1st is always the most difficult

After years of inspiration, self-education and research, we're getting closer to our 1st development. We'd love comments, tips, and guidance please.

Here’s the deal so far.
Building a dual occ (2 villas) on a 670sqm block of land in Central-North Coast NSW
Two of 3 beds, 2 baths, and double garage villas
Selling prices are more than $500k each = $1m (we’ll be conservative here).

Expenses:
Land = $285k - $290k (depending on the seller agreeing to delay settlement and giving us access to remove/relocate the current 1 bed cottage before settlement)

Construction cost, incl. project management (quoted) = $390k (about 160sqm per villa incl. double garage)

Purchasing cost = $2k (just solicitor fee, no SD as we’ll get rid of the cottage and settle as a vacant land)

Selling fees = about $30k (for both villas unless we decide to sell them ourselves)
Interest on land + construction loan = about $35k (for 10 months period)
Council contribution = $27k
______________________________
Total = $769k
Contingency 5% = $38.5k
___________________________
Total cost = $807.5k

Project manger has quoted $1200/sqm for pre-fab homes. This includes all consultants fees, council application fees, builders fees, and his 6% project management fees. Has anyone utilised a project manger in Central-North Coast NSW? How does this sound? We’re building two of 3 beds, 2 baths, double garage villas.

Those are the rough calculations at this stage and we think it’s worthwhile sinking out teeth into this deal. We’ll hit the brick wall at after DA approval and at construction stage, when we’ll have to look for a JV partner(s) for construction loan deposit and/or to sell these villas off-the-plan for financing purposes.

Any advice is appreciated guys. We’re scared and excited, but figured the best way to learn is to research, research, research and jump right in!
 
Are your costs for the DA included in the project manager's fee? Is it separately itemised so you know what you are up for if you sell with DA and don't proceed to construction? Is there demand in the market for the product you are developing?
 
Where is GST on sale?
Are you margin scheme?
Will you be classified as professional developer by ATO?

Some points, Peter 14.7
 
Are your costs for the DA included in the project manager's fee? Is it separately itemised so you know what you are up for if you sell with DA and don't proceed to construction? Is there demand in the market for the product you are developing?

Hi,
The DA application and documents fees are included in the proj mgt fees.
the actual council contributions are noted separately above.
Yes, these 3 bed villas are still high in demand with some being sold off the plan (as per local REAs, and architects). Mine's just a stone throw away from a private hospital that's currently going through extensions and renovations. So, we think it's pretty solid.

Thanks, Brendio. :)
 
Where is GST on sale?
Are you margin scheme?
Will you be classified as professional developer by ATO?

Some points, Peter 14.7

Hi Peter, We're not registered for GST so it'll be CGT we'll have to pay for. It depends on our income status next year so we still have to talk to the accountant to minimise CGT.
To tell you the truth, we haven't thought much about the tax aspect yet. What defines a professional developer by ATO? and Margin scheme? :confused:
 
Hi Peter, We're not registered for GST so it'll be CGT we'll have to pay for. It depends on our income status next year so we still have to talk to the accountant to minimise CGT.

To tell you the truth, we haven't thought much about the tax aspect yet. What defines a professional developer by ATO? and Margin scheme? :confused:

Without knowing your situation I can advise in general:

GST of 10% is payable on sale of new residential homes, whether you are registered or not. The existing house may qualify that you have one sale exempt but as you are full replacing thin and not renovating that may not apply. Your income stream is irrelevant to GST.

Margin scheme allows you to pay only a margin of the GST bases on numerous to complicate to mention here factors. Your income stream is relevant to margin tax paid.

Professional developer is again too complex.

My advice: see your accountant now. Email them what you propose like above and ask then what structure, entity, system, issues you need to consider. The right decision now on the above could save the $1000's of $$$$.

GST and Margin scheme has been discussed on this thread but use as guide and seek your accountants advice.

http://www.somersoft.com/forums/showthread.php?t=53207

And if you accountant does not know get one who does. Don't let he/she learn on your job.

My accountant is in Sydney and I can pass on his name if you want.

regards

Peter 14.7
 
Thanks so much, peter. I'll get make an appointment with my accountant. Anyhow, could you please PM me your accountant details as well, in case mine doesn't have a clue?

thanks!
 
On the whole GST and developer issue, there is a good booklet from BAN TACS, which is really helpful at explaining various situations. I have posted the link before, so you should be able to search for it.

I second Peter that spending the $$ upfront to get the right structure is well worth it. Our structure is very complicated, but getting it wrong could have cost us 10s of $1000s in extra tax liability.
 
accountant stuff

Thank you. I've got a copy of Ban Tacs booklet so gonna go through them now. Spoke to the accountant as well and he took me through the structure and margin scheme, GST briefly.
Just found out from a copy of contract of sale that the vendor is a Pty Ltd but not registered for GST. I guess margin scheme is out. I would've called the accountant but it's the weekend, so just wondering what the implications are when buying from a vendor like this for development purposes? We'll most likely sell one and keep one.
 
