Balga 3400sqm development site

[Blair007]

http://reiwa.com.au/Buy/Pages/More-...1&listingid=10309777&listingno=3311369&puid=0

http://reiwa.com.au/Buy/Pages/More-...1&listingid=10309776&listingno=3311368&puid=0

http://reiwa.com.au/Buy/Pages/More-...1&listingid=10309774&listingno=3311366&puid=0

Agent asking 1,600,000 for all 3 sites, surely a bulk discount to 1,400,000 would be possible?

3400sqm means that av of 220sqm per unit is required = 15 units right?

so 1,400,000 + 70,0000 buying costs, 100,000 holding costs
180,000 total cost per unit x 15 = 2,700,000
total cost = 4,270,000
repayments pm, interest only @ 6% = 21,350

total end value of each unit 330,000 x 15 = 4,950,000

rent on reiwa says 400 pw x 15 = 24,000 pm


do the numbers sound good to the more experience out there??

- Blair

 

[Blair007]

I know joint ventures could mean a lot of hassles but if those numbers were correct and given that there is a lot of competition between development sites at the moment does this seem like a good idea?

Also when you do have a block of 15 units do tenants get put off by this?

By the way I'm not planning on buying this or anything just interested

 

[westminster]

As a hypothetical it's pretty it's pretty crap at 15%. On such a large development you'd want WAY over the minimum of 20% - you'd want 30-40% for taking on the commercial loan rates, the longer construction times, the need to do presales, the higher risk blah blah blah

You could put 2000 sqm of apartments on it. That would be 25 apartments in a mix of 1, 2 and 3 beds.

Or you could mix it between apartments and villas.

If I was going to do a 4 mill project I'd go somewhere much nicer.

For about 3mill I'd do apartments on Vincent Street
http://www.realestate.com.au/property-house-wa-west+perth-113034663

1m for land for 9 apartments (644 sqm of apartments) - hmm maybe 1.2 mill construction?? Working on $2000/m plus blah blah costs.

Let's say it costs 3 mill, approx value would be 4.5 Mill

 

[Blair007]

As a hypothetical it's pretty it's pretty crap at 15%. On such a large development you'd want WAY over the minimum of 20% - you'd want 30-40% for taking on the commercial loan rates, the longer construction times, the need to do presales, the higher risk blah blah blah

You could put 2000 sqm of apartments on it. That would be 25 apartments in a mix of 1, 2 and 3 beds.

Or you could mix it between apartments and villas.

If I was going to do a 4 mill project I'd go somewhere much nicer.

For about 3mill I'd do apartments on Vincent Street
http://www.realestate.com.au/property-house-wa-west+perth-113034663

1m for land for 9 apartments (644 sqm of apartments) - hmm maybe 1.2 mill construction?? Working on $2000/m plus blah blah costs.

Let's say it costs 3 mill, approx value would be 4.5 Mill

valid points made westminster, i think i saw the 3 joining sections for sale and took it for a bit more than what it was, i also need to look at things in a % view rather than $ view in terms of profit.

 

[TMNT]

As a hypothetical it's pretty it's pretty crap at 15%. On such a large development you'd want WAY over the minimum of 20% - you'd want 30-40% for taking on the commercial loan rates, the longer construction times, the need to do presales, the higher risk blah blah blah

You could put 2000 sqm of apartments on it. That would be 25 apartments in a mix of 1, 2 and 3 beds.

Or you could mix it between apartments and villas.

If I was going to do a 4 mill project I'd go somewhere much nicer.

For about 3mill I'd do apartments on Vincent Street
http://www.realestate.com.au/property-house-wa-west+perth-113034663

1m for land for 9 apartments (644 sqm of apartments) - hmm maybe 1.2 mill construction?? Working on $2000/m plus blah blah costs.

Let's say it costs 3 mill, approx value would be 4.5 Mill

hi west min, how did you get to the figure of 15%, I get 27%

anyway, did you incorporate gst?
ie
total end value of each unit 330,000 x 15 = 4,950,000
=4.5mill + GST

if so I get under 10%
or am I doing it wrong!

