All Topics / Help Needed! / Townhouse Development

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  • Profile photo of HeathJonesHeathJones
    Member
    @heathjones
    Join Date: 2009
    Post Count: 9

    Hello!

    I am new to the forum, I joined to ask a few questions and have spent most of today reading through other topics etc – very interesting reading.

    I am about to enter into a JV with my father.  He owns a block in Charters Towers zoned correctly for unit development.

    I have contacted council town planning with a proposal for 9 townhouses which is within the councils development requirements.

    The block is 2500m^2 with an existing house rented for $250/week.

    Buy in cost is $115,000 ($230k each half for me half for my dad)

    My plan is to keep the house rented out (it is quite old and needs some work), fence the front of the house and access through the side of lot to build 4 units/townhouses initially in order to maintain the house income to offset repayments, and then knocking the house down to construct the last 5 units and possibly a swimming pool etc.

    Is anyone able to provide me with cost estimates for building townhouses?  I have been told $1000 by several people here in Cairns, however I called a builder in Townsville and he said it would be $1900 per square metre.

    I would also like some advice as to feasibility, local real estate agents confirm there is a demand for units, especially with a medium level of finish.

    Comments on the below calcultions would be appreciated (based on interest only rate at 7.25%):

    The block and house has been valued at $285,000 but due to capital gains tax/selling fees etc Dad would only clear $230k if he sold it, therefore he said I can buy in for half of the 230k value.  This gives us roughly 50k in equity from the beginning to help finance the first few townhouses/units.
     

    OutlayRepayments# UNITSHOUSEReturnDeficit/wkEquity
    23000034901230-11955000
    4900006832177087180000
    7300001017411310293380000
    9700001352601620268350000
    13300001854902430576650000
    Construction/Unit120000
    Rent/unit/wk270
    House/wk230

    Profile photo of HeathJonesHeathJones
    Member
    @heathjones
    Join Date: 2009
    Post Count: 9

    To add to the above post I have 2 IPs already with approx 150k in equity.  My father also has approx 700-800k equity in his PPOR which we can use to finance the construction.
     

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Heath, you are heading in the right direction. Your brief to the architect should take in your desire to build in 2 stages maintaining the current house.

    Is the intention to strata and sell all/some of the units off or are you going to hold on to them all?

    Is your father going to be contributing to the construction costs/finance costs on a 50/50 Share basis or other basis – you will need to have a look at some documented partnership arrangement with your father.

    It would be prudent to float the concept past a real estate agent or two to ensure that there is demand (not just because they have nothing on thier books & want sales). Check what is in more demand ie 1,2 or 3 bedders and any specific requirements like a/c vs fans.

    Speak to a quantity surveyor (or check out their websites for a cost guide), remember to add the appropriate loadings for the remoteness of the region as well as cyclonic conditions. Costs will vary wildly depending upon what has been included eg only the building cost (and to the stage of completion eg lock-up or fix-out), whether it includes all paths, driveways, landscaping, fencing etc, connection to drainage, design costs, DA/CC fees and the other myriad of costs. (A copy of Rawlinsons Construction Cost Guide wouldn't go astray).

    Profile photo of HeathJonesHeathJones
    Member
    @heathjones
    Join Date: 2009
    Post Count: 9

    Thanks Scott

    The intention is to achieve positive cash flow and hold onto the units, using the equity created to purchase more property.

    Is the staged plan a good idea? or should we just borrow a little bit more to cover repayments during construction (say 6 months worth) and do the whole lot in one go?  Can you defer payment during construction, or negotiate with a builder to pay a significant portion on completion? 

    I have also considered giving the builder 4 of the 9 units as 'payment' for the construction, or even 2 units plus cost of materials etc although I think it would be better to have control over the whole lot.

    If we hold on to all of the units should we still go through the strata title process?

    We will be going 50/50 on all costs, what do I need to have documented?  I know people always say to have things set in concrete – even family – but I am not sure what is required.

    I was planning on not using an architect for this project,  I have drawn up a few sets of house plans and have a good structural enigneer that I use who certifies the engineering side.  Is this a wise move?

    Is it worth getting the townhouses to 'lock up' stage through a builder and then organising the fit-out myself and the fencing/landscaping?  I have just gutted a house I bought and pretty much done a full fit out quite cheaply.  Buying in bulk should also help to reduce fit out costs.

    I am assuming headworks charges will be approximately $10k per unit, and the driveway/entry will cost approx $30k.

    I have thought about the idea of pre-fab units (the block is large enough that we don't need to go 2-storey townhouses – but I like this idea as it frees up space for a possible swimming pool etc).   Any thoughts on this?

    I would like to have the units/townhouses built for approx $110k and then headworks charges and connection costs to be added on top of this. 

    Profile photo of HeathJonesHeathJones
    Member
    @heathjones
    Join Date: 2009
    Post Count: 9

    I will wait until the new edition in Feb for the Rawlinsons Construction Cost Guide, thanks for the tip looks like it is a fairly comprehensive guide.

    So far the figures I have been given from builders around Cairns is:
     
    $1100/m^2 First Floor
    $1500/m^2 Second Floor
    $2000/m^2 Third Floor

    Thanks again.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Remember Cairns is not Charters Towers and builder are going to charge a premium for going inland.

    Richard Taylor | Australia's leading private lender

    Profile photo of HeathJonesHeathJones
    Member
    @heathjones
    Join Date: 2009
    Post Count: 9

    Thanks Richard – I am trying to find construction costs for other building around Charters Towers, it seems that not a whole lot is going on there at the moment.  I will be going for a drive in a few weeks to pay a few builders a visit and to have a closer look at the house.

    On a side note I have just changed my other loans to interest only to help free up some cash for this project, and hopefully we can buy in the US as well very soon.

    I think I have a property addiction now…I just want more and more and more.

    Profile photo of Whaleman7Whaleman7
    Participant
    @whaleman7
    Join Date: 2010
    Post Count: 17

    Hi guys,

    I'm also new and interested in a developing a townhouse project in Townsville. Did you have any luck in getting any construction costs from local builders?

    Dale Lee

    Profile photo of j.wj.w
    Participant
    @j-w
    Join Date: 2009
    Post Count: 17

    Hi Dale,

    I amalso in Townsville, more into renovations myslef but would be keen to hear how your development goes. Do you already have DA approved on your site?  PM me with your email address if you want to have a chat about things.

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