Forum Replies Created
- Originally posted by resiwealth:
In Queensland we can produce a 4 bed house 16squares for $138,000.00 where on earth does $1100.00 per/m2 come from is beyond me unless the commission is very high.
Mike what is your commission back from the builder or is this a two storey price. We just completed a two storey Westminister 38 sq project home for $342,000.00 including ducted air (11 outlets) $45,000.00 water detention pitt, granite kitchen, marble floors to bathrooms and ensuite, two storey, 5 beds, turn key etc etc that works out at $900 s/m in Sydney.
Or is it that Melbourne is just that expensive, as i said on other posts we build in QLD turn key with air and all the bells and wistles at $750 s/m
resiwealth – i’m confused
There is NO commision or hidden extras.
I am quoting average prices of medium density multi unit contruction, which was the request, not houses.
We currently have 95 medium density ( 2 to 10 townhouse) developments under project management at various stages from town planning to completion. Over 20 are projects currently under construction and we use a panel of of 7 builders.
I also have my own construction company for our own projects – currently doing about 12 town houses a year.
So we have a good and broad based database of costs.
Obvioulsy a single house costs less and we can’t compete there with the volume builders, but on muliti unit developments our costs are as good as we can get.
Townhouses have landscaping, paving, and soft furnishings inside so tenants can move in this costs.Boy have prices gone up. Not to long ago we were quoting $850 per sq mt
Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by Zulik:Thank you Bill and APerry, that’s very helpful. I will certainly be following these leads up. Michael, what are the main other factors affecting how many units can fit on the block?
Cheers!
Guy
There are a heap of factors such as council zoning, neihgbourhood charecter, setback of neighbouring properties, northern orientation, site constraints, existing vegetation, floood levels, easements, overlays
We take all the above into account when we doa prepurchase feasibility study before we even start drawing some sketches.
Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by Zulik:Thank you Michael,
That’s great. When you say all up costs, does that include obtaining permits etc in the first place?
Also, is it realistic to try and fit 3 townhouses/units onto a 1009 sqm block – approx. 20m by 50m?
Cheers!
Guy
The cost I suggested does not include the costs of permits, but would include council drainange and sewerage fees etc.
Can you fit 3 units on?
It depends. The size of the block is only one determining factor. There are many other factors to take into account.
Michael Yardney
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FREE subscription http://www.metropole.com.auRob Balanda MBA Lawyers in Appel St Surferes Paradise.
He is a great guy (and a friend) knows his stuff and regularly writes in API
Michael Yardney
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FREE subscription http://www.metropole.com.auIt depends on the quality and because of the location (which I know well) and relatively low end values, you would have to keep the finishes on the low side.
We have just completed a 3 townhouse development in Bonbeach (next suburb) and are invloved in building all over Melbourne.
Currently the all up costs including landscaping, fences, carpets, window furnishings varies from $1,150 per sq mt (ths is all up area – unit ples garage) to $1,450 per sq mt (better finish difficult site Richmond)
Michael Yardney
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FREE subscription http://www.metropole.com.auThe capitalisation rate varies and depends on:
* class of building eg office, retail, industrial
* the state eg tasmania they may require a higher cap rate than in Sydney CBD
* security of the lease and tenant. A long lease to Coles Myer would attract a cap rate of say 5% but if the tenant was a “mum and dad” type business the investor would wanta better return to make up for the extra risk so the cap rate may be 8%
*competing investment rates, when interest rates go up, yeilds on commercial goes up (cap rates) and prices come down
Michael Yardney
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FREE subscription http://www.metropole.com.auIn Victoria you can get this info for free at teh REIV web site http://www.reiv.com.au.
They track median prices by suburb.
Michael Yardney
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FREE subscription http://www.metropole.com.auThere will always be somebody who will tell you why not to invest in property!
I have been investing in property for over 30 years and there has always somebody, or some publication explaining why I should not invest in property.
At times their arguments seemed to make sense, but history has proved them wrong. The average price of a home in Melbourne, Sydney or Brisbane has just kept going up.
Who would not want to buy their parents home at the price the paid for it?
