Just bought a development site in Sydney!

[MichaelW]

Guys,

As I stated up front, all my numbers are a bit rubbery yet. I need to do all the work Peter147 and See Change and others have suggested to determine the level of finish I want to achieve and the associated cost. I need to understand the market demand in this area in detail before committing to any particular style or quality standard.

For those interested, here's some links to recent up-market developments within a few blocks of my site and how much they're asking for completed townhouses. I've allowed $600K-$650K for mine on completion:

$1.1M to $1.3M

$825K

$875K

$660K

I believe those particular townhouses to be well over the quality mark I'll be pitching for, but they are all within a couple of blocks of my site. The site is in the heart of Mona Vale which is effectively the CBD of the Northern Beaches with Council Chambers located there as well as the library, shops, hospital, beach etc etc.

Time will tell how it all pans out, but one thing is for sure and that is that I've got a lot of work ahead of me now.

Thanks again,
Michael.

 

[FrankGrimes]

Here's a link to some duplex costings at Valley Homes in Maitland. I don't think I'll get costings this good for where I'm building and what I intend to build, but they do demonstrate that you can build townhouses for less than $1000/m2.

http://www.valleyhomes.com.au/products.php?action=viewProduct&id=41&sub=2

The Sands 278m2 $989/m2 Total cost $275,000
Marlin 436m2 $819/m2 Total cost $357,500
Tomaree 420m2 $854/m2 Total cost $359,000

That's very reasonable and the duplex doesn't look half bad either. I'm assuming they build in Sydney as well? What would the process be for a display duplex like this? Would it be any easier than from scratch?

What are the steps involved? Based on your posts and other development posts, this is off the top of my head..

1/. Enquire about minimum land size and zoning requirements with Council (Does anyone know the minimum for Hornsby and Ku-Ring-Gai?) My father in law works for Hornsby council so this should be easy.

2/. Feasability study on potential site(s). Who completes these? Can you pay a professional to make sure all the numbers stack up?

3/. Purchase land based on feasability study results.

4/. Display home plans submitted to council via display home provider?

5/. Clear existing house and build new dwellings.

How does finance work? Is it just a regular loan for the property to start with, then development finance during the construction phase? Do the banks lend based on the finished product? Is interest capitalised during the construction phase or does this come out of your pocket?

Sorry about all the questions, But I have been pondering/dreaming the idea of buying something in the upper north shore with the potential for future development. Half would be to live in and the other would be rented out.

MW - Look forward to the progress reports. The time and effort you put into your posts always makes for a great read.

 

[House_Keeper]

Michael,

Congratulations for having the courage to make the big decision.

It has been a long learning experience, but it sounds like you are on a good track.

Cheers,

 

[muney]

well done michael..
as a builder/developer let me give you my perspective on things..let me tell you that for a complete project driveways,landscaping and everything else (turnkey) do allow for about $1300-1500 per sq metre.(brick veneer WITHOUT basement carpark if not needed).anything less i would be highly suspicious of...120 sq metre is way too small for a double storey townhouse..i would make them 140 sq metre as a minimum..you can do 3 bed + study or 4 bed for that size..wouldnt bother with 2 bedders in that area..
in the northern beaches people are fussy and in a depressed market prospective buyers are very picky..i would suggest putting in nice finishes but also make the building attractive so that brings people in..you cant get people in if the building is horrible looking..think of this development as if you will be living in one and what you would want as a prospective buyer..
if i can be of anymore help just PM me

P.S dont be fooled with these project home mobs who advertise a cheap price..that does not include ALOT of things..and then when you start adding these up..thats where they make their money...they love the magic "V" word...VARIATION!!!they make 20%+ ..which is their profit

regards

 

[sparky23]

Hi Michael

Congratulations! Along with everyone else I have been following your journey
on the forum. When you are ready to build ask Greg from Eagle homes based in your neck of the woods to send some duplex plans over and check out your site and you will be pleasantly surprised. I have used them for a 2 storey IP and have had plans drawn up for a duplex which is coming in massively cheaper than I can get anywhere else.

