Development Costs reallly digs into profits

[Fudge]

I am doing a bit of a feasability and am looking at either:

1. Subdividing (reconfigure a lot) and then doing MCU to put a duplex on the back of an existing dwelling
2. Subdividing (reconfigure a lot) 1 lot into 3 lots. (2 lots at the back of the existing dwelling)
3. Knock exisitng dwelling down and put 4 units on land

Doing this in SEQLD and since the water / sewerage companies have taken over from the council, the infrastructure costs are about $35k per dwelling!! (25k from council and an additional 10k from the water authority)

This is on top of other costs such as physical connections and crossovers and driveways.

Ouch!!!!

It certainly does dig into profits.

How does all the guys out there intend to subdivide their larger plots of land.

If I was putting 4 up, this would be a $140k deficit to the authorities, before I pay money for the lines to be put in?

How can it be worth it?? (you must need to sit on the plot for a good while to increase value, or buy it for a steal.??

F

 

[Sheryn]

To add 1 addtional building to a block of land eg detached duplex unit it is about 18.5K. There is a new limit in NSW that Councils can charge up to 20K per unit (that is my interpreation anyway).

If you were putting 3 units on a block of land that had an entitlement for 1 house then you would pay 37K in my local council area. At the most 40K.

DA for a duplex application ( 2 units ) is approximatley 7K.

Agree with you that you need to look at your figures as the profit is in buying good land at a good price not inflated price.


Regards
Sheryn

 

[Fudge]

To add 1 addtional building to a block of land eg detached duplex unit it is about 18.5K. There is a new limit in NSW that Councils can charge up to 20K per unit (that is my interpreation anyway).

If you were putting 3 units on a block of land that had an entitlement for 1 house then you would pay 37K in my local council area. At the most 40K.

DA for a duplex application ( 2 units ) is approximatley 7K.

Agree with you that you need to look at your figures as the profit is in buying good land at a good price not inflated price.


Regards
Sheryn

They must be more expensive up this way Sheryn.

I have had quotes from two town planners so far.

The council have an upper limit of 25K, but the water authority now apparently has been known to charge an additional 8k - 10k.

If the plots are for single dwellings, then that is the charge per plot.

If it is for attached units, I have heard they are less.

f

 

[RumpledElf]

Its heavily location dependant.

We paid about $2500 council contribution and the water connection was a fixed price of about $3500. It was $1000 just to lodge the form though, a fair swag to the surveyor, about $1000 the lands titles office and we had to pay a plumber to mess with the septic before we could get it all approved. Would have added up to about $14,000.

I'd like to do this again sometime and I have my eye on a triple block a few doors down from my house, but this one is in alotments so all it needs is to be surveyed and the lands titles fees paid to split it. The block is fractionally too small to try anything fancier with it. Problem is, to build it still needs 3x water connections and power doesn't pass the block so it will be a small fortune for electricity connections. I'm hoping all the local investors are busy and PPoR hunters are put off by its somewhat dubious location and its still for sale when I can afford it

 

[tcocaro]

Fudge,

Welcome to development and the wonderful world of "legalized" extortion from the government.

Your correct about your cost estimates it seems whoever you have spoken to in order to get an idea on price has taken into account that the 35% subsidy for some of the elements no longer apply e.g. water as it doesn't fall under BCC anymore but Bris Water. (this is an amazing joke and why I did everything I could to ensure my application was submitted before June 30 this year). The charges literally jumped by 40% overnight!

The only thing I do note is remember to credit 1x given there is already an allotment\house present which you dont have to pay infrastructure charges for.

All connections cost approximately 7-8k. Why you ask? Because council only permits their nominated contractors to work within the rd reserve. So for a job that I could do myself for no more than $1000. (hire digger, 2 hours labor, pipe\materials) it costs me 7-8k and I have no choice. So much for market forces!

Not sure how your arrangement is however note you need a new connections\crossovers for each alotment you cannot just have one then run each service off the 1 connection to each lot. So remember to multiply that figure of 7-8k by each lot

Feel like vomitting yet?

And yes, in development all the money is made on the buy not the sell.





You ask how it is worth

I am doing a bit of a feasability and am looking at either:

1. Subdividing (reconfigure a lot) and then doing MCU to put a duplex on the back of an existing dwelling
2. Subdividing (reconfigure a lot) 1 lot into 3 lots. (2 lots at the back of the existing dwelling)
3. Knock exisitng dwelling down and put 4 units on land

Doing this in SEQLD and since the water / sewerage companies have taken over from the council, the infrastructure costs are about $35k per dwelling!! (25k from council and an additional 10k from the water authority)

This is on top of other costs such as physical connections and crossovers and driveways.

Ouch!!!!

It certainly does dig into profits.

How does all the guys out there intend to subdivide their larger plots of land.

If I was putting 4 up, this would be a $140k deficit to the authorities, before I pay money for the lines to be put in?

How can it be worth it?? (you must need to sit on the plot for a good while to increase value, or buy it for a steal.??

F

 

[wylie]

Welcome to development and the wonderful world of "legalized" extortion from the government.

This is how it appeared to us when we initially looked at developing our double block. We figured as novices, we could make a lot of money or lose a bigger lot of money, so we did nothing .

The only thing I do note is remember to credit 1x given there is already an allotment\house present which you dont have to pay infrastructure charges for.

Being a novice, I'm curious about this statement. When we spoke to a town planner about developing a double block, in demo control precinct with two houses that had to stay, the developer said that headworks would be $20K per house, including the two that were already there, plus $20K to get power (?) to the whole lot. I cannot remember exactly the figures or whether the last $20K was power or something else, but I do remember that it was $100K to spend before we touched a shovel.

