Development Assistance - Melbourne

[neK]

Hi all,

I'm looking for some guidance on developing 4 town houses (3 Bed + 2 Bath + 1 Car?? - 90 to 100sqm each?) in Melbourne.

To date, my only experience when it comes "development" consists of renovating an existing house and building a granny flat.

After reading some of the recent posts here lately and meeting a few other investors in person, I've come to the realisation that I've simply be wasting what I have, so its time to pick up and move forward.

My thoughts at the moment are to buy in East Melbourne, looking for a site that costs around $800-$1m. Then build 4 town houses with the view of keeping them all. Not aiming for positvely geared (though it would be nice), but at least neutral. Then maybe sell one off in the future to help speed up retirement.

My view is (and I am happy to be corrected), if its going to cost the same amount to build, i might was well build in a more upmarket area (based on what I can afford).

Some back off the envelope calculations (and seriously these are completely guesstimates which why I'm looking for guidance, because think I am completely out) indicate it may be possible... so here goes (please be harsh - i can take it... i hope )

Site Cost : $1,000,000
Stamp Duty: $55,000
Build Cost: $700,000
Approvals: ???
Holding costs: ???
I'm guessing total costs are around $1.9m to $2m?

Funding I am hoping would go along the following lines:
Deposit for site: Existing Equity
Stamp Duty: Existing Equity
Build Cost: Construction Loan + Equity (for shortfall)
Approvals: Existing Equity
Holding Costs: Savings
Buffer: Existing Equity + Savings

How long does it take to get these kind of approvals through? How much does it cost. Is there something similar to NSW where there is a complying development where approval process is much faster?

The long term goal is to be able to live on rental income (paying down loans through employment income) and be able to leave the properties for the next generation.

Whether or not this is the strategy that suits me, there's only one way to find out, and thats with more information.

Any suggestions would be greatly appreciated. Thanks in advance.

 

[oc1]

You said you can take it, so here's a few assumptions that are incorrect:

You say you want a better suburb. 3 bedders will have to be minimum 13 squares plus double garage and a touch more if double storey. This is the East, not the North or west.

Build cost is low. You would be closer to 7 figures.

Determine what your end buyer wants. If I develop in the East what I do in the North no one will buy. When it's the other way round I would make no money.

There's a big difference is build prices when building in the East compared to other areas in Melbourne.

Hope this helps.

 

[neK]

Thats oc1, thats the feedback I'm after.

I've only been to Melbourne twice in my life, 1 was a day trip for work, the other was a weekend holiday with my wife.

This to me a is a starting point, I really have no idea what the suburbs are really like. From the sounds of things East Melbourne is like Sydney's Lower North Shore.

So in terms of getting things approved, whats rough cost range from and the time frame?

 

[neK]

Done some more online reseraching. Melbourne rents really seem quite poor.... or am i just looking at the wrong places?

Townhouses renting for $450-$500 per week. Seems rather low (keep in mind I am from Sydney).

Even brisbane yield seems higher.

 

[oc1]

Done some more online reseraching. Melbourne rents really seem quite poor.... or am i just looking at the wrong places?

Townhouses renting for $450-$500 per week. Seems rather low (keep in mind I am from Sydney).

Even brisbane yield seems higher.

Melb rents tend to be lower than most other states.

 

[elsLan]

When you say east melbourne do you mean the suburb east melbourne? Or east of Melbourne.
Good luck trying to get a site in East Melbourne to qualify for a subdivision. It's all heritage listed property on those blocks and pretty much CBD. You would be spending much more than $1m......
East of Melbourne yea, possibility but it depends where exactly.

You're better of buying in a good pocket of very inner north and building 4 or 5 (I was discussing this the other day with my pm/sales colleague - the planning dept approved 5 on a 920sq block recently). 3bd, 2bth town homes going for about $750k in the area I've been looking at.
Land purchase around $900k- rent existing dwelling while you wait for subdivision/permits ect. Build cost around $650k dependant on quality/inclusions. Rental on this about $600 per week.