Forum Replies Created
BCC setback is 1.5m from side boundary
Hi
The key to success is conducting a detailed feasibility analysis. Your due diligence should also include consulting a townplanner for advice. He will then outline the steps for you to follow.The basis are as follows.
If you need to lodge a DA then you will need a surveyor then an architect to prepare development drawings. You may need engineers reports if your site is difficult. The types of engineers will depend on the problem. it is generally better to provied as much information upfront rather then waiting for the council to tell you what to do as this will cause delays.Once the DA is approved you will need to study the conditions appropriately. You also organise BA drawings together with engineering and submit to your builder for a fixed price quote.
Good luck
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi
I know have known Michael for over 8 years now and have found him to be helpful, honest and trustworthy individual.I hope you find your journey with Metropole a profitable one.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Originally posted by kp:Lots of assumptions there Sailesh.
First one being that the resale is $260k each.
What if it was $350k each ?
Would it be worth going ahead then ??I would suggest that resale in this suburb of Perth WA, is quite different to what you are used to in Bogan ( oops…I mean Logan)so making the assumption that the market value of each @ $260k when you don’t know the market is misleading.
Better to get and then use, a more accurate market value for this particular suburb than to guess at a figure, before making a comment.
kp
kp,
Thank you for your wise words of wisdom.I was simply quoting the $260k resale value given to us by patbc in his initial post in this thread. I am sure that he has done some homework on this before coming up with this figure.
However if you know more about this property then feel free to enlighten us.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Andrew
You need to be more specific. Each council in the area has different rules and fees.
It may be worth going to your local council offices and checking up on the requirements.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi again Patbc
You are in an interesting position here. Assuming it costs you $250k to build a duplex and resale value at $260k each then your nett equity position would remain unchanged.
My guess is that your cashflow position would remain unchanged as well…depending on rental estimates of the new dwelling. However your depreciations will increase giving you better cashflow. This is beneficial if you are in the higher tax bracket.
Therefore the benefits of developing would be better cashflow and gaining experience. Although, the lessons learnt here will be valuable remember, each project you undertake will present new challanges. In the last 3 years alone I have been involved in around 50 small development projects and you learn something new each time.
Good luck
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi Patbc
At a quick glance, if I where to buy the site from you and sell the finished product at $260k each I would offer you around $150k for the site with the house removed.
Any developer who looks at this property will be working with similar figures in mind. Therefore, if you can get $280k for your property then it would be a good price and you may be better off accepting such an offer.
If you developed the site your profit will naturally be a lot higher considering the price you paid for the site.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
I have come across an interesting and legitamate tax strategy for such cases. By using this strategy you end up paying no tax on the old property. However, this only works if you end up keeping the new dwelling.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi Julieand Thomas.
You are very lucky to have acquired a corner lot subdivision so cheaply. Your council is also very generous with thier development costs. Brisbane City Council charges close to $30k for a similar subdivision.
You are also very fortunate to have such a low construction cost. I am currently paying around $730 per sqm turn key to build 300 sqm duplexes and thought that was cheap. Most builders charge close to $1000 per sqm.
Interest cost can mount up very quickly so you need to get this done in a timely manner to reduce this cost and improve your profits.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
There have been a lot of interesting points raised by some experienced people.
The only thing I have to add to this is that you need to do your feasibility carefully when looking at sites. This also includes producing the right type of accommodation to suit the demographic profile of the area.
You do not want to produce more of the same as you may come across stiff competetion and this will lead to lower prices. This is great for buyers but disaster for developers.
Timing can also be a factor but, careful research will reveal opportunities.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Originally posted by Amused:Hi, Sailesh, how long did it take you to get through the council (subdivision ) or planning authority to get strat tyled?
The Development approval process in this instance took around 3 months. Now that the council is familiar with our plans we are finding that this process is even quicker now.
We will be applying for strata titles upon completion…this process usually takes around 2 weeks.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Mark Partick
I can give you some of the information you are looking for. We manage the following duplex project on behalf of a client. Since we started our negotiations on the land the market in Brisbane has worsened however, we used conservative estimates in our feasibilities and the numbers were still in our favour. This prompted our client to proceed with this development.
Land purchased price $190 000 (90 day settlement)
Purchase costs $ 8 000
Development costs $ 25 000
Interest $ 11 000
Construction cost $220 000
Total Cost $454 000Sales
Currently we have a contract on one of the duplexes at $280 000 without any marketing. Construction begins in approximately 2 weeks and will take between 3 to 4 months to complete.
Assuming the second duplex sells for the same money the total income would be $560 000
The expected outcome would be as follows:
Development sales $560 000
Less sales commissions $ 12 000 approx
Less GST (margin scheme)$ 10 000 approx
Net proceeds $538 000 approxProfit $84 000 approx
The overall project duration is 8 months however due to the delayed settlement on the land the funds will only be tied up for around 5 months.
While the above return may not excite everyone the annulised return will be fairly healthy.
ps other factors such as personal tax and loan early discharge fees have not been accounted as this will vary based on the individual.
Personally, my recommendation is to buy develop and keep. You can utilise the equity in the first project to move on to the next.
As mentioned earlier this is not a completed project and we have assumed that we will be able to achieve the same sales result as the first duplex.
When selling off the plan you will find that your income may not be as good as selling a completed product. Therefore is is possible to achieve better results by selling on completion.
I hope this provides some motivation to budding developers to look harder until the right opportunity arises.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Great advice resiwealth.
I also use your method when conducting feasibilities. With the current weakness in the realestate market it is very difficult to make money from property developments.
Apart from this BCC had a massive hike in fees as of this financial year and town house construction costs are prohibitive.
