Hi
I have a property that I own outright and hold the title and it is in a prime redevelopment area ( 10 minutes walk from Canberra city area) such that about 9 apartments or perhaps several townhouses can be built on it. It is 3 storey zoning. I can sell the property to a developer but I'm thinking about developing it myself (as I love living here and I am thinking about a townhouse for us). I do have substantial equity in other properties but I do not have much cash unless I sell these other properties. Perhaps I don't have to borrow very much as I'm thinking I can surely sell them all off the plan at an early stage. Does anyone have any ideas on what I'm thinking, who I should talk to or should I just sell it to the developer and be done with it.
Thanks
CarpeHi Carpe
It will take you a lot of time, knowledge and planning to take it on yourself, especially if it is something that you haven't done before. There are many pitfalls but its not impossible. The other option you might want to condider is to go into joint venture with a developer. If you are just after a townhouse for yourself on the block where you live and that's the only reason that you would take it on, I would buy a townhouse from the developer that you sell it to. If there are other reasons that you would want to do it, then you need to think through it more thoroughly.
Cheers
BecDoing it yourself is going to give you the best profits and results. Knowledge in property development is not innate, no one was born with it, it is all learned but you need to put in the time and effort.
This thread or this website is NOT going to give you the answers you need to know to get started. If it was that easy everyone would be doing it!
Start with the council and a mortgage broker about getting a development loan to fund it. Speak to council planners and drafts people that have put these together before.
You need some feasability studies. Get it all on paper and see if you feel comfortable with moving ahead.
It's not rocket science but I don't think anyone is going to come and hold your hand, you need to put in all the hard work!Thanks Bec.
Xenia. I'm not certainly expecting anyone to hold my hand on this and I'm not expecting magical answers from anyone. However this site has always been an excellent source of inspiration for me and I'm sure there are people on it that have done things like I am now pursuing. Where I have got with my property wealth has not been easy….it was a consequence of putting in the hard work myself. I suppose I was just exploring the main question on the risks associated with selling off the plan. I'm sure there are people who have demolished their home and replaced it with a dual occupancy for example without having to borrow too much for the work if they sell off the plan.
CarpeHi Carpe,
You don’t mention the land size or the zoning type, just the number of units. Where did this information come from? While I am not familiar with Canberra town planning I may be able to assist to some degree.
In Brisbane a three story limitation is classed as MR (Medium Density) and you are able to use 60% of the land size for GFA (gross floor area). Given that a typical 2 bedroom unit is approx 80m2 and you say that you can fit 9 on this block it would equate that your land size should be approx 1,200m2. In Brisbane a unit site will sell for around $100,000 (depending on location) so your land value would be around $900,000. Cost of construction of a 80m2 unit is around $190,000 so you would require to finance approx $1.7 mill plus holding costs and council fees.
The up side to building your self and holding is that you would not have to pay GST on the sales if you hold for a period of time. This would equate to around 7% of the sale value of each unit. At 450,000 each this would be $31,500 by 9 or $283,500. Not a bad profit if you can afford to build and hold and well worth doing the sums on.
Hint. Work out what the rent would be on each unit times 9 and take into account the tax concessions and this may be an excellent investment.
I do have an excel spread sheet that may help you to analyze affordability if you pm me.
Jon
On the downside financing them could be an issue unless you have a few pre-sales.
Most development lenders will go to a maximum of 80% land value + 80% of cost subject to this figure not exceeding 65% of end valuation. For a virgin developer you will need a fair bit of equity in other property or be prepared to put in cash.
Richard Taylor | Australia's leading private lender
Thanks Jon…I did send you a pm but have not heard back from you.
Thanks Richard…very handy figures to work off. When I have been through all the research etc with Planning body, architect and builder I will be in contact with you to discuss further. Besides this development property that I own (1.0m) that is in a prime redevelopment City area I do have additional equity of $900k in other properties. I have no doubt that the completed properties in such an area will sell easily off the plan. I'm also thinking of using a project manager for a job like this rather than me. So based on your figures I can borrow say $800k on the property up for development plus $1.72m (80%) against the development cost (9 x240k x80%). The end valuation is likely to be 9 x 470k = 4.2m…….and the borrowing percentage against that is (.8 + 1.72)/4.2 is about 60% so I should be right on the finance side given I've probably also overstated the expected costs….if I've done the calculations correctly.
Regards
CarpeHi Carpe, I did reply to your pm and also attempted to send a new pm, however It came back as not able to contact???
Please pm me your email address so that I can send you the Development Feasability Spreadsheet.(don't seem to be able to send attachments on this forum) If the bottom line is not over 20% then forget the exercise. I have filled out yours and on the information given it looks like around 34% return on investment.
regards
JonHi Jon
Thanks for your generosity in sharing the spreadsheet with me and thanks also to the contributions from others. I love this site as people give without expecting anything in return. It's like we're in a good family!
All the best to everyone.
CarpeHello Jon,
I too am interested in a unit development site, I am very interested in your spreadsheet – are you able to share it with me?
Thanks!Hi Ms B,
Happy to help, but must inform that it is simply an excel spreadsheet with built in calculator. Provided that you know the variables it works out the %rate return on the investment outlay. If this is not around the 20% mark then I would not consider the site. Please email me where you want it emailed.
Jon
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