Blackminster JV: 4 apartments in Mindarie WA
- Thread starter westminster
- Start date
I assume you are talking to Westminster in this regard?
Not from me, I still have too much learning to do.
Blacky
I think this is very important. Knowing what can fit onto a site. Im still learning in this regard, Westminster knows it well.
Being able to look at a site, and clearly identify what can go onto it is a great asset. You are not 100% relying on a 3rd party to advise you. It saves a lot of time, and has the potential to identify sites which the seller (or even REA) don't know what is possible.
From there you can crunch the numbers and do a 'back of the envelope' feaso in about 5mins (given WM prior point in regards to construction costs).
Blacky
Thank you for your reply Westminster. Excellent points and if I ever do another granny flat build, i'll definitely be aiming for Snobsville. Not sure if that will be possible with my next development but I'll go as snobsville as I can.
In terms of finding sites, do you use methods such as trawling online sites like REA.com, maintain contact with REAs and be on their lists, do drivebys in target suburbs?
Given that my current development does not hit any major problems and finance is not an issue, I'll be looking for a new development site in October/November in Melbourne. Will probably organise some one to help me look for it but always good to learn how to do the job properly yourself.
Small update:
We've just had a Skype meeting (love technology!)
Design is coming along well. We have our second version of the concept and have decided on some changes to it.
We are happy that we have met or know all our Due Diligence items so will be taking off that 'Subject To' tomorrow.
Finance is still progressing and we should know by mid next week. Our finance clause runs out on Friday 20th so it is tight but the banks are hammered with EOFY requests.
We've just had a Skype meeting (love technology!)
Design is coming along well. We have our second version of the concept and have decided on some changes to it.
We are happy that we have met or know all our Due Diligence items so will be taking off that 'Subject To' tomorrow.
Finance is still progressing and we should know by mid next week. Our finance clause runs out on Friday 20th so it is tight but the banks are hammered with EOFY requests.
Are you a crazy as well?
Maybe haha. For my finances and my circumstances, it just seems to stack up as the option with the most potential. I'm under no illusions it'll be easy, but I think I'm in a prime position to do it financially.
We knew it's listing history:
24/08/2012 From $565,000
04/05/2012 $585,000
21/02/2012* $625,000
28/09/2011* POA
09/11/2010* $695,000
07/07/2009* $850,000
Then we opened verbal discussions to see how firm they were on the 'from $565'. Turns out not firm at all and REA said they would probably accept $510. Small wahoo moment.
Then whilst we were faffing around setting up companies, trusts blah blah another block came on the market down the street, a bit smaller but 'from $499k'.
We didn't want the other block as it wasn't as wide and we needed the width for the garages. But we used it in negotiations, ie if you don't accept our offer we'll just go buy that one.
We were originally going to offer $480 and prepared to go up to $510k but after more verbal discussions we told them that we were offering $480 and they said they would accept.
Finally all our ducks were ready and we offered $480 and they accepted.
I'm pretty sure if they were prepared to accept that, they should have changed the price on the listing as it probably would have sold sooner but they didn't
That is absolutely nuts. I can't believe you got it for nearly half the original asking price! Also, projected profit margins are looking very healthy, even under the most pessimistic assumptions. Excellent work
I'm soon to be 40 but less mature than my 15yo
Blacky is a spring chicken.
I maybe younger than Westminster. But I'm far far far more mature
(She's going to kill me for that one.)
I'm just turned 32. But look about 50. I've had a hard paper round
WM maybe almost 40, but looks far younger than me.
(Keep digging Blacky).Great post to read.
Can you confirm your margins so far in your feasibility. Worst case scenario $700k profit on $1.7m costs gives a whopping 41% return on costs. I didn't think that was possible on just 4 units. Obviously this excludes GST and possibly sales costs but still extraordinary good. Do you only consider developments above a certain margin say 20%?
Can you confirm your margins so far in your feasibility. Worst case scenario $700k profit on $1.7m costs gives a whopping 41% return on costs. I didn't think that was possible on just 4 units. Obviously this excludes GST and possibly sales costs but still extraordinary good. Do you only consider developments above a certain margin say 20%?
Incredible, you must be drowning in paperwork but it's going to be worth it.
Can I ask where GST fits into this picture? No idea how this works, do you have to charge GST on the sale price and is it included already in the estimates you posted earlier?
Can I ask where GST fits into this picture? No idea how this works, do you have to charge GST on the sale price and is it included already in the estimates you posted earlier?
Our net return wont be quite that high after all is said and done (GST, Tax, selling costs, etc etc etc). But yes, it will be a very healthy return, especially when looking at the return on investment (ie, what is the return on our own cash).
