Hey Carpe

I haven't read any books on multi-developments before but also interested in finding out – if anyone can suggest!

I guess by the time you have read a couple of books and have Surveying, Engineering + Architectural Drawings your plans could sit in Council a while waiting for DA – by which time, the market may have started heading ^ward again? (hopes)

Are you set up as a Company? You should be able to visit your Bank Manager / Lender with your current Property Portfolio stats and borrow for a multi-development through your Company. During the Development process you would only pay Interest anyway, which would keep your cash flow plenty!

If you are registered as a 'Developer' you can have Sales staff (or yourself) selling the apartments without having an Agents Licence – which could save a few thousand bucks if you know what you're doing!

I guess if you pursue development during the big-bad-Recession, you could always opt toward Leasing your apartments as there will be more of a demand with Vendors selling up! I'd suggest discussing both Off The Plan Sales + Leasing options with your Bank Manager / Lender

Congrats on such an achievement with just 15% debt! That's incredible

Beth Ashton

    * Borrowing can only be used to fund the purchase and redevelopment of commercial property
    * Following the changes in Regulations on 6th April 2006, the maximum that can be borrowed is restricted 50% of existing SIPP funds. In calculating the maximum loan “Protected Rights?? funds may be taken into account, but these funds can not be used towards the actual purchase/development. They can however be used for the associated costs, e.g. professional fees and stamp duty
    * The loan can only be secured using the assets of the Member's SIPP
    * The rental income produced by the property must exceed the mortgage repayments (including capital and interest)
    * Where a number of Members are buying property together, each Member may borrow a maximum of 50% of the value of their respective funds. Each Member may have different levels of borrowing if necessary, but each Member’s share of the rent received must still exceed their individual loan repayments.
    * The loan is made to Trustees of the Member’s SIPP, not the Member
    * The Lender is given First Legal Charge on the property as security. All documentation must include a Limitation of Liability clause, which limits the liability of the SIPP’s Trustees to the value of the assets held by the Member's SIPP.
    * Any loan must be repaid when the property is sold
    * No new borrowing is permitted once the Member has begun drawing retirement benefits using all available funds i.e. a “full?? drawdown.
    * If the Member elects to take phased retirement benefits, he/she may still be able to borrow to purchase commercial property, based on the assets not yet “drawn down??
    * Loans should in general be taken out on an interest and capital repayment basis, though some may have an initial interest only period
    * Members may take out a bridging loan to cover any VAT payable on the purchase. This can be in addition to the 50% of fund maximum. However, the term of the bridging loan must be no more than 12 weeks from the completion date of the property purchase.

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Miami Real Estate | Miami Beach Condos

Hey Carpe,

On the other side of the coin, you should really spend time on doing research to maximise profits and target the correct demographic.

No point targeting middle income families in an area that is high end.

Invest your time in contacting local real estate agents and rental managers, contact town planning and see what is currently in the works.

Good Luck.

Cheers,
Miike

Hi, you might be alright borrowing off the end value of the devt. I reckon 10×1 might cost 1.5-2M to build? and you might end up with 8-10 apts with end value 3-5M

Once DA is approved, the banks will provide funding. I borrowed close to 1M for building and the bank released it as and when the builders asked for payment.

Always borrow more than you need. You pay interest only when it's drawn down.

The 'danger' period is when the building is almost done but hasn't sold. Your interest cost will be way way up there & the pressure to sell can be quite horrendous.

Can you do a mix of 1, 2 & 3 BR apts? Or maybe just 1 & 2BR ones? There's no need to have them all uniform.

That's the part I like about building & 'devt'. Creating the best mix for your land is a very very satisfying exercise.

Good luck,
KY

Hi Carpe, a couple more points to consider [as though you don't have enough to think about!]

Just something I've observed : 'best' time to build seems to be near the end of a recession – our recession is just beginning so your idea to wait & learn all the necessary steps while waiting seems sensible.

Another point is Canberra has peaked after a rather dramatic few years of sharp increase. It has to settle into a plateau before it goes up again.

