Hi Everyone,
I have recently bought a development site in Brisbane, despite living in Sydney. I am looking to engage a project manager to oversee the development of 7 units, as it is my first development, and I am interested in learning along side the project manager as he uses his experience to co-ordinate the development.
I have just received his quote back, which stands at $10, 000 flat fee to DA approval, and then approx 2.5% on construction cost per unit ($6000-$7000 per unit). This will be around $59, 000 total for a build of of 1.9 – 2.1m. Does this seem reasonable in the current market?
Thanks
Hi Gmumm,
I would question what's exactly included in his fees.
1. A fee of $10,000 for DA Approval – does this include the costs of Design Fees and Townplanning Reports? If not, then I would question what his involvement would be.
2. 2.5% for construction costs per unit – is he going to send your project out to the market for a competitive price? Is he going to manage the actual construction from client side (e.g. Negotiations, Site inspections, Defects inspections, Time management etc?)
David
Thanks David,
I understand your comment re involvement up until DA and will check.
With regards to the remainder of the project, this fee will cover all management from the client side including negotiations and on site duties/inspections.
Thanks for your advice
Gmumm, ……. for a first project that's a hell of a task and living interstate as well.
Too late now, but another option would have been doing a couple of smaller developments to learn the business first where you don't have so much at stake.
By not understanding the whole process you are leaving yourself open to extra costs and charges that eat into your end profit and it's the sort of project where you need to be on-site most day's to see first hand what is going on. I understand that you are employing a project manager, but it is not there money at stake here it's your's so will he/she really care if costs go over?
How did you do the feasibility study to decide that the price you paid for the land and the approx cost of building the units plus all other associated costs made the project viable? Have you factored in council contribution costs, header costs etc?
Look I'm not trying to be a downer here, but costs can spiral out of control if you are not careful. By doing smaller duplex/triplex developments you could learn the business inside out before committing to a large project like yours where the stakes are higher.
I sincerely wish you the very best of luck and much success with the project, … as long as you make profit at the end then all good.
Mystery
Thanks Mystery,
No need to be worried about the caution, I understand the concerns.
We have negotiated a 45 business day DD clause in terms to do this feasibility, which is why it is great to have some opinions from this forum. The project manager is sourcing quotes which we will check against opinions from friends in the business in QLD to compare figures and get as realistic an understanding as possible.
The idea had been to do a smaller project first, but after 3-4 projects that didn't make it through DD, this looked to have some possibility. Ambitious yes, but hopefully I DD will reduce the risk to a reasonable level that the project is worth doing, if not we will walk away at only a small cost.
Thanks for the input.
The old "bite off more than you can chew, then chew like hell" philosophy, …. I like it!
Well done and every success.
Mystery
Have you had discussions regarding finance?
Recommend you get a really good broker on board asap to run your numbers, make recommendations and to liaise with banks on your behalf.
Part of your DD period should include address the question of finance.
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