During the boom time commentators would say, “inflation is too high, don’t invest in property, tenants won’t be able to pay the rents.†I remember in the late 80’s the cry was “Our children will never be able to afford to enter the property market†or “Prices will never go any higher, don’t invest in propertyâ€.
During the recessions there was always someone who would say, “inflation is low, property values can’t rise†or “we are in a recession, money is tight – don’t buy propertyâ€.
Through this entire period someone would always find a reason not to invest but the value of good, well located properties has increased consistently, increasing about 10% per annum during that time.
The same suburban house that my family bought as an investment in the sixty’s for $12,500 is now worth over $600,000.
The first investment property that I bought in the 1970’s for less than $20,000 is now worth well over $550,000.Unfortunetly I sold it[angry2]
The rent from myproperties has helped pay down their mortgages and the capital growth has allowed me to pyramid myself into a huge property investment portfolio.
But you can’t just buy any property and hope it goes up. It does’t work that way
Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by hihopes:Michael, Bit off the topic, however is there any information regarding property development. I am looking at career change and would like to find information on going about first property development. Very inexperienced in this area, but keen to learn??[biggrin]
Property development can be fun and very very lucrative, but most people involved in it go bankrupt at some time. Over the years I have seen many inexperienced property developers and quite a few that I thought were smarter than me go broke.
So take it slowly, start with small steps, Some of the significant risks I have come across include:-
• A downturn in the property market leading to lower property values or increased holding costs until the development properties are sold
• Increases in interest rates resulting in increased holding expenses;
• Increases in construction costs during the project. This was particularly obvious during the recent boom. Many inexperienced developers think they have entered into a fixed price contract yet are hit with cost variations;
• Changes in the supply and demand ratio for real estate market such as we are currently seeing in the inner city apartment market which depresses property values;
• Unexpected disputes with building or trade contractors or unions which can cause costly delays to a project;
• Changes to the laws relating to property development such as the laws relating to zoning and town planning restrictions on land use, environmental controls, landlord and tenancy controls, user restrictions, stamp duty, land tax, income taxation and capital gains tax. Changes to any of these could adversely affect the profitability and viability of your real estate development projet;
• Unexpected delays and increased holding costs may be encountered when town planning (DA) approval is required for a development. Councils are currently very slow in assessing development applications and they reject many development / town planning applications. Not obtaining an approval or obtaining one on unfavourable terms is a growing risk for developers. The cost of obtaining approval or fighting council’s rejection in a court of appeal is continually rising;
• Some inexperienced developers find that some of the improvements they have made to their properties do not result in an increase in value. They learn the hard way that increases in value do not necessarily occur in line with expenditure on improvements;As you can see many of these risks are outside the control of the developer.
At Metropole we are aware of the risks involved in a development project and this helps us minimise them so that our clients do not get any unpleasant surprises. Most of our projects are very successful, but I have to be honest and admit that we also run into the same problems in some of our projects and they are not as successful as we initially hoped.
We must learn from all our developments. Learn what went wrong and minimise the risks of this occurring again and learn from what went right and repeat this if possible.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auOriginally posted by blogs:You say the property you settled on last week for $700k is now worth 1 mill, based on what??? Its worth what you sell it for. If you can turn around and sell it today or tomorrow or even by the end of the month for 1 mill then I stand corrected. But it amazes me how people have the preconcieved idea of ‘worth’ an item be it property, cars or even stock doesnt really have its value or ‘worth’ realised till its sold.
Good point but I do know what I am saying.
I bought a large old house with a granny flat on a 1,700 sq mt block of land. During the 90 day settlement I have organised plans and am very close to havving development approval for 5 townhouses. 2 large double storey dwellings with double garages and 3 x single storey.
Development sites in Mt Waverley sell for about $230,000 per unit sites with permits (DA) this means the property is worth considerably more than $1million.
Sre I bought well, but I added value creating my own capital growth.
[/quote]
My point I was making is things are going to get worse before they get better, for the sake of 6-12 months I ‘think’ that property will be cheaper than now.
[/quote]What are you basing this suggestion on?
