2000m2 Strathpine - Units or Townhouses

[sassarassa]

Hi all,

This is my first development after 3 successful renovations. So I have some small amount of experience in property investing but none in developments.

It is just a lucky coincidence that the place I bought at strathpine (brisbane north) has been rezoned intensive residential as part of the councils plans for the area.

So to take advantage of this I have started a DA process by enlisting a town planner and architect. The plan is either sell at DA approved stage or do the development if it doesn't look to risky.

The million dollar question I have is whether I should go for 10 townhouses or 15-18 units (approx numbers based on taking to townplanner and architect.)

The issues as I see it are risk, final yield and marketability.

There seem to be a lot of town house developments around. Is this just because they are cheap to build (less risk) or because this is what the market wants?

Based on build cost etc has anyone got any advice on the 10 town house vrs 17 unit decision? Any thoughts on what sale price of block with DA would be worth in both cases?

thanks in advance,

Jon

 

[Aaron Sice]

you need to assess what demand is for what in the area.

i see places re-zoned all the time for intensive use and yet there's just no market for the product because you're the first/second/third person to develop smaller stuff inside 1ac hobby-farm/lifestyle areas.

even if the market demand is for, say, 800sqm lots and you are proposing 400sqm lots, then make all your lots duplex lots and design the product so it can be subdivided later, either side-by-side or battleaxe.

ascertain the market demand and reflect it.

 

[sassarassa]

Hi Aaron,

Thanks, yeah thats exactly what I'm trying to determine. A townhouse development near here (8 on 1800m2) sold quickly at 350k each average at the end of last year.

I just don't have any info on units or apartments ... perhaps this should tell me something? I drive past heaps of unit developments in progress on the way into the city but none out here that I've seen.

 

[Aaron Sice]

is there stress in the market? if you can capitalise on that by supplying a similar product but for cheaper then you could probably look at units/apts.

otherwise you'll need to play by the status quo.

are people okay with a balcony only or do they want to feel the buffalo under their toes? another huge sentiment i think a lot of developers miss.

 

[rexilla99]

There a few things you need to do.

Do some preliminary site investigations and feasibility. As Aaron mention before you need to determine what is in demand for the area and what is selling. You also need to know the cost factor for the townhouse, for a simple 3 bedroom traditional design they can be built for about $150k to $180k.

If your planning to sell it with a DA than you need to make sure there is enough profit for the next person to take on. Whether your looking at 10 x townhouse or 17 units will depend on many factors, having more dwelling on the site will reduce the land cost per dwelling. But it can also increase the build cost as well.

Locate a similar development in the area and find out how many units or townhouse they are putting on. Than look up sales history to find out how much they acquired the land for than divide it by the number of dwellings. Find out the sales price and work backwards from there to see how much profit they are really making or if its worth going ahead with the project.

This is just some quick info, I hope its helps.

 

[BlueRidgeHomes]

Hi Sassarassa,

I'm in agreeance with the posts above. The other consideration you should consider is your ability to finance the project for either the 10 or 17 dwellings development. Either way will be commercial finance - talking to a financier (email me if you'd like a recommendation) experienced in property development would be my recommended next point of call - this will answer alot of your questions up front about ability to proceed with the project.
All the best with it!
Kind regards
Meg

 

[Ocean Architect]

All of the above are spot on.

The other thing that I would consider is what the banks are doing/who they're lending to. Townhouses are lovely, but tend to be priced out of range for those who not only have the desire to buy, but the ability to as per the banks.

Also important is the issue of liquidity, should you want to keep a few for yourself. I think it more sensible to build units that sell/rent easily quickly, so that you can keep (just throwing numbers out arbitrarily to make the point) 7 $250 000 units instead of 3 $600 000 townhouses, so that should you decide to sell one of them in order to finance something else (lets say you need $200 000 for some whiz bang property) you aren't forced to sell something vastly more valuable than the money you need and pay a heap of tax/have money left sitting in an account that you need to reinvest someplace else, especially since more expensive properties are harder to sell.

I know a few developers that have fallen into the liquidity trap because they made a decision to build 3BR units instead of 2BR units (worth $600 000 vs $470 000). An opportunity arose where they needed quick cash for a great deal, and because of the nature of their portfolio, it wasn't worth selling the 3BR (and a lot harder) and the opportunity passed them by.

Are you selling off the plan?