Hi
I'm into residential property investments and have done well (mainly accidental as I lean more to bricks and mortar). All properties are on land in the inner areas of Canberra. Virtually all are in redevelopment areas. Whilst I have excellent equity and low debt (15%) I don't have access to cash other than my income which is fine. If I decided to develop one of the blocks (zoned 3 storey for about 9 apartments on corner block 5 minutes walk to city) myself am I able to borrow and then sell off the plan? Perhaps there are particular book(s) that I should read that give me insight on handling from beginning to end such a bold move. Appreciate any advice you might have to offer. Probably wouldn't do anything right away but I guess I'd better start planning for growth in the future. Thanks
CarpeMost important thing you can do at this point is investigate what sort of Development Approval you can get for the block, by speaking with Council Planning/Town Planning. Once you have an understanding of what you're allowed to, and not allowed to do, your next step would be to get some plans put together via an architect/engineer/builder. Once you have your project scoped out, then you can start to get pricing for construction via quantity surveyors etc. THEN you can start to think about whether you'd try for finance in which case you'd need to securitise or tip in some equity for the construction funding (and now wouldnt' be the best time to go looking for that as LVRs etc are changing rapidly) OR sell the site with the DA further down the track to someone else and let them have the headaches of construction. Of course feasibility studies are integral to all of this as well, such as factoring in completed value, construction costs, project marketing, holding costs etc etc etc ad nauseum..
Another useful thing to do is find out what the market wants from the real estate agents, and once you have an idea of the council's wants needs and desires via their town plan, you can then start to focus your project scope at something that will be more likely to attract buyers etc.
Good luck!Bricks and Mortar IS Property?
Hi Carpe,
This is the short answer. In capital cities the land component in a unit development typically represents 25% – 35% of total development costs. In other words if the land was unencumbered you would have equity towards project costs of 25% – 35%.
Development finance is a bit 'over the shop' at present depending on the financier. I'm still getting 85% of total development costs including capitalised interest from my main bank but I have a long successful track record with them. Lets say you can get 75%. If you can rejig your loans to produce an unencumbered site it should be able to be financed on the TDCR (total development cost ratio).
Of course there are other issues such as presale requirement, your overall asset position and not the least of your problems – inexperience. An experienced project manager or advisor could offset that issue.
There are very few books on property development in Australia. Ron Forlee has one and so do I. If you go to my website below you will find some helpful resources.
Hi Matt007 and Bob Anderson
Thank you very much for the information provided…..all very useful to get me started. The block I'm planning to develop is unencumbered and worth about 1.5m so it seems like I have a good start. As I say I'm not going to start building tomorrow but I can prepare for it to take off in 3 or so years and the market by then should at least be known. By then I could sell another property to assist in the finance. I agree given my inexperience I'd be mad to take on the headaches myself so a project manager is a good suggestion. Thanks for your generosity in giving your time and leads which I'll explore. All the best to you both.
Carpe
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