I don’t disagree that some areas still have a way to fall, but I can show you suburbs where values have increased by 10% in the last 6 months. Not my thoughts. Property sales facts.
Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by marksavs:How important is population growth in a potential town you want to buy in? is it the be all and end all?
any opinions would be appreciatedthe major factor that pushes up property values and in fat rentals is supply and demand.
If more people move into a town, they create demand for the properties that are there pushing up prices or rentals.
Reading between the lines of your post, I suspect you are considering a regional town. Most regional towns are loosing population.
WHen looking at regional towns consider “why is it there? What justifies its existance?”
Is it mining, – possibly this will bring people in. Is it agriculture – may this will have difficulty sustaining a population.Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by blogs:Michael….spoken like a true salesman[angry2]
Why wait a little and save 10% when you can buy at peak, because as we all know property is selling like hotcakes and if you dont get in quick there wont be any left right[biggrin]
Why wait a little?
Property prices have been flat for almost 2 years, but I always find it easier to find good buys in a buyer’s market than in a seller’s market. It’s much easier to buy below market price when you have desperate sellers.
OK now we have to work out what a true market price is in a flat or falling market. That’s a whole different argument and one I have a research department helping me with.
Also the areas in which I am buying properties are moving up in value. I can show you the facts.
Am I a salesman? Yes. Do I sell property NO! (We have no properties for sale).
What I can honestly say is that I believe what I have written and in the last 15 months I have added $4million dollars worth of new properties to my personal property portfolio.
NO wraps no fancy stuff. Direct property purchases or new developments I have built for me to hold as long term investments.
And I have not regretted one purchase – all the properties are worth more than when I bought them.
One settled last Friday for $700,000 but is already worth $1million.
Michael Yardney
METROPOLE PROPERTIES
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FREE subscription http://www.metropole.com.auEvery time this part of the property cycle comes around I hear teh same argument.
Don’t buy property!
Let’s have a look at a few of the excuses I could have used over the last 40 years or so:
 In the early to mid 60s we had just emerged from a major credit squeeze and finance had dried up. In the late 60s we had the nickel share boom and property was proclaimed an inferior investment.
 In the mid 70s, we had another recession.
 In the late 70s we had rising inflation and the OPEC Oil crisis.
 In 1983 there was a recession with high interest rates and peaking inflation.
 A few years later commentators said property prices were too high.
 In 1985, the government changed the tax laws pertaining to property with the quarantining of the tax benefits of negative gearing and the introduction of the Capital Gains Tax. Commentators explained how this was going to be the end of property investment as we knew it.
 In 1987, there was the fear of a ‘1930s-type depression’ after the stock market crash.
 By 1989–90, interest rates and inflation were again too high and led to the famous ‘recession we had to have’ – a heaven-sent excuse for procrastinators to stay out of a property market awash with bargains! I still remember in the late 80s the cry was ‘Our children will never be able to afford to enter the property market’ or ‘Prices will never go any higher, don’t invest in property’.
 In 1991 Australian unemployment was 11.3% and people were selling their houses at bargain basement prices, as most people felt property values would only fall further.
 The mounting foreign debt and current account deficit of 1993–94 was enough to scare people off buying property.
 The ‘world economic slow-down’ and the ‘Asian currency crisis’ were good excuses not to buy property in the mid 1990s.
 In the middle 90s we were told inflation was low so property prices would stop rising.
 Rising oil prices, September 11 and an oversupply of investment property in the inner city areas could have been great excuses not to invest in property over the last few years.
Through these times the value of well located residential properties has increased consistently, at about 10% per annum.
The first investment property I bought for $18,000 would now be worth over $600,000 if I wasn’t silly enough to have sold it.
Over the years the rent from my properties has helped pay their mortgages and the capital growth has allowed me to borrow against their increased value and pyramid myself into other property investments.
But at the time every one who talked dowm property seemed to have a good argument[blush2]
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auMost solicitors a re only registered to practice in one state so it is unlikley your solictor could help, but even so as Mal says, there are lots of reasons to use a local solicitor.
By the way, don’t use the one recommended by the selling agent.