Jsoe,

Good luck with your plans; my 2 cents - you may not be able to sell the properties immediately after completing them; furthermore, settlement could be 90+ days... so you are best allowing more time for loan repayments as this can add up very quickly!
 
acid sulphate soil

negotiating terms now for early access, etc.
my solicitor pointed out this Section 149:
"The 149 certificate from Council indicates the property is zoned residential 2(b), development permissible with consent, among other things includes dual occupanices-attached and dual occupanices-detached, dwelling houses. The property is identified as being clause 3 (works beyong 1 metre below the natural ground surface, works by which watertable is liely to be lowereed beyong 1 metre below natural survace) on acid sulphate soil planning maps held by Council. You will need to contact Council directly to ascertain exactly what this means as it may determine whether there are restrictions or constraints that apply to any future development of the land. We leave you to contact Council and satisfy yourself in this regard."

I rang the Council who merely said that the soil is treatable and told me to get a Geo-tech report / an Environment Officer. Great. We're just working out whether it's feasible to buy this block at all. Has anyone come across this? How much does it cost usually? We're just building a simple duplex so not sure excavation is required. I have no idea though. May be it's required for sewer, plumbing, etc.? Do we usually dig beyond 1 meter underground for these stuff?
 
Just combining previous responses in one thread.

How long is a piece of string? If your just building at natural ground level shouldnt be a problem, speak to your builder. Get a geo report done / soil test they should advise as to the extent and what your options are.
- Chomp

When I am thinking about buying a block of land ususally in a new subdivision I ask the vendor via my REA for a copy of geotechnical report as this saves me about 1K.
If the block is part of an older subdivision a report may not be available but no harm asking
- Sheryn

The vendor / REA doesn’t have the geo-tech report. My questions above still remain regarding the requirement of excavation beyond 1 meter with the duplex development. Thanks.
 
Hi Jsoe,

Normally acid sulphate soils occur in low lying areas that have maybe been old swampy ground that has been filled or natural low ground. Why don't you ask some neigbours or local builders if it was an issue when they built nearby. If you have to excavate deeper than 1 metre (which is uncommon) you would have to treat the excavation with lime to counteract the acid sulphate problem. I wouldn't see it as a major hurdle but ask around just in case.
 
Thank you, Rockstar. Apparently, we don't need to dig below 600mm for normal constructions. A local builder said there're cost effective council guidelines for treating these soil if needed.

So, it's just a matter of settling on the land now. REA is playing a bit funny giving signs that the vendor's found another buyer, and that our bank ANZ is playing difficult to approve our finances, etc. Hopefully our contracts get exchanged (without cooling off period as we were negotiating some terms) on Monday. *fingers crossed*
 
10 months interest on holding sounds very tight. That'll be assuming the DA goes perfectly well, the builder builds really fast, and there are no rainy days...I'd always allow at least 14 months for a development with no DA, just to be cautious
 
We're at a little over 2 years for a subdivide-and-build but we had a 6 month delay in there to get finance, and we lodged the original DA in Octoberish so it had to wait for the development committee to go on a very extended Christmas break before they got to us in February. We started the build process off early instead of waiting for the subdivision to go through, as the builder was OK with a 'proposed' block of land as long as it had survey pegs, but the bank wouldn't touch it for equity until it was all through.

Our actual *build* started May 5th this year. We still don't have a rates or water notice for the subdivided land, hoping we get one this financial year, we just missed out last financial year as the subdivision came through around April. So that's 14 months wait just for a new rating on the property.

Basically, SLOW.
 
wow. thanks for this guys. definitely need more provision for interest payments.

We're planning for a pre-fab home so it should be a bit quicker than the traditional build.
One thing ANZ pointed out was that they could give us 80% of the end value for construction. That's quite new to me but we'll look into to when it comes down to it.

REA is playing games now. He said there's another offer and the vendor's solicitors are holding onto our contract (express posted for exchange with unconditional finance approval and no cooling off period). They're supposed to be exchanged today! He said the vendor's solicitor has issued another contract out to that buyer who's running around frantically to get his finances organised today! What the H3LL?!?!? :mad:
 
retiree villas development

Does anyone have some info about building villas for retirees in NSW?
I know Developers Contribution is exempted so that's a beauty.
And the buyers (retirees) get stamp duty exemption.
Anything else I need to be aware of?

thanks a million!
 
Unfortunately, gazumping is legal jsoe. Been gazumped once before and it's not a nice feeling after organising finance, etc. Good luck with it all, RS :)

There is no issue if you exchange contracts but often buyers expect the vendor to take his property off the market but themselves haven't made a comittment to buy the property by signing the contract and putting the deposit down.

And they complain when they miss out.....
 
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