Hi all
While I am not currently in a position financially to proceed with this exact site, I want to keep advancing my researching/education now so I am further along the path when I do want to commit to something. (hopefully within the next 12 months)
Proposed property is here; http://www.realestate.com.au/property-house-wa-woodbridge-116162015
Reasons I like the site;
- walk to high and primary schools, river, train, shops.
- MidlandGate just up the road, Bunnings/home improvement type shops etc not far away either.
- site backs onto park
- I think Woodbridge may be an up and coming suburb, given its proximity to Guildford and the river, plus all the infrastructure spending going on next door in Midland (without it actually being in Midland).
- front house has some nice period features, seems well kept and very rentable (just from pics), plus when I sell it I think it'll be a great entry point/location to be attractive for a first home buyer/young family.
My thoughts were to retain the dwelling, rent for 1 year after a small reno (kitchen, paint, floors), subdivide 2 more blocks out the back, build two 3x2 2 storeys on the back overlooking the park, with their entry off the rear laneway. Sell the existing property after the subdivision to help fund/service the build of the two out back. Then sell the two new builds on/after completion (probably in differing tax years)
My rough numbers are;
purchase (incl stamp) 620
reno 10
sub divide block 30
sewerage, power, xover for front 15
interest yr 1 33.75
build 2 townhouses 500
interest yr 2 26
total costs 1234.75
add contingency5% 1296.4875
rent 1 year 19.2
sell front house after 1 year 400
sell 2 townhouse 1100
total income 1519.2
nett +222.71
In addition to some of the numbers above, things I am unsure about are below;
- I assume I would have to provide for parking for 1 car (just 1?) at the front of the the existing house given I am removing the current parking accessed via the rear. This would need a need crossover cut in, have no real idea of costs for this.
- There doesn't seem to be any similar developing going on in this pocket, most homes appear to have their original block sizes. Not sure if there is a valid reason for this in a negative way, or if its an advantage for me.
- Midland next door seems to have MANY new multi-dwelling developments done/being done, could lead to an oversupply?
- would I even be able to have the 2 new builds fronting an old laneway? (current laneway isnt exactly pristine bitumen). What would the new addresses be/mail delivery etc? Is there a process to have a laneway 'registered'?
- is my 5% contingency prudent? 10% more realistic, esp for a first project?
- the sale proceeds of $550k each for the new builds is a best guess, finding it hard to find comparable sales. (range seems from $650k for nearer to river vs $450k for being almost on the trainline)
- my numbers show a potential 17% return, I keep reading here that its an initial return of 20% on paper or move on as a good yardstick. Especially for a first project, should I shoot for a higher potential return up front, giving me more padding to absorb all the costs I will undoubtedly 'learn of' along the way?
I also did a similar numbers exercise for demolishing the front house and doing a standard triplex development, the final numbers seemed to be very similar. If they are in fact similar costs vs return, I prefer the idea above of selling the existing house half way through the process to help service the loans.
Thanks in advance for any feedback peoples (good and bad).
While I am not currently in a position financially to proceed with this exact site, I want to keep advancing my researching/education now so I am further along the path when I do want to commit to something. (hopefully within the next 12 months)
Proposed property is here; http://www.realestate.com.au/property-house-wa-woodbridge-116162015
Reasons I like the site;
- walk to high and primary schools, river, train, shops.
- MidlandGate just up the road, Bunnings/home improvement type shops etc not far away either.
- site backs onto park
- I think Woodbridge may be an up and coming suburb, given its proximity to Guildford and the river, plus all the infrastructure spending going on next door in Midland (without it actually being in Midland).
- front house has some nice period features, seems well kept and very rentable (just from pics), plus when I sell it I think it'll be a great entry point/location to be attractive for a first home buyer/young family.
My thoughts were to retain the dwelling, rent for 1 year after a small reno (kitchen, paint, floors), subdivide 2 more blocks out the back, build two 3x2 2 storeys on the back overlooking the park, with their entry off the rear laneway. Sell the existing property after the subdivision to help fund/service the build of the two out back. Then sell the two new builds on/after completion (probably in differing tax years)
My rough numbers are;
purchase (incl stamp) 620
reno 10
sub divide block 30
sewerage, power, xover for front 15
interest yr 1 33.75
build 2 townhouses 500
interest yr 2 26
total costs 1234.75
add contingency5% 1296.4875
rent 1 year 19.2
sell front house after 1 year 400
sell 2 townhouse 1100
total income 1519.2
nett +222.71
In addition to some of the numbers above, things I am unsure about are below;
- I assume I would have to provide for parking for 1 car (just 1?) at the front of the the existing house given I am removing the current parking accessed via the rear. This would need a need crossover cut in, have no real idea of costs for this.
- There doesn't seem to be any similar developing going on in this pocket, most homes appear to have their original block sizes. Not sure if there is a valid reason for this in a negative way, or if its an advantage for me.
- Midland next door seems to have MANY new multi-dwelling developments done/being done, could lead to an oversupply?
- would I even be able to have the 2 new builds fronting an old laneway? (current laneway isnt exactly pristine bitumen). What would the new addresses be/mail delivery etc? Is there a process to have a laneway 'registered'?
- is my 5% contingency prudent? 10% more realistic, esp for a first project?
- the sale proceeds of $550k each for the new builds is a best guess, finding it hard to find comparable sales. (range seems from $650k for nearer to river vs $450k for being almost on the trainline)
- my numbers show a potential 17% return, I keep reading here that its an initial return of 20% on paper or move on as a good yardstick. Especially for a first project, should I shoot for a higher potential return up front, giving me more padding to absorb all the costs I will undoubtedly 'learn of' along the way?
I also did a similar numbers exercise for demolishing the front house and doing a standard triplex development, the final numbers seemed to be very similar. If they are in fact similar costs vs return, I prefer the idea above of selling the existing house half way through the process to help service the loans.
Thanks in advance for any feedback peoples (good and bad).