Buying property with plans and permit

[PACE]

Hi

Just seeking advice in relation to buying property with plans and permits approved for 3 townhouses (Melbourne).

1. Should I be weary? Has the current owner run into issues with developing that land? Or simply run out of finance? (the agent says the latter, unsurprisingly)

2. How much value should I attribute to the plans and permits in terms of coming up with a price for the property?

3. The plans and permits are set to expire in a couple of months according to the agent but he says we can simply renew them for $150.

4. Would we be bound by the current designs in place or if we wish to amend them would we then need to go through the council approval phase again?

The land is 1100sqm with approval for 3 x townhouses. Asking price $650k+ in outer eastern Melbourne. It is currently tenanted $400 per week, month by month basis.

Any thoughts are welcome.

Cheers.

 

[MTR]

You will only know once you have worked out the numbers.

These will be:
The completed building cost of each townhouse + cost of plans and permits, holding costs and other out of pocket expenses during the build ie headworks.

Then you work out how much each townhouse will sell for on completion?? and subtract all the above costs.

If you are going to make nothing then the plans and permits are worthless and no one will buy them.

You need all the costings and I would also contact a couple of real estate agents to get further opinions on design/sales price/evidence.

I sold plans and permits for 8 unit site because I did not have the experience or the money at the time to complete this size project.



MTR

 

[PACE]

Thanks for sharing your experience with the 8 unit site, MTR. We have an idea of construction costs and plans/permits etc. I guess I was just wondering whether a vendor would expect a premium for the convenience of having plans/permits in place or simply add the cost of such plans/permits to the market value of the block.

I wonder if I could ask the agent for all relevant paperwork regarding approved plans/permits and find out how much that costed the vendor in total so I can work out an appropriate offer for the block...

 

[oc1]

Some permits and not worth the paper it's written on. Dwelling sizes too big or small or not the type of dwelling demanded. Having said that you do find some that are make money. I see builders go for these though as their costs are much lower.

Oscar

 

[esdarch]

Hi

1. Should I be weary? Has the current owner run into issues with developing that land? Or simply run out of finance? (the agent says the latter, unsurprisingly)

Maybe both

2. How much value should I attribute to the plans and permits in terms of coming up with a price for the property?

Nothing if possible

3. The plans and permits are set to expire in a couple of months according to the agent but he says we can simply renew them for $150.

Normally it would not be an issue to extent another year. However, there will be more document to provide due to the changed title, you should ask vendor to extent if the expired day is less than 6 months.

4. Would we be bound by the current designs in place or if we wish to amend them would we then need to go through the council approval phase again?

If you wish to change the design, definitely an application to council is required. Depend on type of amendment, you may not waste time for the advertising again, but have to pay for architect/ designer redesign fee.

Just my 2c

 

[PACE]

Thanks guys. So perhaps go in with the mindset the permits are not there, but rather we see the block as development potential. Make an offer based on the block alone, if the permits work for us - great. If not, start fresh and come up with our own designs.

 

[SOULFLY3]

Hi PACE

Im in the same boat... will have a nice amount of cash soon for a small development (2-3) but all this seems so daunting...

 

[Nash13]

Thanks for sharing your experience with the 8 unit site, MTR. We have an idea of construction costs and plans/permits etc. I guess I was just wondering whether a vendor would expect a premium for the convenience of having plans/permits in place or simply add the cost of such plans/permits to the market value of the block.

I wonder if I could ask the agent for all relevant paperwork regarding approved plans/permits and find out how much that costed the vendor in total so I can work out an appropriate offer for the block...

Also weigh in the time associated with obtaining a new permit and set of endorsed plans...

Should also note that you can apply for an extension of time for the permit 6 months after the expiry date - however check with the particular Council and expiry condition.

 

[kev888]

My DA application was just submitted for 3 townhouses and the plan is to get the DA and sell the land with the DA approval. This was my plan from day 1. The additional time required to do the actual development ties up my equity for longer. If I can get in and turn a decent profit and take that into the next project, then job done.

On the flip side, a small developer looking for a 3BR townhouse block that already has approval, puts them one step ahead of the council approval stage. a win win for both if the numbers work for both!