While this site may have 2 lots it means little when you are applying to build townhouses. This means the council will slug you with massive operational works charges.
However if you manage to pick this block up cheaply and can afford to land bank then it may work out to be a worthwhile project in the long term.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Michael, thank you for the referral I will pay you later (joke)
I think your warning about the town house and unit market is right as there is an abundance of such dwellings currently. The vast majority of such dwellings are purchased by investors and if interest rates rise then we could see investors bailing out further weakening this market.
I have also mentioned before that in Brisbane at least it is very difficult to make over 15% return on development capital with town house developments. This assessment is based on several years of researching potential projects. My belief is that currently only land bankers and builders are making reasonable profits from townhouses.
However, it is not all doom and gloom as there are certain types of dwellings that are in constant demand as well as shortages. This is where careful research is required.
I think Delboy has been given some good advice by fellow forum members.
However if you wish to contact me please feel free to call.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi
Around $1200 per sqm for townhouses these days so $180 to $200k is about right. Construction costs will vary between types of dwellings.
Your simplest type of dwelling is a low set brick and tile home and here you will pay under $800 per sqm for a decent turn key product. Prices increase as you go to a double storey and even more for a town house. Unit dwellings cost around $3000 sqm plus.
Having carried out numerous feasibilities on townhouse projects I have come to the conclusion that the only ones that can make reasonable profit out of these types of projects are builders or land bankers.
The vast majority of projects I looked at showed around 12 to 15% profit. I feel that you would to make double this profit for such a project to be viable.
You also want the higher return for the extra risk associated with such a large project as well as the longer time frames….although our projet manager managed to complete a townhouse project in Morningside in 12 months.
You need to be careful with your due diligence and ensure you have a good manager looking after your project.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
A little knowledge can be dangerous. Going to free seminars and picking up bits of information in order to embark on a major development project is asking for trouble.
Property development has the potential of making massive profits and loosing as much. Over the last few years I was associated with an organisation that miss-managed over 40 development projects. While this provided me with useful first hand knowledge on how not to do things it also showed me that there are many intricate paths with property development that the average person would not be aware of and each of these little twists and turns could cost you thousands.
You see, each development will present you with a new set of challenge and unless you have years of experience over multiple projects you would not have encountered this challenge before and therefore you cannot prevent the problem from arising.
Michael Yardney, has this experience and his seminars will give you a greater insight into property development. If by going to his seminar you learn one idea you may end up saving thousands.
You would outlaying such an amount if you were seriousely considering embarking on a development project.
I would imagine the majority of people would realise the complexity of undertaking such a project (especially if you are still working)and get someone else to manage the project for them. However the knowledge gained would help them understand the processes and keep up with that is happening.
I must applaud Michael for putting together such a course as it requires a lot of time, effort and cost. If there is a profit in it for him then I am sure that he deserves it. However once you consider the cost to market and hold such and event will cost many thousands (I think I saw free airfares and accommodation somewhere) the price he is charging is justifiable.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
AnnaB
As you may be aware the Brisbane city council covers a very large area. The counter staff while being very helpful unfortunately will not be able to provide you with detailed information that you would require prior to purchase. Therefore purchaseing a property on the word of an inexperienced counter staff could be risky.
All the senior townplanners are busy and all they will say is…put in your proposal and we will look at it. the application alone will cost you a few thousand dollars…therefore IMHO taking the easy route could cost you a lot of money and if your report lacks detail then the delays will cost you a lot of money as well.
Your contract should be mage subject to due diligence… generally 21 days is acceptable. You don’t want to go unconditional until you have all the answers. Unfortunately a unit or town house development is not code assessed…it is impact assessable and the council may get objections to your proposal. Unfortunately, this is the risk you take when you want to do such a large development.
You can minimise your risk by addressing all the possible objections you may get to your development but you cant stop people from objecting.
To be successful you have to put in a lot of effort up front in finding the right site and assessing the most suitable dwelling appropriate to the area. Then, you need to undertake extensive due diligence on all the possible scenarios that may effect your development and have these costed. There have been a lot of small developers that have lost money in property development because they have been negligent in this critical part of the development phase.
Remember with property development, your profits are made at the time of purchase.
Once a development is under way it is important to keep up to date with all the paperwork and processes as you go through the various stages. Things happen very slowly when it comes to dealing with council however there are critical steps that you need to take in order to keep the project moving. Delays are one of the biggest reasons for failure as interest is a significant cost factor.
For the risk you will be taking you would want a return that is greater than 20%. However you will find that this will be impossible to achieve in today’s market.
This is why for most investors we recommend simple code assessable developments where your outcomes are known prior to purchase
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Anna
I provide a development advisory service to assist investors investigate and qualify the viability of the development.
This is done by engaging professional consultants that will provide a fully costed report on all the development costs asociated with such a development. We will also research the market for the most suitable dwelling for the location and have it costed as well.
Once you have viewed this report you can then decide if you want to go ahead with the purchase of the site.
Please feel free to contact me if you wish to find out more.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi
What is your real profit after purchase costs, selling costs and taxes have been taken out.
If you are still ahead and you really need the money then go ahead and sell.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
The expected gross rental on the Morningside place will be around 5.8%.
The property was acquired through a small lot subdivision where I split a 800 sqm block to build one brand new 5 bedroom house and renovate the existing house into a 4 bedroom 3 bath house.
The profit from the exersice is around $180 000. Both houses will be rented out.
The long term growth for Morningside (5km east of CBD) is my main reason for keeping these houses.
While the yield is reasonable it is the current equity and future growth that will enable me to keep adding quality properties to my portfolio.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