Sparky

 

[grossreal]

hi MichaelWhyte
I have put your figures thru my system and if they are correct you are running at 26.3% and I require 21% so it seems to be ok.
yes you can get to the 150k per site I am at that with my sites but its a hard slog and you need to screw down the suppliers and you won't do that with brick look at the alternatives styrocon and unipanal.
at 26% you can go to 500k across the lot and still be ok.
good luck and well done you do need to make sure you can raise above the problems and look for solution as you are going to have to make alot of them.
but I look forward to your progress and the next sydney meeting make sure you ask me how you hold them and I will explain, there is no problem.
the killer is the blow outs and you need to keep on top of them.
well done my hats off to you for having ago but also to get it over that magic 21% return

 

[tigerGT]

HI,

Congratulations Micheal!! Im sure it feels great after all the time you put in...

You get out what u put in hence ur great buy

Look forward to see how you go with this project. Seeing all the suport you have I am sure it will be a very beneficial experience in more than one way...

A lot of my friends are builders and I have seen the quotes they give drop significantly due to a big slow in building industry. I suggest looking at tradies from all over sydney as from past experience I have noticed that builders and tradies in hte northen beaches tend to charge more than for tradies from other parts of sydney. This was the case during the last boom. I dont kow if things have evened out now though...

Im also interested to find out what grossreal meant when he said u were achieving over 20% return???

All the best and good luck!!

Georges

 

[MichaelW]

...let me tell you that for a complete project driveways,landscaping and everything else (turnkey) do allow for about $1300-1500 per sq metre...i would make them 140 sq metre as a minimum..you can do 3 bed + study or 4 bed for that size..wouldnt bother with 2 bedders in that area...

Muney,

Thanks for the post and offer of assistance. I might just take you up on that offer when I start getting plans drawn up!

I agree that the market here seems to be for higher quality developments. My original costing and end-valuation was based on a cheaper build and finish. If I were to go bigger and better then my costs would add about $100K per townhouse, but I could probably market/value them at $150K more than I've estimated (maybe even more than that).

Time will tell, but this is precisely the due dilligence phase that I'm in at the moment. I'll be sure to understand the market demand as intimately as I can before I commit to any design and level of finish.

Thanks for your support,
Michael.

 

[Kenny]

Hi Mike,

My belated congrats to you as well on nailing down a dev site. I miss a day or so of checking SS site and I'm 48 posts behind on one thread <sigh>

I don't know the northern beaches much. What demographic will you be targetting with these THouses?

Regards,

Kenny

 

[AndyB]

Lizzie, yes I was working on 100m2 footprint as a rough guide, and $1500/m2 for the costings. The site is only 680m2 and the maximum we can develop is 50% of that. So, 3x100m2 makes for 300m2 site coverage. I will actually try and get them a bit bigger than that (113m2 max) so their resale (or revalue in this case) is as high as possible. I checked with council and I can excavate if I want to as well to put parking underneath and two stories on top. That will add some cost, but will be an option I'll consider. So long as my maximum height is 8.5m from the original ground level and max two stories then I'm within council guidelines.

Michael,
A couple of questions in regards to your council Floor~Space ratio of 50%;

If you don't excavate for garages are they included in your total floor area?

Are you talking about building 2 storey with total floor area of approx 100-113m2?

Or is the 100m2 for ground floor only? My local council requires you to add together both ground & first floor area when calculating total floor area.

Regards
Andrew

 

[rj]

Wheres my thanks for all the gym advice

Good on you man, apply that same "kick ****" strategy that you use in the gym in the world of investing!

RJ

 

[rj]

Hey Mike - do you still work? Or are you doing this as full time income?

RJ

 

[MichaelW]

Andrew,

They're easy questions that I can answer even at this early stage so here goes:

The 100m2-113m2 per townhouse is its "footprint". My maximum site coverage is 50%, with the remaining 50% being reserved for landscaping. So, I can go up (or down) and still only cover up to a 113m2 footprint on the site.

I need to include all driveways in the "built" footprint calculations so these form part of the 113m2 that I can allocate to each building. However, I do plan on doing two storey buildings so my actual floorspace will be in the order of 150m2 to 180m2 per townhouse. At this stage I'm not planning on excavating for below ground carparking. I'll stick to a concrete slab with garages at ground level at this stage and see what designs I can come up with.

I've got dual street access as its a corner block so the driveways should be able to be kept to a minimum. I'm also entitled to strata them or torrens title subdivide them when I'm done and will consider this in the design stage. If I can allocate small discrete courtyards to each of the three buildings and fence them separately then this should add to their value even more. All just conjecture at this stage.

