Can someone go through my spreadsheet?

[toony]

I have a premonition that this is going to start world war three again with the agent bashers on this site - however, here goes...

agree all you like with Neil - I like a lot of what he says - but i disagree with him on this point.

you cannot sell a secret. too bad if the street the house is on is a back street that no-one traffic drives down. It would prevent it being seen.

Window cards are almost a thing of the past - the numbers you see at your window now are maybe 10% of what existed even 5 years ago.

As for RE.com - yes a necessary evil, but marketing requires a broad approach and developing attraction strategies includes many media. I am not talking about a full page ad in the Sydney Morning Herald, but certainly each property should have a tailored marketing plan developed to attract the largest number of buyers to the property to increase the chances of finding a buyer and perhaps even creating that sense of urgency or multiple offers...

this point alone (marketing) is why the majority of jenman agencies do not compete well on a local level - they tend to have their support in a very localised area due to the methods of marketing their services (doorknocking etc), but when there is a coupe of competitors close by they struggle. I have worked with Jenman, non-Jenman independent and franchise agencies - so am not pulling this out of my rear...

A good agent won't touch a listing without marketing - reputations are everything in this game and when you develop a reputation for being able to sell quickly at a good price, you don't want to risk having a property sit on the market for a while due to either high price expectations by the vendor or them not willing to "put it out there!"


as for your question about sales per year - difficult to answer with market fluctations and types of agencies, locale etc - but one a fortnight gives a good income. Any agent pulling over 100k could be GENERALLY considered as having a clue.

hope this helps...
UC


(ducks preparing for the barrage from agent haters)

I am not an agent hater.

The house on a back street is always going to struggle. No amount of advertising is going to make that a gem if the position is no good.

All your doing is marketing yourselfs with the money from sellers. Our local paper is covered with advertising form Buxton, Hocking Stuart, Ray White, Hodges etc.

I will only agree to disagree on the marketing side.

 

[urban cowboy]

sorry bloke - the agent hater remarks were not directed at you - there will inevitably be a couple of people who come and have a go...happens anytime i try to put an agents perspective on things - trying to show that we are not all a pack of #$#$%^... but it's to no avail most of the time.

i agree generally with your statement - the house in the back street or back of the estate will be harder to sell, but that is the point of marketing it helps get it out there - marketing can include things like letterbox drops, paper ads, internet options, specialist options for more unique properties...it all helps.

as for marketing "yourselves" - I agree many agents do that far too much - but I have two reponses to that

1: an ad should be all about the property, but you do have to have the agent details on there for the contact - agreed some agents make the ad about them not the house - I hate that!!!!!!!!

2: agent branding is part of why some people (yes not all) choose a particular agent in the first place - the popular and good agents have a market presence - think of the agents in your area and think where you see them - the more they are there, the more people see them and the more on their mailing lists - hence more people look at their ads...which leads back to the statement about increasing exposure.

Yes i am the first to agree that there are many dodgy agents out there who abuse the system. But there are a lot of good ones too - problem is that everyone has a different opinion about all of this and there is no middle ground.

happy to agree to disagree!

cheers
UC

 

[toony]

Yes I agree about the Market Presence. But its these agents in my area who are the one demanding the high advertising expenses.

 

[RE rocks]

Profits dropped from $200K to $5K Am I missing something??

Thank You everyone for their feedback.

Please find attached the most updated Townhouse fesability Calculator.

I don;t know how my profits dropped from $250K to $5K

Can someone look at my numbers & calculations please........

as I'm going to pay an architect fairly soon to apply for townplanning permits.

Thanks
Manish

I usually look at total expenses for sales(legals,agents etc.) to be about 4% of sale price.

$15000 for contingency seems to be way under especially for a 1st time developer.

3 months to sell is(incl.60 day settlement) is optimistic.

You seem to be trying to make your figures give a predetermined outcome
which would be very risky on your part.

Cheers

Pete

 

[Minx]

In terms of the construction loan, you would not be paying the full amount in interest as you would be making progress payments therefore paying interest on what has been paid to the builder.
It would be hard to calculate this without a contract, as the contract will stipulate the % for each stage and completion and stage timelines.

You want me to be brutally honest? I may get flamed but here goes.

Profit can be made with building/developing but the key as to how much profit lies on a number of factors.

1. What can you bring? E.g people that I know personally who develop are all registered builders. In addition to this, they have an additional background that they bring to the project. One is an architect (he obviously does all that stuff rather than pay someone else, another is also an engineer, my other half is a chippy. Do you get the drift? There are aspects of the project that they can do, and essentially pay nothing. In essence they are paying themseves as it adds back to the profit. So for something like footings, subfloor, frame, lock up and fix; my partner does this and pays himself in essence for doing this.
2. When you are engaging a builder, they charge you around 20% of the cost to do so. This is their wage. So thus far we have 20% builder margin + what else they can do e.g architectural or carpentry etc
3. Cash. Most of the people who I know that develop don't have the holding costs fo the site (land) as its purchased using cash. So in your case the $46k + LMI = over 50k in their own pocket.
4. These people do this every day. It's not a special project, a one off, it's their job. I can also tell you that a few have a few of these developments on the go. So in essence their tradies are always available as they provide concurrent work.

If you were after a couple of hundred k as a first timer, sorry but its unlikely to happen.

Best of luck with it though.

 

[BV]

I don;t know how my profits dropped from $250K to $5K
Manish

What type of duplexes are they?
Looking at your figures there is no much juice in this project so why do it?

IMO in order to cut costs you should be looking at off the shelf designs from a project home builder and not try to invent the wheel.
Can you do some of the work yourself to cut costs?

Are you sure you can get $600K for each townhouse?
Have you got a backup plan?
What if the market tanks in 12 months and you can only get $500K for each 1?
Can you hold them and rent them out instead?
have you considered subdividing and selling the 2 lots instead?

 

[RumpledElf]

have you considered subdividing and selling the 2 lots instead?

This would probably turn you a small profit. You can always keep one. Rent the existing house out or live in it while you're waiting for all the DAs.

 

[Ajax]

This thread interests me as I have always wanted to have a go at something like this (and am wary as have quite recently seen the costs of a unit development nearby blow out because of construction delays-approaching start of year 4 and the thing is still being built).

My questions come from a perspective of someone with no development experience:

(1) Would your tax bill be less if the townhouse 1 was sold in a different tax year to townhouse 2 (capital gains realised in different tax years)? Goes to the issue of marginal incremental tax rate.

(2) You may not get to retain the first home owners grant if you don't live in the property for a period of time.

(3) Why are you paying principal and interest on the home loan...cashflow is vital...I'd be paying interest only.

(4) Have you factored in interest rate rises on the original loan and construction loan or are the rates on these fixed?

 

[Minx]

Ajax you have put some great questions out there. Interest only is the go as you say, for cash flow.

I would advise anyone who wants to do such a project to speak with an accountant. I believe that in regards to demolishing an existing home and building townhouses would appear that the intent for profit is there, therefore GST is payable. I would highly recommend that anyone planning to do a project like this engages with a good accountant. If you get it wrong, all your profit may be wiped out.
I would also advise for newbies who don't know much about the process to engage with someone who does. I would expect that they will charge a consutancy fee for their time and knowledge. There is a lot involved with projects like this and unessecary and unknown delays do cost money.