Hi All,
Im curious to know if there is a general percentage that a development approval adds to a property. I understand location and what the DA is for come into consideration.
Is it more profitable to subdivide with DA plans for a new dwelling creating 2 properties or simply a straight up DA for 2 townhouses or 3-4 units.
Im looking at 600-800sqm blocks in the Bayside area of Melbourne.
Hopefully I have given enought information. I want to know the differences in a Development potential property and Develpment Approved property profit wise. And then if subdividing keeping existing dwelling and building as opposed to knockdown and building.
Thanks alot.
Sash.
Want it. Own it. Enjoy It. Achieve It.
HI Sash, I have never seen a pattern emerge for a 'rule of thumb' percentage increase due to the many variables involved. I have however seen properties with no value whatsoever added to them when a DA has been obtained (wrong product for the wrong market at the wrong time – owner actually went backwards as getting a DA through is not cheap as you probably know). You will probably need to run the numbers on both your scenarios and take it from there. Sorry I can't be more helpful.
I'd agree Henley, there is no point getting a DA unless it is for the highest & best use of the site (but the product has to be designed to be the most cost effective as well).
Hi Sash,
You will find that there is a price developers will have in mind for approved developments. eg. 200k per dwelling on a lot. So if you have approval for 3 dwellings the price would be around 600k for the property. So, try and find out what the price is. A good real estate agent should know their area.
Regards,
Andrew
itsandrew
Go as far as you can see and you will see further.
There is no rule of thumb, it depends entirely on the site, the DA itself and what sector (resi, comm, retail etc) and where the market is at at the time. Yes a DA adds more value as it removes the first element of risk for a builder/developer looking at the site. It doesn't however add what some agents would have you believe.
Things developers/builders will consider:
* cost per sqm to construct
* end value or gross realisation of the site
* holding costs
* indicative council fees and charges
* agents fees and commissions
* timeframes for construction and onsale of product
* minimum profit margins banks will accept to finance a project
* size of the site and yieldJust becuase you have a DA, doesn't mean it'll be what they want either. Often someone will view it and then have settlement conditional upon certain alterations to a DA or BA.
Someone mentioned highest and best use for a site. That's a good thing to keep in mind, and means understanding the zoning and town plan very well, or having a planner who does.
Not sure if that helps or not but good luck with your venture!
Matt.
Thanks All,
Your information is all helpful.
I really was trying to dictate for a residential block 600-1000sqm would it be more profitable to:
a) subdivide into 2 or 3 seperate lots with DA to build townhouse/s
b) demolish existing dwelling, DA to build 2 or 3 townhouses
c) demolish unitsThen work out your costs and profit margins for each. Unfortunately there's no one size fits all approach for that, just have to crunch the numbers, but once you know what your costs will be, it'll simply come down to applying those numbers across the 3 variations.
Also consider the timeframes for completing each and your holding costs for doing so and what impact that may have on re-selling etc. Most profitable might also be most problematic.
Hi Sash,
In considering the value (or otherwise) of land fit for development, the following is common:
- Find the right property by checking the zoning and overlays will suit the purpose.
- The first exit point can be the issuing of the TPP (DA) and if done well will generate significant profit.
- The second exit point is the sale of serviced and subdivided land. This means you, as the vendor, can sell smaller parcels to more people.
- The third exit point is the sale of the proposed dwellings, as a house and land deal. This can be done by selling the property for a set amount "as if complete" and the purchaser enters into a contract to build with a builder who you have already negotiated contracts with.
- The fourth exit point is the sale off the plan, whereby you take on the building risk.
- The final exit point is the sale of the completed properties.
As pointed out in the thread, the value attributable to any of these exit points is really dependant on how well the figures stack up. Anyone buying land with a TPP will generally have a good handle on all of the development costs, so your assumptions about costs, values and risk will need to withstand some scrutiny.
In the case of buying or selling land with a TPP it is also common for the vendor to proffer, or the purchaser to request, the project feasibility analysis for the property.
Hope this is of some help, and best wishes in your endeavours.
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