Cheers,
Michael.

 

[MichaelW]

Hey Mike - do you still work? Or are you doing this as full time income?

RJ,

Still working. My salary is the main reason we could afford to borrow that amount of money. The loan and the title are all in my name. We haven't needed to include my wife's income nor our Navra share income in the servicability equation. When we come to develop it we'll have those incomes up our sleeve for the funding on the build stage.

Kay is only working part time, and when we get to the building stage (in at least 12 months time) she will probably consider dropping out of work and project managing it herself full time. She's an awesome project manager and built our house to completion from lock up already. We've got subbies lined up for all the key trades already from that process so will probably adopt a similar approach to this build instead of full turnkey.

Cheers,
Michael.

PS You know I appreciate all your gym advice. I think I've posted that already in the gym thread many times. If not, then a big thanks for that right here too!!

 

[rj]

Youre a champion mate. KUDOS!!!

RJ

ku·dos (kū'dōz', -dōs', -dŏs', kyū'-)
n.
Acclaim or praise for exceptional achievement.

[Greek kūdos, magical glory.]

USAGE NOTE Kudos is one of those words like congeries that look like plurals but are etymologically singular. Acknowledging the Greek history of the term requires Kudos is (not are) due her for her brilliant work on the score. But kudos has often been treated as a plural, especially in the popular press, as in She received many kudos for her work. This plural use has given rise to the singular form kudo. These innovations follow the pattern whereby the English words pea and cherry were shortened from nouns ending in an (s) sound (English pease and French cerise), that were mistakenly thought to be plural. The singular kudo remains far less common than the plural use; both are often viewed as incorrect in more formal contexts. • It is worth noting that even people who are careful to treat kudos only as a singular often pronounce it as if it were a plural. Etymology would require that the final consonant be pronounced as a voiceless (s), as we do in pathos, another word derived from Greek, rather than as a voiced (z).

 

[MichaelW]

All,

An interesting article in today's SMH that particularly relates to developing in Sydney and the state of the market today. Seems I might have jagged it with some good timing! Well maybe, just maybe it was the result of a lot of research and informed action...

http://www.smh.com.au/news/property/a-punters-way-of-life/2006/05/19/1147545490425.html

"If you can find a good site in a good location with redevelopment potential in Sydney or surrounding suburbs, and provided the stock is in demand, now would be a good time," says Bill Fatouros, residential director of independent valuers LandMark White.

"While it may not be a good time to sell the end product, it is a good time to buy because prices have come down.

"With your initial price cheaper, you can wait for the market to pick up.

"In a slow market, there is more risk involved, and that has reduced the number of people taking on developments, so it has pushed up the profit on these sites. There's also fewer people bidding for land."

Regards,
Michael.

 

[Lily House]

Let me add my congratulations to you Michael. That is great news for you and your family.

I think you have played the property game with great intelligence. The way the market has been over the last year - there was no need for any haste. I disagree with the 'buy for the experience' people. Buy when you are well researched, and certain of an end profit.

I have certainly learned a lot from your posts. Thank you. I very much look forward to reading of your progress through this development. Thank you for sharing this with the forum - a wonderful opportunity for so many of us to learn through your experiences.


Lily

 

[DavidMc]

The loan and the title are all in my name.

Well done Micheal, I look forward to hear how it works out for you.

Quick question - why didn't you go for a Hybrid Trust?

 

[KL1]

Congratulations Michael and Well done!

Sounds like you've got a really interesting learning experience ahead of you.

I look forward to reading your updates.

Best of luck!

Kelly

 

[investor]

Andrew,

They're easy questions that I can answer even at this early stage so here goes:

The 100m2-113m2 per townhouse is its "footprint". My maximum site coverage is 50%, with the remaining 50% being reserved for landscaping. So, I can go up (or down) and still only cover up to a 113m2 footprint on the site.

Hi congratulations.

Unless your council is different, site coverage and floor space ratio are two different things. Just because you coverage is 50% doesn't mean you can go up another 50% unless your floor space ratio is 1:1.

What is the floor space ratio for the block ?

for example if your site is 700sqm and the floor space ratio is 0.65:1 you can only build 455sqm total regardless of site coverage.

Regards
Investor