If you know somwhere where council is allowing more dwellings rather than less, let me know, I'll be there.
DWolfe, sound advice as ever, but I will have to politely disagree in part. All councils have areas that are "informally" deemed more appropriate for higher densities, as well as those areas formally earmarked for higher densities. I spend a lot of time dealing with municipal planners and these things come up from time to time. Discussions with strategic planners within municipal planning departments are also often quite illuminating!
There are also trends that can be followed, and to a lesser extent, zoning changes that can be anticipated by understanding the proposals being considered by the DPCD.
Kenny,
Most planners know a little about architecture.
And most architects know a little about planning.I have both working in my office, and I'd say the architects, on balance, have a broader knowledge.
To answer your questions:
- Is a town planner the right person? Yes is the simple answer, but a planner will need to rely on the expertise of an architect or designer if the proposal is constrained by size, orientation or other complexities. A good planner will have ready access to this expertise.
- What do you have to do to develop your property? In most situations a Development Approval (DA or TPP) will be required for the proposed development. A planner or an architect will point you in the right direction, and a good one will have a clear process for you to follow.
- Is there anyone who can guide you from start to finish? Yes, there are many! Find someone who works in your area and who has the skills you require. Someone who has experience in handling the type of project you are proposing.
- How do you know if your proposal will be approved? A pre-application meeting with council, attended by your architect, designer or planner should leave you with enough feedback to make a decision as to the merits of the proposal.
While private practice is not necessarily in opposition to the municipal planning authorities, we do have a different objective. We are trying to achieve the commercial (and other) development objectives of our clients, and it is incumbent on us to find the best way to get your project approved.
Best of luck with the project.
It's technically possible. Perhaps!
The issue is that there are several triggers for the requirement to use a licensed builder.
If the works are of more than a certain value (I believe it's currently $12,000)
If the works are "structural" in nature.The tricky part is that a building permit will be required for all of the works.
It may be a good idea to contact a building surveyor (they issue the building permits) and explore the scenario.Kris,
Not sure if I provided the quote. If so, forgive my bias!
The fees look to be around the mark. As for the second part of your question, my process works like this:
One: Assessment. Do the planning and feasibility background to make sure it all works.
Two: Strategy. Put together some basic documentation to communicate your proposal.
Three: Concepts. Using the information gained in the first two steps, and integrating municipal feedback, create concept plans.
Four: Application. Make formal application for town planning approval.At this point, pause, take breath and consider your options.
A town planning permit (TPP or DA) is "currency" and it is worth money.Five: Detail. Turn the TPP drawings into working drawings.
Six: Build. Find the right builder – by tender, recommendation or otherwise – and build the project.
Seven: Realise. Sell, rent or a bit of both.Hopefully this serves to explain a little bit about the process and terminology.
Further, I would suggest the following.
The biggest decisions you make will cost the least amount of money.
But that does not mean they are not the most important decisions.Many people are happy to put in another $5,000 at the end of the project to, for example, change from carpets to polished timber floors, but are less willing to spend a similar amount at the start to understand how they can put together a proposal that will make them an extra $100,000.
Best wishes for your project.Good advice from Scott.
Zoning particulars aside – and they are vitally important – an assumption of 1:250m2 is reasonable.
It may be however that a yield of substantially less, or a little more is the ultimate outcome.
Seek solid early advice.
A budget of around $1,000/m2 is adequate.
The process of completing the project beyond lock up is complicated if you are not a registered builder.
If contemplating doing this work yourself you should instead consider a contract to build to lock up, plus rough-ins, plus hang and stop plaster. This means the "fabric" of the building is mostly complete.
Beyond that you will require the ability to "assume" the sub-contracts for licensed trades such as plumbing and electrical.
No, as I said, it starts getting too particular, and I don't want to give you advice that is inaccurate.
I know some people apply a percentage of 75% for garaging and 50% for balconies, but I don't concur.In the context of budgeting I would include all built form. This allows some slip.
The more technical answer is that there are different build rates for the elements you have listed.
