Project management

Hi

We charge a fee of $10k to help source a site. This includes conducting a feasibility study, help with due diligence and negotiation. Apart from the above charge we also charge a 10% success fee upon project completion.

The feasibilities are done using resale estimates in todays market value. The project should have a return of at least 60% return on capital invested.

We have been providing this service for the last 5 years with many satisfied clients. Most clients have now moved onto multiple projects.

For house and land packages we do not charge a fee.

With most small developments you will need around $100k of funds from existing equity to help you fund your purchase. This money will be used towards purchase costs, interest and development costs.

Therefore, if the project takes 1 year to complete you will need to make a profit of at least $60k to get a 60% return on your capital invested. Fortunately most projects have shown profits far greater than this.

Setting a minimum standard allows us to assess potential sites and we only recommend properties that pass the test.

It depends on what your objectives are when looking to develop. If you are a developer who develops for a living and is approaching the bank to fund  the development as a development loan then the returns will need to be at a minimum of 20% and naturally the margin on your capital would be a lot higher. So far we have had only 1 client choose this method of funding. The loan was approved after a lot of delay. However, since the project was being undertaken by a joint venture  the joint and several liability issues was off putting and they ended up going with conventional finance.

Most of our clients are investors looking for small duplex, splitter or house and land investments. They fund the projects using their own equity and obtain a loan at 80 or 90% to fund the land and construction cost. These investors are just happy to have made the transition from buying at retail prices and now going to developing and owning new properties at wholesale prices.

Buying wholesale also leads to having better cashflow.

The following is an example of the latest results obtained by our client. The property was tenanted about 6 weeks ago.

Project background:
We helped a client locate a duplex site in Caboolture. The land was located in a new estate close to town center, train, hospital, schools and easy access to the freeway. The site came with an existing DA approval. This was the first of many that we recommended in this estate. However, being the first led to us going through some learning experiences as the DA approval was granted outside the planning guidelines of the Caboolture council. This meant that no one in the council could give us a straight answer on what design parameters we should employ. After weeks of discussions we managed to come up with an acceptable solution that satisfied the council, covenant police and certifiers. Fortunately the block was purchased on a delayed settlement pending land registration. However design costs where abnormally high.  We managed to defray some of the concept costs to other clients who where developing in this estate as they benefited from our earlier learning experience.

The figures are as follows:
    Land purchase price: $193 500
    Stamp duty, etc :$8 750
    Consultants fees( includes drafting, engineering, BA and our PM fees): $40 000
    Construction cost : $282 750
    Interest: $22 000
    Rates, etc: $2317
    Total Cost: $549 317

    End valuation: $704 000.00

    Profit: $154 683

    Equity injected $130 000 which means the margin on equity was 118%

    Total rental income: $680 per week

The above returns are fairly typical of what our clients generally achieve. However, when we initially presented the figures to the client he was only expecting a profit of around $70 000. The market moved up over the duration of the project which led to a better result.

This client initially approached us in 2006 where we helped him with identify and split a block in Rothwell. He had similar profits in his first project.

Mid way through his second project he purchased another duplex block and we expect to start construction on his third project in 6 to 8 weeks.

In this way we have helped quite a few clients with the majority going on to multiple projects. A number do develop to sell however, we encourage our clients to develop and hold where possible.

The only difficulty with this type of investing is the availability of viable sites. The vast majority of sites are overpriced which makes finding affordable sites suitable to the small investor/ developer quite a challenge.

The land was purchased in a major northside development undertaken by QM properties.The developer obtained a material change of use (MCU) from the council on designated lots in the estate. This was written into the overall DA for the estate.  Generally the approved sites where corner lots that where 800sqm or greater. This meant that the developer did not have to submit plans or building envelopes.

The Caboolture council generally only allows duplexes on blocks that are 1000sqm or greater. This means a lot of the design parameters are based on the assumption the land will be of a certain size. Therefore, very little consideration was given to the impact  the duplex design policy will have on smaller blocks.

The project managers at QM properties where unaware of the existence of a duplex design policy. Other builders had built duplexes in this estate prior to us and they did not follow the guidelines. However, we did not want to be the ones to get caught out and blindly follow what the others had done previously.

The duplex is a 4 bedroom low set dwelling with double lock up garages with a under roof area of 180sqm each. It is reasonably spacious and can accommodate a small family. The construction cost was based on last years prices. With recent increases in material cost the same dwelling will cost around $290 000. However we have improved the specifications slightly as well.

Thanks Jon

We can build these duplexes at such prices because we are large enough to get very good discounts from suppliers on material costs. Yet, we are not too big where we have very high overheads.

We do not have display homes, sales people or franchise fees either.

This way we are able to pass on the savings to our clients which translates to greater profits. We end up benefiting in this win win relationship as we get a lot of repeat business and referrals. This saves us tens of thousands in advertising. To date we have not spent on advertising apart from our business cards and website (which has not been updated with new phone numbers for the last few years)

ps the 1300 number is correct.