Hi Gmumm,

I would question what's exactly included in his fees.

1. A fee of $10,000 for DA Approval – does this include the costs of Design Fees and Townplanning Reports? If not, then I would question what his involvement would be.

2. 2.5% for construction costs per unit – is he going to send your project out to the market for a competitive price? Is he going to manage the actual construction from client side (e.g. Negotiations, Site inspections, Defects inspections, Time management etc?)

David

$800 per square meter might get you a very basic standard of finish and the build would most likely come from a spec home builder. These are much cheaper for the following reasons:

 – They have contracts set in place between head contractors and subcontractors, to build a set number of houses. So the turnaround time must be very fast for the subcontractors. Some find it difficult to keep up to the workload, so they hire apprentices to do the work.

 – The price is quoted based on an economy of scale – meaning that the larger size the house, the cheaper it is to build. In a room that has minimum services (informal lounge / bedrooms), they only require maybe 1 powerpoint and a single light fitting. Studies are even cheaper because they do not need to have a window. So, if you have a house filled with those, and minimize the services areas (bathrooms, kitchens), you'll have a 20 square home with very low number of services. That's why, these work when you have a LOT of land to play with.

 – Materials and equipment – the materials and finishes are generally very very basic. As others have covered, these houses may require a lot of optioning to bring to a good specification – some even extend to adding windows, changing size of hot water services (these large houses can't be serviced by a small Hot water service unit designed for a 2 bedder). Understanding that investment properties do not need polished cypress pine floorboards / Italian marble hand carved bathtubs, but, you also don't want to be at the other end of the spectrum, because some of the lower quality finishes do not have a good longevity in general.

– Site access – I am guessing that you want to build a building behind or near an existing dwelling, so access would be a problem. Demolition, excavations, installation of services, connections etc, that all needs to be done differently with an existing building. This is not going to cost the same as a single house on a single block.

Anyway, these are just some thoughts. PM me if you want to know more.

Hi Susan,

Yes, there would be some other costs as well.

Without the full details of your projects, I am going to throw in a few assumptions here and there:

1. Consultancy fees – You need to make allowance for a group of consultants to get your townplanning / building permits and other approvals.

2. Approvals – There would be some fees associated with councils and authorities.

3. Utilities – assuming that we are talking about a multi-unit development, there would be additional fees for connections and possibly construction fees if needed.

4. Financier – Unless you are able to fund the entire development with your own source of funding, you will need to pay interest incurred for the duration of the construction phase.

5. Selling fees – I am assuming that you will be selling your project, so commissions and campaigning fees for your real estate agent.

6. Solicitor / Conveyancer fees – This will be needed if you are selling your properties off.

The rule-of-thumb for $1,500 is purely for the construction costs, which would be excluding the fees I mentioned above.

If you'd like, PM me and I can give you a bit more details around these costs.

David