By the time you're ready, hopefully valuations are reliable and therefore your calculations will be accurate.

The cost seems big but by devt stds, it's only a small devt [based on cost of houses/apts] we used to think 1M was huge but high housing prices have shifted the parameters.

KY

Hi Carpe,

I have now developed over $50M worth of property over the past 5 years (including 1 large $23M at present) and can offer this advice:

There are many skill bases you require before even contemplating development, especially one the size you are considering. Some of these can be summarised as:

Negotiation Skills (Most important)
Design Knowledge (Equally Important)
Market Knowledge – So a unique product may be created and released into the market for sale/lease with multiple exit strategies to explore if things don't follow plan (which the rarely do)
Building and construction knowledge
Knowledge of Law
Knowledge of Finance and Accounting
Knowledge of Marketing
Town Planning/Environmental Law knowledge

These are the very broad areas of knowledge you require as a bare minimum before you would consider "diving" in. So many people think they can outsource all the above by engaging consultants, and that they will just "take care" of your interests. This IS NOT the case, unless you have the knowledge and skills to drive them in the direction the project requires in order to achieve a favourable outcome. The most dangerous thing you can do is read one of the many generic books on the market that brush over the core skills required and make you believe you can do it on your own. A seasoned, skilled developer (like any professional) gains their knowledge and skills over many years, if not decades. Lastly on this point, if you don't intricately know anything about a particular disipline of a development, how can you go and hire of engage the correct professional to fill that void? What questions do you ask to ensure they are the right person for the job? How do you know what terms to include in any agreement that is to be executed with the consultant?

The other thing to consider is that when undertaking a development as a one off, you are unable to spread your overheads across multiple projects, which in effect make the exercise unviable. For example, a construction contract (prepared properly) will cost around $15-20K, a sales contract will costs around $2-3K alone to have prepared etc etc etc (I could list the fixed costs for various expenses all day) If you look at these costs as a percentage of the total cost of a 10 unit development vs a 100 unit development, it quickly adds up to ensuring the project isn't viable.

In summary, setting up all of the infrastructure to run 1 project as well as making all the mistakes along the way that you inevitably make as a result of inexperience will ensure the project fails financially unless the market booms to cover all your mistakes. No business in the world succeeds by outsourcing every skill required to make it a success. You simply have no control over consultants and are at their mercy at all times. You can't run to the courts and take legal action against a company every time they don't perform and if you withold payments, you end up spending more money on legal expenses whilst the lawyers engage in letter wars.

If you think you want to be a developer, start with a very small, low risk reno to see if you can make that a success. You will learn how to deal with councils, contractors, agents etc etc by doing this and then be in a more powerful position to decide hw you proceed with this property (other than asking others on here what to do, that quite frankly, in the majority of cases, have probably never engaged in a development before either)

Anyway, goodluck with whatever you decide. I don't usually post on forums, however your situation is a common one, and if you do some research you will find that construction/property services have one of the highest failure rates of any business sector.
So what I am saying is that you will answer your own questions as you become more sophisticated and gather more experience.

Wardy

Hi

I'm interested in something similar and am based in Sydney.

I've got a few questions.
How do a legally start up a compnay (Pty Ltd) – does Accountants do this, or can I do it myself? Theres a lot of stuff on the net, but I'm not getting any real luck. Can anyone recommend someone to me in Sydney that sets up a company, e.g. financial advisor/accountant?

Wardy – you say you have done many of these projects.

What type of loans did you utilise? As in did you use GVR loans/capitalised interest? etc What was the lending criteria invovled – as in for someone who is attempting their first project, and with the current economic situation, what would a lender (be it a bank or private lender) be looking at (criteria/asset wise) for lending. Do lenders provide loans based on Margin Development cost and business plan, in addition to personal assets(which i would rather avoid collateralising)

Can you recommend me any specific lenders/mortgage brokers etc?

Thanks

Feel free to private message me if you like

Cheers