Brisbane - 7 Unit Development
- Thread starter evan1875
- Start date
Basically if you are registered for GST and build a house for resale but then change the purpose by renting the house out you have to pay back the input tax credits on the property. A property held for rental is input taxed so no GST credits are available on the cost of building it. Then using it as a rental property will mean quite a large amount of GST has to be paid back.
Hi Evan,
Thanks for sharing your past experiences and current development. It seems that we are in very similar positions. I too have several buy and holds, a failed property development in a regional town where if I sold now would lose >$200k and currently undertaking a development in Brisbane of 6 townhouses. This is also interstate for me and I'm using a project manager.
Using conservative end values my margin on costs is 17% for the Brisbane development. I know lots on SS swear by achieving a 20% margin however I've spoken to many people in the industry and they all say this is a typical return for developments of this size in Brisbane. As you've purchased yours with DA I would expect the margin to be slightly lower (if all other factors are equal) as the vendor would take a small slice of the profit.
It was quite a big step for me to take the fact that the first development didn't work out and move on and go for another one. Heaps of lessons (expensive ones) have been learnt, probably most importantly is being within 10km of a major CBD. Just couldn't quit after the first set back and die wondering what could have been.
I look forward to reading about your progress.
Thanks for sharing your past experiences and current development. It seems that we are in very similar positions. I too have several buy and holds, a failed property development in a regional town where if I sold now would lose >$200k and currently undertaking a development in Brisbane of 6 townhouses. This is also interstate for me and I'm using a project manager.
Using conservative end values my margin on costs is 17% for the Brisbane development. I know lots on SS swear by achieving a 20% margin however I've spoken to many people in the industry and they all say this is a typical return for developments of this size in Brisbane. As you've purchased yours with DA I would expect the margin to be slightly lower (if all other factors are equal) as the vendor would take a small slice of the profit.
It was quite a big step for me to take the fact that the first development didn't work out and move on and go for another one. Heaps of lessons (expensive ones) have been learnt, probably most importantly is being within 10km of a major CBD. Just couldn't quit after the first set back and die wondering what could have been.
I look forward to reading about your progress.
Hi Evan, Thank you for posting about your development.
I've just finished a 3 unit development in Melbourne and are looking to do another development (subject to finance) in Melbourne or Brisbane.
Will follow your thread closely and learn from what you have done and are doing.
May PM you down the road to get your opinion of project managers and builders I've looked into in Brisbane
I've just finished a 3 unit development in Melbourne and are looking to do another development (subject to finance) in Melbourne or Brisbane.
Will follow your thread closely and learn from what you have done and are doing.
May PM you down the road to get your opinion of project managers and builders I've looked into in Brisbane
Hi Caferacer,
Thank you for clarifying that up.
I would very much love to hold the units but the fact is that the high debt taken on would be prohibitive to future ventures.
Would love to hear about your development soon.
Indeed very similar.
Good on you for getting back on to your feet. I know the stress that comes with a bad financial decision, the depression, the reality check.
Hopefully these experiences make us stronger and wiser. It is always to better have a go then die, than die wondering.
All the best with your project. Feel free to share some details for all of us to learn.
Hi Evan, Thank you for posting about your development.
I've just finished a 3 unit development in Melbourne and are looking to do another development (subject to finance) in Melbourne or Brisbane.
Will follow your thread closely and learn from what you have done and are doing.
May PM you down the road to get your opinion of project managers and builders I've looked into in Brisbane
Hi Brendon,
Been following your Sunshine thread for a while now. Congratulations the units look great. I got a 4 pack in Melbourne on the go currently. Hoping to wrap it up second half of this year.
Just a question on your decision keeping all three units. What is the effect of that on your future development loans, if your intention is to further develop?
I like the design very much
You can postpone claiming the GST until you have a contract of sale then claim it and do the margin scheme. This is probably the simplest way unless you are definitely selling.
Thanks Westminster.
Just a burning question that I was gonna ask the accountant when he comes back. But now you have clarified it.
Congrats evan looks like a nice project.
How did you come to the construction cost of $220k per dwelling?
Have you done the engineering plans and drawings? What type of construction are you doing, i.e. a full blown double brick/concrete or a lightweight construction?
How did you come to the construction cost of $220k per dwelling?
Have you done the engineering plans and drawings? What type of construction are you doing, i.e. a full blown double brick/concrete or a lightweight construction?
Good project, good luck with it.
Only problem i find doing developments in Brisbane is the costs involved, when you compare it with Perth & Melb it is more capital intense. On a 7 unit project you would have to pay $23k+ per unit in contributions that's $160k or more plus you have design,da,ba,deposits etc.
