Hi Giddo,"]Helloooo
Michael from Monavale are you there???
Any comments on this article?
SeeChange already answered correctly for the most part, but I'll add my 2c...
Firstly, mine is Northern Beaches and not along the Pacific Highway. I also didn't just buy an expensive site with its purchase cost predicated on developing it for a fat margin. I bought a distressed house and land in the heart of Mona Vale for well below the median house price for the postcode. I got the bonus of a MUH zoning. Its now tennanted and cash flow neutral with a nice yield. I'm going to put the rent up again next month.
Also, my price on completion is still only $850K each for two high quality townhouses and one unit. Stuff at that low price point is still in demand in this postcode. In fact, I had an agent call me the other day to ask if I'd commenced as he had an elderly male buyer who just wanted something with lift access at my price point. But it was the block two down from mine that has just commenced so he had the wrong developer. They'll do OK, this whole strip is in very high demand as Mona Vale is the CBD of the Northern Beaches. I won't run the list of all its attributes again, except to say that you need to look at individual markets and not tar them all with the same brush.
Having said that, I'm still not locked into a construction timeline in this stage of the property cycle. I've just suggested to Kay that we get a year's extension on the DA so we can wait another 18 months before we commence if we choose to do so. I'd rather be building into an established boom, than into the beginning of the recovery. Time is on our side! Every month I wait, rents go up and interest rates come down. In 12 months time construction costs are probably going to be a lot better too.
I could probably build it today and do well out of it, but why chance it? Sure, the rental yield on costs at completion is 6.5% and CF+, but that would require three separate groups of tennants which is another potential risk factor. I'm big on risk mitigation, and if a 12 month DA extension works to achieve that, then its something I'll actively pursue. I think delaying your timeline is something you should understand given your own villa build circumstances...
Again, time is on my side...
Cheers,
Michael