Thanks Jaxon

Here is my deal I sold in July 2016 (4 townhouses, Thomastown, North Melb)
The irony is if I just old the DA to a builder at the time I would have made more money, that’s life.

Just thought I would post my project/numbers, 4 (2 bedders) Townhouses, in Thomastown, North Melb, around 17 km from CBD. This project will be completed in late February 2016.

All the town houses have now been sold OTP and prices varied dependent on size, front townhouse always sells for more. They are all unconditional, but I will post the link once they have settled. Buyers were a mix of FHB/investors.

Block size 650 sqm, walking distance to the rail. Location was excellent.

$449,000 Purchase costs
$540,000 Building costs
$110,000 Infrastructure/holding costs
1,099,000 TOTAL

Total Sale Price: $1,375,000

Gross Profit: $276,000 25%

The slab was poured in July 2015 so it has taken around 7 months to build this project assuming completion is in February 2016, and builder completed in Feb, I did charge liquidated damages of around $500 per month.

I consider this project very low risk because if the market turned and I could not sell anything the rent and depreciation would make it cash flow positive.

David Hall wrote:

Purchased for my clients
47 Taywood Drive Wanneroo WA. Paid 375k,Its a retain and build triplex site. Land value each block 160-180k + original house post subdivision 320-340k
283 Morley Drive east Lockridge WA. Paid 375k. Getting $600 per week rent. Property has yet to settle, due to ex husband and wife warring with each other, but we are getting the rent in lieu of suing the seller for late settlement. Once settled we will be subdividing off the Granny flat to return all capital
128 Walter Road East Bassendean. 3 x 1 + 2 x 1 Granny flat. Demolish and duplex site. Paid $400k CBA online bank val came up at $558,000. Client is renovating, will live in the granny flat and rent out the front by the room, which will cover all mortgage costs. Waiting for reno to be complete, will tap equity and go again
3 Kardinia St Craigie Paid $555,000
House + Music studio + Splitter block. Bank val post subdivision has come in at $480,000 for house + studio and $280,000 for lot. Building to start on lot next month. Will then try for a change of use to convert the studio to a Granny flat, which we will also subdivide off using an exemption for a single bedroom unit.
What I’m currently negotiating on in Perth
3 bed house on 800m2 corner lot. Subject to some more investigations, It looks to be a retain and build site. Will convert the down stairs studio to a 1 x 1 granny flat, to produce 3 x income. Price will be in the low to mid 500’s
3 bed 1 bath house down stairs. 4 x 1 upstairs. 1720m2, in a premium beach side suburb. A demolish and triplex site. If I can purchase a 200mm strip from the neighbor it will be a retain and build triplex site. Land value each block 450k, but a lot of supply in the area. Wanting to pay low to mid 800’s
This is the joy of no compeition.

Purchased a block of land in Croydon, Melbourne, ($520,000) put together a DA, ($20,000) plans and permits for 3 townhouses, and flipped it to a builder for $752,000

30% profit, not even getting my hands dirty. With the frenzy In Melb preferred to move my profits into another deal

MTR:)

I would be interested to know if anyone has made money in a falling market, I only know investors who have lost money and could not sell so they have to hold.

I think its a huge risk developing to manufacture growth in falling market.

I am seeing this in Perth at the moment, developers building apartments but there is an oversupply and values have dropped at least 10%+ and buyers have choice, but there is an oversupply of stock.

In falling markets your feaso is run on the figures from purchase date, unfortunately its like catching a falling knife, the end values will only be determined on completion and in a falling market you could lose 10%+ and that could be all your profit, so going into the red… ouch.

Thanks for link
Not my cup of tea, though I have heard that some US savvy investors are making money in this market, but they live in the area and understand the beast, not for me, I will stick to States with sunny climate and that have continued to boom.

Marisa
MTR:)

Hi Ana
Interesting, re agents in Melb told me that they had reduced stock this winter and this drove prices up.

If you are considering buying a block in Melbourne the most important thing to remember is that land has already gone up in Melb rising since 2013, so you may be paying too much at this point in the cycle, which means the figures may not stack up unfortunately.

As a developer I notice I make my money on the land that is if you get the timing right, this in turn reduces your risk because you wont need to build, you can just flip it or put a DA together and add value, so you end up with choices.

I have been asked many times what is the best way to learn and how to start developing?

Start small and work up to larger projects and learn along the way. It could be an older house and build at the rear and sell the front and keep the new product, or sell the lot and make a profit. If you decide to sell then its important to get the correct accountant advice on structuring to reduce/minimise tax.

It could be land and house packages, source the land and use a project builder, good way to learn and lower entry level.

I think you are wise to have concerns about buying in Melb market at this stage of the cycle. Its great that you have an architect as a friend.
Developing to make a profit has a lot to do with timing the market, market conditions and building the right product at the right price.

I think its great that you source a site, but if it makes no sense, the figures don’t stack up, don’t do it.

Also in your contingency I would be very conservative with the end values because the market may change. I would also look at the scenarios if you can not sell these, will the rent cover the interest? I play in the lower end markets once again this is to reduce risk so if I can not sell the rent will pay interest.

One step at a time, keep researching and learning, more than happy to help with any questions, I really am still on “P” plates, but amazing what I have learnt from others and the thing is you never stop learning, always tweaking….LOL

Marisa
MTR:)

Crazy stuff, I agree, Wannabe wholesaler, wow, all the best with that one….LOL

Anyone wishing to invest in USA market should visit the country in the first instance.

Just my opinion but I also think they should be an experienced investor in Australia before tackling USA market, it just makes sense.

I have read a number of threads/posts on other forums where people are giving advice/recommendations on US market and they have yet to buy one property in USA, suddenly they are the experts, unfortunately its dangerous, that is probably why many investors got burnt, getting the wrong advice.

Marisa
MTR:)

Hi Ana

Nice to see another female developer on this forum.

I have been developing in Perth and Melbourne markets over the last 3-4 years, and just sold 4 townhouse development OTP in Melbourne and just got plans and permits approved for another development in Croydon, Melb. I totally agree with you Melb is a very hot market has been for some time and momentum has continued, my guess is the historical low interest rates and FHB market is helping to drive this market

I don’t know your particular patch but I have heard these areas are very good. I also don’t have a crystal ball, but I do focus on risk and protecting what I have made my profits.

At this stage of the Melb market very important to work out what is happening in your particular area/suburb, what are developers building, is there too much supply coming on the market. Is everything selling, how long is it taking to sell. One way to reduce risk is to build but sell OTP, however there needs to be a market for this. Re agents should be able to give you feedback on this. Once you gage this then you can work out which way to go.

What do your numbers look like? Is there plenty of fat in the deal? If you built and you had to drop your end values/sales would you still make a profit?

Its important to look at all the scenarios.

I have sold 2 development sites with DA approval with over 30%+ profit, this is excellent strategy but this only works if the builder has enough fat in it. No one is interested in buying a development site if they will not make money at the end.
First step is to work out a feasibility on everything, a $ value. At the moment in Melb depending on the quality/specification of the build you could be looking at anywhere from $1200-1500 per sqm to build.

Many investors do not realise that 80% of developers actually lose money. Everyone wants to be a developer, but if it were that easy everyone would do it and they would be making money, not so.

I think you are wise to consider market conditions, I have seen plenty of developers who do not do this and at the end they make no profit or worse lose money.

Marisa
MTR:)

• This reply was modified 8 years ago by  MTR.

I agree With OP Ringwood gone nuts
I am developing in Croydon, plenty of properties where you can add value however this area has also risen. Try Ray White Croydon they seem to be an agent that under sells….hint hint

Marisa
MTR:)