Prior to commencing we developed, for want of a better word, a business plan. It detailed basically what we were doing, how, who, when - it included what returns we were aiming for. We targeted anything over 25%, and would walk away if it was less than 20%.
The paper work side is made slightly more complicated due to me being overseas, however, my brother is helping out with that (he is actually buying into my 50% share in the project).
In reality Im not sure it would make a huge difference, as most documents are scanned and emailed nowdays anyway. About the only docs I will need to be present for are the mortgage docs, and I should be in Perth for signing those - otherwise DHL provides a great service.
Yes - we have registered for GST. We have adopted the margin scheme to the project (if your not sure what it is - look it up - as we had to). We sought advice from accountants (3). WM has her accountant, I have mine, plus we have a third firm for the project enitity (whom I have used previously for company setup/mgt). GST will be a bit of a pain, and adds to the paper work and cost. But with good record keeping shouldnt be too bad (I hope).
With us both being from Chevron we both seem to be fairly good with documentation. Meetings are minuted, documents are filed etc. The 'business' aspect is kept quite formal and is run as a business.
I think this is where many partnerships fail. People dont document what has been said/done/agreed. Documents can be shared much easier (than conversations), and they dont forget.
Although I am overseas 95% of the year - technology nowadays helps. We are in communication nearly everyday (if not everyday atm). I message WM more than I message my fiance
. Skype meetings - well, you could be sitting next to each other. Blacky
Our net return wont be quite that high after all is said and done (GST, Tax, selling costs, etc etc etc). But yes, it will be a very healthy return, especially when looking at the return on investment (ie, what is the return on our own cash).
Prior to commencing we developed, for want of a better word, a business plan. It detailed basically what we were doing, how, who, when - it included what returns we were aiming for. We targeted anything over 25%, and would walk away if it was less than 20%.
The paper work side is made slightly more complicated due to me being overseas, however, my brother is helping out with that (he is actually buying into my 50% share in the project).
In reality Im not sure it would make a huge difference, as most documents are scanned and emailed nowdays anyway. About the only docs I will need to be present for are the mortgage docs, and I should be in Perth for signing those - otherwise DHL provides a great service.
Yes - we have registered for GST. We have adopted the margin scheme to the project (if your not sure what it is - look it up - as we had to). We sought advice from accountants (3). WM has her accountant, I have mine, plus we have a third firm for the project enitity (whom I have used previously for company setup/mgt). GST will be a bit of a pain, and adds to the paper work and cost. But with good record keeping shouldnt be too bad (I hope).
With us both being from Chevron we both seem to be fairly good with documentation. Meetings are minuted, documents are filed etc. The 'business' aspect is kept quite formal and is run as a business.
I think this is where many partnerships fail. People dont document what has been said/done/agreed. Documents can be shared much easier (than conversations), and they dont forget.
Although I am overseas 95% of the year - technology nowadays helps. We are in communication nearly everyday (if not everyday atm). I message WM more than I message my fiance
Blacky
I think this really gives an idea of just what is required.
Very high returns, but a lot of effort and an extensive knowledge required.
This ain't no passive income
Quoted for relevance.
In some ways the 'knowledge' aspect is learned/acquired by doing. Neither of us were overly familiar with the area, but both got in and researched the area, market, sales, listings etc etc etc. So now we are pretty comfortable with the market. We are by no means experts, but also know a lot of what we need to know (unless of coarse we dont know what we dont know...which could put us in a pickle).
I have emails on this dating back to before Feb this year. So to get to this point you are already looking at about 5-6months of work/effort/discussion.
Blacky
All I can manage to say FAAAARRRKKKK.
Truly epicly bad week but all good now. Almost lost the deal due to contractual mess.
Lessons
- do have a lawyer for Settlement. Our Lawyer sounded way scarier than their conveyancer
- do date EVERY change made on contracts
- do read how to do notifications, variations and waivers as per the contract and forms.
Good news is that we have finance, we are unconditional and settlement will be 21st July.
AND I'm dying to find out if someone from SS bought the block down the road.
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Yes we used Mel who is a lawyer. Thank goodness we did because she when she said what we were saying it sounded way better and more official. Having a lawyer on your side is awesome.
Well, it is good that we came through - but not without an uncomfortable weekend. How on earth I (we) can turn such an easy process into something so hard is beyond me. I sometimes wonder if it is me?
Anyway, I think having a lawyer in early helped - even though I still fail in any way to see how we were ever in the wrong?
Maybe the seller just had their knickers in a tangle.
Now all we need to do is settle...
Blacky