But Brisbane should grow in 2015 & 2016.
Only problem i find doing developments in Brisbane is the costs involved, when you compare it with Perth & Melb it is more capital intense. On a 7 unit project you would have to pay $23k+ per unit in contributions that's $160k or more plus you have design,da,ba,deposits etc.
But Brisbane should grow in 2015 & 2016.
Hi Shahin,
No working drawings or engineering plans at this stage. I have no background in building but I guess it will be combination block work and light weight framing.
The numbers came from talking to builders as mentioned earlier and 210k-220k was the narrow range (which was a bit more reassuring) from all three builders involved in similar projects, derived from viewing the raw drawings of this project.
So at this stage of the feasibility we went with the 220k. Will have a much better idea after the tendering process. But then might have rock problems with excavation etc even down the track.
Yes QLD is very high...
Well done Evan. All of us are very grateful you are sharing you experiences.
I see most of the developer in this forum live inter-state and away from their development.
I live in Sydney and i have not seen many NSW/ Sydney development thread with the exception of LeoT.
Could some one local in Sydney tell me why? is it the development sites in sydney is over -heated?
They all appears in either in Perth, Melbourne or Brisbane.
I see most of the developer in this forum live inter-state and away from their development.
I live in Sydney and i have not seen many NSW/ Sydney development thread with the exception of LeoT.
Could some one local in Sydney tell me why? is it the development sites in sydney is over -heated?
They all appears in either in Perth, Melbourne or Brisbane.
haha funny .... thats could be the answer to my question
Nice man I know its early days but the first step is always the hardest.
Hopefully rock excavation (if you hit rock) shouldn't be much since there is no basement.
I don't think the builders can quote without CC plans, structurals, hydraulics, etc but hopefully its not going to off the mark.
Update
From early Jan we engaged the company that did the DA to proceed with working drawings, structural and hydraulics. They are competitive in their pricing and threw in landscaping for nothing for this project. Things are progressing on track and I expect those finalised by the end of the month. Still 6 weeks till settlement so can't complain. But wish I bargained harder and negotiated a longer settlement still.
I have seen the version 1 of the working drawings over the weekend. My project manager has been doing the heavy leg work and keeping me updated. Things are starting to take a more vivid shape.
The construction is blockwork and externally a mixture of painted render finishing and decorative metal screen. Suspended concrete slab flooring and colourbond roof. So yep, completely out of my depth looking at those drawings.
Soil test came back as class "P" due to abnormal moisture conditions, type was H1 which my PM says is commonly seen in the area.
We had some brief discussions of type of appliances and tapware etc. But my indecision on which and how many units to sell and to keep, isn't helping. Better get my act together and decide. The investor side of me wants to keep all the units. I guess when you start investing in houses you strive to be a hoarder. It is hard to ditch that mentality when you are transitioning to developing.
More experienced fulltime developers on here are not going to have my problem. But essentially I want to be one of them and keep doing project 3 and 4 and so on after this. The equity position afterwards, extra debt and new cashflow picture will have to be considered. I need to 1. make money; 2. be able to rinse and repeat; 3. hopefully be in a position to have more options on sites. So my gut feeling is that I need to sell most of these. Factoring in this we are going for an owner occupier buyer's market, with a few luxury items. My project manager firmly believes doing things different to others, therefore being able to demand a higher price and set a bench mark for an upcoming area. I like the way he thinks and am constantly learning from him.
I also have a wonderful mortgage broker. But we have not had the chance to discuss my position in the eyes of the lenders after this project. This is because the money for my two current projects aren't there yet! Last week I hit a bit of a snag with Project No. 1 in Melbourne. Lender A was supposed to go 80% resi on 4 unit constructions. They are a PITA lender to deal with in all honesty and have already made me bend backwards many a time. The only reason we went with Lender A was because this 4 unit resi deal was supposedly their niche. Now that my builder has started on the Melbourne site Lender A has come back with a formal approval of 70%! I wasn't happy and even scratched a head and shrugged a shoulder. But my mortgage broker was livid! Good to know he cared so much!
It means Project 1 in Melbourne will suck a fair bit more equity than expected, potentially jeopardising this Brisbane Project No. 2. Currently scrambling to find an alternative. Just done a bunch of paperwork for Lender B yesterday. Miraculously managed to get about 35 pages of originals certified and express posted before 6pm. Saved a business day! Now just sit tight and wait for a week till they get back to me... Only when Lender B goes green light can we move to secure finance from Lender C for Brisbane site for settlement, and then construction with Lender C or D..., in that order. Lucky for me I have a 3-month settlement. When I negotiated this I was just pushing the vendors on my terms trying to save holding cost. But the way it is going, it looks like I will need every last day of the 3 months to find the money to, err, avoid penalty interest!
