Advice neeed - 3 townhouse development is this feasible?

[LeoT]

OK so assuming your numbers are at least somewhat accurate:


Land: 800k
1.7m total construction cost

2.8m potential end sales.

Gorss Margin is 500k or, 20%.

Not too bad, assuming the numbers are decent.

With regards to "We have no projected sales. We will build and hold". End sales is very important because if you want to at least get a reval at the end to do more development/investment then its important, and it also justifies the risk involved,

 

[TMNT]

OK so assuming your numbers are at least somewhat accurate:


Land: 800k
1.7m total construction cost

2.8m potential end sales.

Gorss Margin is 500k or, 20%.

Not too bad, assuming the numbers are decent.

With regards to "We have no projected sales. We will build and hold". End sales is very important because if you want to at least get a reval at the end to do more development/investment then its important, and it also justifies the risk involved,

leot, do you actually have any real experience developing?

 

[wylie]

No plans to develop further... But we need values to be high enough to refinance as these are built in stages.

TMNT - do you have any development experience or thoughts on my very loose figures?

 

[Nemo30]

What are the dimensions of the block Wylie?

Also, which way does it slope?

 

[TMNT]

No plans to develop further... But we need values to be high enough to refinance as these are built in stages.

TMNT - do you have any development experience or thoughts on my very loose figures?

there are heaps more people on here with more experience then me, but without knowing the location and figures,
the first thing I always ask is, on the assumption its 2+ site, and you are assuming to sell most of them, are you doing your figures on ex gst prices for sales?

eg say you want to sell at $550k for example, then your sales price needs to be calculated on $500k+GST
obviously, you get gst input credits and gst paid, so you dont technically 'lose ' the whole $50k, but for being conservative sake

 

[Mindmaster]

leot, do you actually have any real experience developing?

A quick search of Leo T's public profile comes up with this thread "My Duplex Development near "parramatta""

So more than an armchair theorist enlightening the masses

http://somersoft.com/forums/showthread.php?t=102591

 

[wylie]

What are the dimensions of the block Wylie?

Also, which way does it slope?

Total of the two blocks is about 120m x 15m frontage, blocks back to back with one houses on each facing each street, which both must stay. One will be moved to allow a driveway beside it, and it seems we have better chance of approval if we also move the other house forward to give a larger block in the middle.

From the total 1800sqm the plan is to create a middle block of about 1000sqm.

The plans show townhouses, two lots of two. They will run in a line from the back of the top house to the back of the bottom house with a driveway running from one street to all four.

From the back townhouse, there will be two stairs down into its garage, then another drop down to the joined second townhouse and another two steps down to its garage. Then we have an open space which allows for the sewer to be accessible, and which we can use as green area or carport. Then the second building starts even lower down and repeat.

His elevation drawing looks much more interesting with the step downs than a straight run, but obviously there is more cost involved, more engineering. We don't have a choice anyway. I believe the extra costs we will face would deter a professional developer, but seeing we are not paying for the land (only paying to get it ready to build on - which still is costly), and because we won't be selling (unless we are forced to due to budget blow outs), then this still can work for us as "keepers".

Designer is trying to minimise costs for build and retaining walls but must design to suit the slope.

 

[wylie]

there are heaps more people on here with more experience then me, but without knowing the location and figures,
the first thing I always ask is, on the assumption its 2+ site, and you are assuming to sell most of them, are you doing your figures on ex gst prices for sales?

eg say you want to sell at $550k for example, then your sales price needs to be calculated on $500k+GST
obviously, you get gst input credits and gst paid, so you dont technically 'lose ' the whole $50k, but for being conservative sake

We don't plan on selling any. As long as the rent covers the loan, we will keep them. We won't have money in our pockets probably, but right now the rent doesn't cover the interest and we want to change that.

 

[LeoT]

leot, do you actually have any real experience developing?

No I just like buying sites and hoping for the best

 

[Noknee]

So Wylie
Yours sounds a f $$k load better than mine

 

[LeoT]

No plans to develop further... But we need values to be high enough to refinance as these are built in stages.

Have council allowed you a staged development ?

QUOTE]

 

[wylie]

No plans to develop further... But we need values to be high enough to refinance as these are built in stages.

Have council allowed you a staged development ?

QUOTE]

DA is being prepared and this will be part of the DA, three stages actually. First to lift and shift the front house and rent it out again, second to build two townhouses. As it will be staged development approval, we then get a certificate of occupancy, rent them out, have them valued by a bank, pull out our equity and build the second two (stage 3).

Initial build won't involve banks as we are borrowing privately.

So many things than can go wrong

 

[LeoT]

DA is being prepared and this will be part of the DA, three stages actually. First to lift and shift the front house and rent it out again, second to build two townhouses. As it will be staged development approval, we then get a certificate of occupancy, rent them out, have them valued by a bank, pull out our equity and build the second two (stage 3).

Initial build won't involve banks as we are borrowing privately.

So many things than can go wrong

Very interesting Wylie. Do you have any indication that a staged DA will be accepted? Or is it more your hoping?

 

[wylie]

Very interesting Wylie. Do you have any indication that a staged DA will be accepted? Or is it more your hoping?

We have had a pre-lodgement meeting which went well. So it should be accepted. If not, we would have heard at the meeting I guess.

 

[LeoT]

We have had a pre-lodgement meeting which went well. So it should be accepted. If not, we would have heard at the meeting I guess.

Yup awesome. Good idea to have the Pre lodge.

 

[albanga]

Based on the initial numbers I would not be going near this development.
200K for a "high spec" home IMO is not possible unless your the builder and heck even then your pushing it. Also if your valuing the completed product at 450k then why would you even want to build high spec? It seems the wrong build for the market.

 

[Greenjoy3001]

OK so assuming your numbers are at least somewhat accurate:


Land: 800k
1.7m total construction cost

2.8m potential end sales.

Gorss Margin is 500k or, 20%.

Not too bad, assuming the numbers are decent.

With regards to "We have no projected sales. We will build and hold". End sales is very important because if you want to at least get a reval at the end to do more development/investment then its important, and it also justifies the risk involved,

To clear my own confusion, unless I'm mistaken gross margin in the above example would be 300K right?

800K + 1700K = 2.5M.

At 2.8M valuation, margin would be 300K or 12% I think.

 

[LeoT]

Hi greenjoy,

Gross Development profit is: (for example)

Total Development Cost (TDC) = $3,000,000
Total Development revenue (TDR) = $3,650,000


Gross Development Profit = TDR - TDC , (3.65m - 3m)
Gross Profit = 650k

Gross Profit Margin is then,

Gross Profit over TDC times 100 (650k over 3m times 100)

= 21.6%

Hope I haven't confused you mate .

 

[Greenjoy3001]

Hi greenjoy,

Gross Development profit is: (for example)

Total Development Cost (TDC) = $3,000,000
Total Development revenue (TDR) = $3,650,000


Gross Development Profit = TDR - TDC , (3.65m - 3m)
Gross Profit = 650k

Gross Profit Margin is then,

Gross Profit over TDC times 100 (650k over 3m times 100)

= 21.6%

Hope I haven't confused you mate .

Nope, you haven't. That makes sense. Cheers.