 

[MTR]

I will be watching this with interest, see how quickly they sell. Balga is just so hot, even if the figures don't stack up someone will probably jump in. Can not land bank in this area because Council is currently looking at rezoning to lower density.

I would just say that this is a very good Street in Balga, but the problem is build costs remain the same wherever you build, so why develop in Balga when the end product/value is low??

 

[Blacky]

hi west min, how did you get to the figure of 15%, I get 27%

anyway, did you incorporate gst?
ie
total end value of each unit 330,000 x 15 = 4,950,000
=4.5mill + GST

if so I get under 10%
or am I doing it wrong!

I got about 15%
Profit of $680k/costs of $4270 = 15.92%

If including tax you should also be able to reduce your cost base by 10% as this will be an offset so it wont make a massive difference ($3,845k costs). Unless Im wrong?

 

[Blacky]

i also need to look at things in a % view rather than $ view in terms of profit.

Blair - you certainly need to focus on the %. Unforeseen costs or delays can easily wipe away 10% of your margin (trust me).

The profit % is your reward for risk. Big developments are not easy (if they were everyone would be doing them). It is easy for them to fall over in a very tragic way. I got lucky with mine. If I wasn't able to service the debt from my income it would have easily sunk me. In the meantime I have waived good bye to +20% profit.

Cheers

Blacky

 

[Blair007]

I would just say that this is a very good Street in Balga, but the problem is build costs remain the same wherever you build, so why develop in Balga when the end product/value is low??

mtr i understand that balgas median household value is lower than other suburbs with development potential but because balga has better yields than a lot of higher end development suburbs i thought maybe not in this particular investment but others in balga and similar areas to balga, e.g. armadale, kelmscott, gosnells, mandurah could be good because you still get that decent equity gain upon completion plus you get positive cash-flow swell which means you can instantly move onto another development because you have the equity there to use and the cash-flow to fund...
i suppose if you are doing a development with a higher median house price you could still sell off part of the development to create cash-flow but you are also going to lose on tax there and possibly time/negative gearing if the property does not sell.

this is probably something i will look for with my next development because it is something that would suit my particular needs. but of course if you are cashed up to the hills then going for the extra equity from a more profitable development might be the way

-blair

 

[Blair007]

Blair - you certainly need to focus on the %. Unforeseen costs or delays can easily wipe away 10% of your margin (trust me).

The profit % is your reward for risk. Big developments are not easy (if they were everyone would be doing them). It is easy for them to fall over in a very tragic way. I got lucky with mine. If I wasn't able to service the debt from my income it would have easily sunk me. In the meantime I have waived good bye to +20% profit.

Cheers

Blacky

yip i know, with the amount of time I'm spending on somersoft and anything else property investing hopefully by the time I'm ready for the next ill be an expert

 

[MTR]

mtr i understand that balgas median household value is lower than other suburbs with development potential but because balga has better yields than a lot of higher end development suburbs i thought maybe not in this particular investment but others in balga and similar areas to balga, e.g. armadale, kelmscott, gosnells, mandurah could be good because you still get that decent equity gain upon completion plus you get positive cash-flow swell which means you can instantly move onto another development because you have the equity there to use and the cash-flow to fund...
i suppose if you are doing a development with a higher median house price you could still sell off part of the development to create cash-flow but you are also going to lose on tax there and possibly time/negative gearing if the property does not sell.

this is probably something i will look for with my next development because it is something that would suit my particular needs. but of course if you are cashed up to the hills then going for the extra equity from a more profitable development might be the way

-blair

Yes, the rents are fantastic and you will end up cashflow positive. I know someone who develops in this area and after all expenses he makes 10%, he sells the lot and moves on to his next deal.
He buys in this area because this is what he can afford.

The interesting thing now is that when I was looking at Balga the units sold for around $350,000-360,000, I am now told they sell closer to $400,000 this has happened in a 2 month period.
The 728 sqm deve blocks have jumped from $380,000 to $420,000. I have not reviewed the figures, but I think this will make it more attractive to jump in.
Nothing wrong starting with cheaper areas until you build equity.

MTR