In the meantime invoices on both projects are coming thick and fast! (Demolition in Melbourne cost 8K more due to asbestos, stamp duty for example must be paid in QLD a whole 2 months before settlement ) I have been taking on lots more shifts at work to have as much cash available as possible just in case. Last time I had a day off was 2 months ago. Anyway I expected this year to be a bit of a whirlwind. Hopefully it will pay off.
At least there is some good news. Our feasibility numbers should be very achievable, judging by what the market is doing.
And finally, a pretax planning meeting will be arranged with my accountant for April/May as there will be a large number of units sold in 15-16. Some savvy advice needed.
Big thanks to Team Somersoft, from my project manager to my broker to my accountant, and of course the developers who regularly posts and inspires here.
From early Jan we engaged the company that did the DA to proceed with working drawings, structural and hydraulics. They are competitive in their pricing and threw in landscaping for nothing for this project. Things are progressing on track and I expect those finalised by the end of the month. Still 6 weeks till settlement so can't complain. But wish I bargained harder and negotiated a longer settlement still.
I have seen the version 1 of the working drawings over the weekend. My project manager has been doing the heavy leg work and keeping me updated. Things are starting to take a more vivid shape.
The construction is blockwork and externally a mixture of painted render finishing and decorative metal screen. Suspended concrete slab flooring and colourbond roof. So yep, completely out of my depth looking at those drawings.
Soil test came back as class "P" due to abnormal moisture conditions, type was H1 which my PM says is commonly seen in the area.
We had some brief discussions of type of appliances and tapware etc. But my indecision on which and how many units to sell and to keep, isn't helping. Better get my act together and decide. The investor side of me wants to keep all the units. I guess when you start investing in houses you strive to be a hoarder. It is hard to ditch that mentality when you are transitioning to developing.
More experienced fulltime developers on here are not going to have my problem. But essentially I want to be one of them and keep doing project 3 and 4 and so on after this. The equity position afterwards, extra debt and new cashflow picture will have to be considered. I need to 1. make money; 2. be able to rinse and repeat; 3. hopefully be in a position to have more options on sites. So my gut feeling is that I need to sell most of these. Factoring in this we are going for an owner occupier buyer's market, with a few luxury items. My project manager firmly believes doing things different to others, therefore being able to demand a higher price and set a bench mark for an upcoming area. I like the way he thinks and am constantly learning from him.
I also have a wonderful mortgage broker. But we have not had the chance to discuss my position in the eyes of the lenders after this project. This is because the money for my two current projects aren't there yet! Last week I hit a bit of a snag with Project No. 1 in Melbourne. Lender A was supposed to go 80% resi on 4 unit constructions. They are a PITA lender to deal with in all honesty and have already made me bend backwards many a time. The only reason we went with Lender A was because this 4 unit resi deal was supposedly their niche. Now that my builder has started on the Melbourne site Lender A has come back with a formal approval of 70%! I wasn't happy and even scratched a head and shrugged a shoulder. But my mortgage broker was livid! Good to know he cared so much!
It means Project 1 in Melbourne will suck a fair bit more equity than expected, potentially jeopardising this Brisbane Project No. 2. Currently scrambling to find an alternative. Just done a bunch of paperwork for Lender B yesterday. Miraculously managed to get about 35 pages of originals certified and express posted before 6pm. Saved a business day! Now just sit tight and wait for a week till they get back to me... Only when Lender B goes green light can we move to secure finance from Lender C for Brisbane site for settlement, and then construction with Lender C or D..., in that order. Lucky for me I have a 3-month settlement. When I negotiated this I was just pushing the vendors on my terms trying to save holding cost. But the way it is going, it looks like I will need every last day of the 3 months to find the money to, err, avoid penalty interest!
In the meantime invoices on both projects are coming thick and fast! (Demolition in Melbourne cost 8K more due to asbestos
, stamp duty for example must be paid in QLD a whole 2 months before settlement ) I have been taking on lots more shifts at work to have as much cash available as possible just in case. Last time I had a day off was 2 months ago. Anyway I expected this year to be a bit of a whirlwind. Hopefully it will pay off. At least there is some good news. Our feasibility numbers should be very achievable, judging by what the market is doing.
And finally, a pretax planning meeting will be arranged with my accountant for April/May as there will be a large number of units sold in 15-16. Some savvy advice needed.
Big thanks to Team Somersoft, from my project manager to my broker to my accountant, and of course the developers who regularly posts and inspires here.
Last edited:
Thanks for sharing Evan.
Enjoyed the read so far.
Enjoyed the read so far.
