Alrighties - thanks for all the replies.
1. Clearly my construction costs are out - I have had no experience in this but I have read on this forum and a number of other websites that a a build cost of $1600 per sqm metre is a good indicator of price for a medium quality finish? 1600x315= $504,000. What do people see as a more realistic price per sqm? I guess the smaller the project the less reliable this is as the quantity expensive items in a property increases much quicker in comparison to GFA? eg. 3 kitchens, 6 bathrooms for 315 sqm, etc.
$1450-$1650 you wont get cheaper, realistically.
2. Again, it has been pointed out that my profits have been unrealistic haha, perhaps I got a little to excited. I suppose a more realistic expectation would be 15-20%? I don't think I would undertake anything for less than this and would be hoping for the upper side of the scale. However I wanted to ask about the option of holding all townhouses? Wouldn't you then save on marketing/selling/legal fees all associated with selling. If finance dictates that you have to sell sure, but I have been thinking that holding all as long term investments would be smart as developing yourself will provide a much higher yield that hopefully can cover the repayments. I know that maybe you would want to diversify the risk a little incase of some terrible influence in the immediate area? (ie. flooding in Brisbane, better to have only 2 of your townhouses in the complex flooded in stead of 4?)
Finance dictates you sell. If you keep 1, then fine. However the best return is selling. Your making 20% on that sale (theoretically) you think you will make 20% on holding the townhouse anytime soon? doubtful
Also remember as I am sure you already know 20% is the magic number but what is lost with most is that 20% depends on whose perspective. e.g. if the bank sees 20% then you will most likely be at 10-15% from your perspective. This is because the bank sees the site from the point you present it, i.e. they dont care (really) what you have spent to date, they simply see it more clean cut as do the valuers. You will find most developers\builders really build at 10-15% without even knowing it. It is easy to make impressive dollar sounding returns in this game much harder to make impressive % returns.
3. I see finance as a clear obstacle for this as I am only in my first year of full time employment and already have a mortgage for a PPOR of 300k. However, I am soon to come into 500k cash from realising a family trust investment. These are all things I will talk with my new mortgage broker in the coming months. Initial thoughts would be to complete first project with approx 300k cash as deposits and than look to complete 2nd project with the other 200k + equity from first? (I should note that the 200k will be used as a buffer in case of extreme circumstances during project 1 probably in offset account - it is still possible that after project 1 if I feel I do not want to undertake another that this could be invested elsewhere from property for a bit of diversification. I am not looking to retire early and expect at least another 30 years of full time work - and hopefully build my salary up through the years. Therefore assuming I kept all 6 townhouses - once fulling paid off in 20 years there would be a passive income of 150k from these.
Fundamentally if the project works it will get financed if not it wont. The issue is if the project is borderline, i.e. 19% return etc then your experience, equity etc etc will play a bigger role and finance will become harder
4. Am I correct in assuming that developers always buy develop and flip? So they can move on to the next project? Is it really the best option? Or is the option of taking it a lot slower and completing a project say every 4-7 years (and holding the properties) not as profitable? (I think some people will say you might miss out of the CG during the long periods between projects?)
Dont use the term flip with developers, this is our business not "how to make a million bucks flipping" strategy. You seem tortured by selling everything. If you do 1 project in your life then I suggest keep all the units if you can but if you intend on becoming a full time developer keeping the majority is insane.. it basically means you think the market will outperform your ability to earn an income from development. If you think that just stop now and dont develop.
5. As I mentioned before - I'd like to thank all those with planning specific posts as I am still extremely inexperienced due to first year and not even working in the property development arm of town planning. But I am hoping in the coming years there will be more exposure at work and a chance for me to really get a good grip over it. I think the poor property/development market compared to strong mining sector has forced/encouraged a lot of planning consultancies towards the later. Well at least I think my company has.
Thanks again everybody - appreciate the guidance and thoughts