And those build rates are almost infinitely changeable.For example a tanked and tiled balcony, with glass balustrade, over a living area will be considerabley more expensive than say a cantilevered timber-decked balcony.
At risk of flogging an ailing horse, these issues are best sorted out at the design stage.
Jazz, generally speaking the margin is what's left after all costs and overheads are accounted for. Different people look at it in different ways, but to me this is the simple answer.
Matt, I commend you for building 3br dwellings of 125m2 – that's a perfect size in my opinion.
Interestingly, it's much easier to design 3br dwellings with 200m2 to play with. Designing a 3br with an "area budget" of say 120m2 is more difficult, but the effects on project profitability – as you rightly point out – are profound.
It is also, in my opinion, better to start with a constraint like an area budget and work from that starting point rather than trying to cut things back later on. I would prefer our clients sacrifice a little space than sacrifice the quality of the space.
Unless otherwise instructed, our office assumes the following "area budgets" for our projects:
2br = 90m2, 3br = 120m2, 4br = 150m2.As for your question about PC or PS items within contract, if the owner is to supply, that's exactly what they must do. In practical terms it's probably more about reasoned and informal negotiation.
To answer your question:
"One more question for Christian B
Given that these types of constructions are one-offs, you mentioned that a builder may typically allow a little more fat for contingency. So would you expect them to add a margin more like 25-30% rather than 20%?"Across the industry the historical average margin is I believe around 16%. This has long been the accepted benchmark for a healthy building company. A project builder, building a product they know and understand may accept 10% or less for a reliable margin.
A builder constructing a one-off (known in the industry as custom build) will assume an increased supply rate and will also generally look for a higher margin – say 20%. These two elements, combined, will result in a cost of at least 20% greater than a similar sized and finished "off the shelf" project house.
Yes, the budget of $1,500 needs to include all elements.
The reason it seems expensive is that people tend to compare "project" houses with "custom" houses.
If what you are proposing has not been built before – and this is generally the case with property development, whereby the dwellings must be designed to suit the land available – then it will be more expensive than something that has been done before.
If a builder builds the same dwelling 30 times, they know every bit that goes into that building. They know (exactly) the materials and labour costs and they have their supply rates at the lowest point. Hit the button and all the suppliers and contractors know what they need to do. Everyone involved accepts a lower margin in return for certainty and continuity.
Project homes can be built for $1,000/m2 or less on a tight margin, because the builder is more or less certain of that margin.
One-off buildings, on the other hand, are not so certain. The supply rates for labour and materials will be greater, and the builder will have a fatter margin to cover contingencies.
Are there ways you can save money?
1. Design carefully and consult with your builder before final documents are issued. They are generally happy to make some cost saving suggestions.
2. Don't waste m2. Every m2 built will incur a cost.
3. As the owner, supply all fittings and fixtures. The owner will have a greater motivation than the builder to scrap and bargain for savings on these items.
4. Some builders will happily build to "lock-up" stage only. On paper this sounds great, but there is still a lot to be done, and expertise required to get it done.
5. Do your research and specify according to the market in which you are developing. Timber floors and stone bench tops are lovely, but your prospective tenant may not be willing to pay for them.
It is my experience that an allowance of $1,500/m2 (inc. GST) is reasonable.
To budget anything less is likely to end in heartache.
And if you choose to save 20% margin by managing the project yourself, expect to earn every cent!The profits are generally found in the acquisition of the right property, the design (don't waste m2) and the yield.
On the final point, if good design will yield 3 compact 3br town-houses, and a poor design yields 2 large 3br town-houses this has a "double double" effect: You will spend more to make less.All that said, commendations for having a crack, and all the best with the project.
By far the most economical way to heat and cool a house is to harness ambient energy.
Thermal mass helps to capture and retain heat for when it's needed.
Good insulation and directed air-flows help keep a house cool.
Simple things like properly calculated eave overhangs make a huge difference.
A south facing courtyard for summer, and a north facing area for winter also work well.Energy is becoming expensive, and will most likely continue to rise sharply.
I believe it will become more common for houses to produce more energy than they consume.
For example, a well designed house with a 4kw solar system is capable of doing this.