Michael Yardney
METROPOLE PROPERTIES
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FREE subscription http://www.metropole.com.auOriginally posted by glencarlson:Hello all,
My name is Glen and I have had a distinction and gained some clarity that harmony is the foundation of building wealth. It is not just what you do but when you do it.
I dug up an old diagram of an economic clock and re read the meaning http://www.paritech.com.au/paritech-site/education/beginners/strategies/clock.asp
THIS IS FREAKY…[blush2]
The words sounded so familiar then I looked back and I wrote a book published by Paritech in 1988 “The Investors Guide to the Australian Share Market” under the name Bryce Harrison (using my 2 sons names) and this is a direct quote from it.
So what do I have to contribute to the discussion as the original author.
The Economic Clock was first published over 150 years ago and while it is not good for picking timing of the cycle, it is still relevant today.
I have traded and invested through 4 cycles and every cycle people say “this time it is different – the cycle does not apply anymore because…..”
And every time their arguments seem to make sense.
Until you look back ten years later and everything falls into place and another cycle has taken place.
Yes this time is different, every time is different, but it is also the same
.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auOriginally posted by jman2207:Special thanks also to Michael Yardney
for his experience, knowledge and wisdom. Thank you for potentially saving me from making a very costly and uncomfortable investment error.It was my pleasure, Welcome to the forum, you will find many experienced people here willing to help
Michael Yardney
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FREE subscription http://www.metropole.com.auOriginally posted by ozi:Hi Michael,
Thank you for the advice. I agree that selling may not be all that profitable in today’s market.
In regards to refinancing, would you say that valuers generally appraise properties much lower than what they are really worth in a flat market, compared to a booming market? …….
Regards,
OziThe simple answer is YES
Valuers are always worried about being sued and their professional indemnity.
(Don’t get me wrong that’s not all they are worried about – most are really nice guys, but this is always on the back of their mind.)
In a flat or falling market properties are harder to sell and some vendors are desperate and give away their proeprties. I can understand a valuer’s point of view, even though I don’t always agree.
In a booming market, it is unlikley that a valuer will get into strife with his valuations
Michael Yardney
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FREE subscription http://www.metropole.com.auWith all due respect to Terry’s comments, and I am sure he has 2 clients who have done it, it is VERY diffcult to do in Melbourne (the question in the post) in the present market.
We (http://www.buyingmelbourne.com.au) have bought over 20 under market price properties which have been renoveted for clients this year . The clients have spent between $5,000 to $35,000 on renovation works.
In all cases they have increased the value of their properties by $1.5 to $2 for every $1 spent. Their rent has also increased considerably so they get great returns.
But could they sell them and make a profit??
After costs and tax they would probabaly break even.
Buy renovate sell is a strategy that works in a rising market. Much harder to make work in a flat market.
Why not try BUY RENOVATE REFINANCE This works well but can’t re finance for 6 to 9 months
Michael Yardney
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Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auRents always drop in winter and go up 10%-15% in summer. It’s the old storey of supply and demand.
Our agency http://www.rentingmelbourne.com.au has about the same number of properties to lease all year round, yet enquiries are far fewer in winter and properties sit vacant for longer.
So to lease them Pam, my wife and director of the comany, suggests her clients drop their rents. A $5 per week drop in rental boosts enquiries from the internet quite noticably and places get leased.
Contrast that to January and February when there are many more tenants looking for accomodation. If for every property you have available for lease, there are 2 or 3 serious rental applications, its really easy to increase rentals by 5% or 10%.
This pattern happens every year.
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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FREE subscription http://www.metropole.com.auOriginally posted by AmandaBS:I agree walk before you run.
Start by subdividing 1 into 2 and learn the process and develop a relationship with Council, Engineers, Surveyors etc.
We are finding the interest a real squeeze on land we’re subdividing (1 into 7). The DA still not through after 10 months.That’s a great point Amanda- start small. You will learn 80% of what you need to know about developing in your first 2 or 3 projects.
Make sure you can survive these so you can get to your 4th project
Michael Yardney
METROPOLE PROPERTIES
Author of Australia’s leading property e-magazine.
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