Someone wants to buy my investment property for unit development…What is a fair price here?

2 trains of thought – if you are not pushed for a sale ie not currently looking at selling (and not fussed either way if you do or don't sell), then a premium of 10% ie $50k may be worthwhile as a trade off for not selling to anyone for the option period. The risk is that they don't exercise the option (no great loss if you don't need to sell & an extra $5k in the pocket).

On the other hand, if you want certainty, the quick sale (on the standard settlement time – 42 days) would suit. This is a 'no-risk' sale, provided the buyers sign a S66W (no cooling off period).

You will need to satisfy yourself of the value of your block – you will need to ask a few agents how much development sites for x number of units sell for in the area (ie cost per site). In your case you will need to determine, is $80-90k/site a low-ball or realistic figure?

You will also need to confirm with council the number of units that you can get on your block (or on two blocks). If necessary work backwards – ie selling price of units less 1/11 for gst. Then assume profit/overheads margin of 20-25% (so divide by 1.25 or 1.3). Subtract the construction cost, say $180-$200k per unit. What is left is the cost of the site. So, say a 3 bed unit sells for $440k, you get six on the site. Gross realisation is $2.64m, incl $240k gst. Take out profit, 25% or $480,000. Construction cost, 6 x $200,000 or $1.2 m. This results in a land value of $720k or $120k per site. If you know how much new units sell for in the area, adjust the price accordingly.

Gut feel, there is alot more in this deal, get the purchaser up around the $105-110k/site on a quick sale (or $120k + for the option) and run.

For the developer, this is an exercise in the control of time and money. One of these will generally be compromised for the benefit of the other. Time allows the developer to improve the value of the property through completing the town planning process (and picking up a little CG) whilst a lesser price is just that. It's business for a property developer.

so it has no d/a now?

also,yeah,if u dont need the money now,then take the option.

as a developer he is trying to reduce holding costs during planning period and d/a period.then build once thats all done.its ideal for him.

and as someone said,he is trying to produce atleast 20% gp in the deal,preferably heaps more,so as long as u keep ur pricing theoretically inside that margin for him then its doable,however he may look for deals with 30% + for eg.

if ur paid up with pricefinder or rpdata u can ask him for a previous development address he has done as proof of who he is,then search that address,click on his name as search his previous deals.try and use that to get a feel for the strategy he goes for,whether he pays good money for his blocks(in your opinion,or search similar sites) or if he seems to try and buy properties and very low prices at the right times.(all this only takes a few minutes if he has been building in area u know)

if its a townhouse probably 1200-1250 per square meter from flat grass to turn key move in ,but it depends on headworks on the block and council etc,does the block slope away to the back etc etc etc.

so if ur building 6 x 130sqm t/houses thats:
 6 x 130 = 780sqm
780 x $1200= 936k for construction + headworks + strata costs  + da + ba + any sewerage mods or anything else the block may need. your maths of 1.08mil maybe close to the mark.

marsmac, as a rule of thumb 3 level walk up unit blocks will typically cost between $1,400 and $2,200 per square metre to construct depending on the finish.  So you can multiply this by the number of square metres you expect the units will have. 

As you might know, the floor space ratio's (FSR) for some of the zoning's in Parramatta council have recently changed.  One site I am working on has changed so we can now build three times as many units on the property, which obviously has effected the site value. 

Another property I'm working on in the upper north shore is worth about $1 million more when we combine with the neighbour.  This is because the LEP allows for a higher FSR once the site goes over a certain size.

A bird in the hand can be great but there may be other ways to get more out of you sale – if you are in no hurry to sell.   Good luck

I would get an independent valuation just to make sure your not under selling yourself. A developer will buy at a certain price only if he or she can have some profit in the end that is worth while.

I am not familiar with the Parramatta local plan, but I would check to see local plans or a town planner to see if zoning could change in the near future. Currently you property can build 6 x units, but what if zoning is about to change to medium or high residential?

1% ??? This guy wants it all his own way. I was in the same position as yourself and was offered the development price of the land which was nothing compared with what the value was after I had sub-divided it. Take a little time to learn what you need to do to before you part control. Ask a Planning officer in the Council to give you some advice then go to a mortgage broker to see what options are open to you. If you don’t want to do it yourself, then get your money now and invest it in another area. At 1% if inflation is running at say 8%, which could be conservative, then you’ve lost 7% of your money even before you have received it!!.