Unless the town planner had it wrong, the two existing houses had the same headworks cost as the two new houses we were discussing.

It all was too hard and we hope one day to just sell the blocks to a developer who can make some profit or just sell nice big blocks to people who want a big block.

 

[mark1980]

The more I read and learn on this forum the more I almost find myself thinking that it is almost impossible to be sure of anything!

With everyone struggling to find accurate information and spending so much time discovering the differences between areas, in respect to council charges, how does anyone have time to actually make money!

Hopefully this is not seen as a deviation from the first post - What is the cheapest capital city (as far as council charges) to develop/sub-divide etc?

What is the biggest "gotcha" charge that a newbie would get stung with?

 

[bcoombs]

I have been quite public for the last few months on this very issue. There is a lot of talk about low housing affordability. The press blame greedy developers and immigration for house prices.

If you look at the layers of taxes, fees and charges extorted by governments it adds up to almost 50% !

However NOBODY in the last election brought this up as an issue. We were concerned about a few boats.

We as a group have to start lobbying for change, as its not the big developers this effects its the inner city mums & dads and investors. Why should the option of downsizing mean living 40 mins from the city? Why should development be in areas of no schools, no transport, no parks, no shops etc

 

[tcocaro]

There is no political milage in raising this as an issue. The general public are convinced all us developers drive ferraris, smoke joints using rolled up $100 bills and drink champagne without our kellogs for breaky.

The issue is if politicians come out asking for a drop in taxes they will be seen as "developer sympathisors" and loose votes. They will loose votes because the opposition (whover they are) will say this exact line "If you lower taxes all you will be doing is putting more money in developers pockets because they wont drop the price they will keep the difference in their own pockets"

Sigh... its called market forces, me competing to sell my apartments from the ones down the rd will drop the price if I can.... so I wont be able to pocket the savings, not to mention how many more sites will now become feasible to develope. Taxes are inefficient we all know that but unfortunately development has become a cash cow for the government cant see it changing.

Also there are already groups lobying UIDA and co.... nothing ever changes.

I have been quite public for the last few months on this very issue. There is a lot of talk about low housing affordability. The press blame greedy developers and immigration for house prices.

If you look at the layers of taxes, fees and charges extorted by governments it adds up to almost 50% !

However NOBODY in the last election brought this up as an issue. We were concerned about a few boats.

We as a group have to start lobbying for change, as its not the big developers this effects its the inner city mums & dads and investors. Why should the option of downsizing mean living 40 mins from the city? Why should development be in areas of no schools, no transport, no parks, no shops etc

 

[tcocaro]

Walk before you run.

Build 1 house first, then two.. then when you get to thinking about doing more than 2 you will understand the process, pitfalls, risks and upside.

The more I read and learn on this forum the more I almost find myself thinking that it is almost impossible to be sure of anything!

With everyone struggling to find accurate information and spending so much time discovering the differences between areas, in respect to council charges, how does anyone have time to actually make money!

Hopefully this is not seen as a deviation from the first post - What is the cheapest capital city (as far as council charges) to develop/sub-divide etc?

What is the biggest "gotcha" charge that a newbie would get stung with?

 

[tcocaro]

What site is it? Maybe ummm ermmm I know of a developer who might be interested

It all was too hard and we hope one day to just sell the blocks to a developer who can make some profit or just sell nice big blocks to people who want a big block.

 

[wylie]

What site is it? Maybe ummm ermmm I know of a developer who might be interested

Not sure if you are serious, but happy to PM you the details. Our favourite REA said that in the past month, after having been pretty scarce, the developers are out and about and thick on the ground in our local area (Coorparoo and surrounds).

We have pretty much decided to sell one 906sqm block which could have two (maybe three?) townhouses in the back. We don't want the hassle of doing it ourselves. We took this plan to a pre-planning meeting several years ago and BCC gave us a verbal "no problems", so I'm sure a developer could probably squeeze more on that we were looking at. Our questions to BCC we re one house in the back, or two townhouses.

I cannot imagine how three townhouses could be put on, but a block nearby of just a whisker over 1000sqm has just had four two car townhouses built in the back with the front house also kept . I suppose being able to put four townhouses plus a house on a 1000sqm block is one way of a developer making money once all his costs are paid?

We are keen to keep our double block, but with hubby having left work, this is something we will decide as our future becomes clearer. We have thought of reconfiguring the block and changing 36 perch plus 36 perch (906sqm each) to 20 perch plus one house and 52 perch and one house - and sell the 20 perch and one house, and still keep the big block which could be developed. This would mean losing the two street frontage, but I don't think that really matters.

Would you recommend keeping both street access? One house is positioned so that it needs to be moved a metre over to allow "legal" access to the rear (and raised and built under at the same time) and one house has enough room already for a driveway to the rear, but this house also would no doubt be raised and built under by a developer to double the size.

Right now, having done so many "what if" scenarios, my head needs a little rest . Sometimes having too many options and paths is as frustrating as having too little.

I always say "don't put off until tomorrow what you can put off until the day after" .

 

[Savanna100]

Sheryn, you said that "there is a new limit in NSW that Councils can charge up to 20K per unit"

Sad to say but 24 of the NSW councils protested vigerously about that and have now had the $20k cap raised to $30K. I was surprised by that and thiought that instead of capitulating, the NSW Govt would have sacked the Council and put in administrators (my preference).

I worked as a planner and used to have to levy these charges (A complicated process which took a couple of hours mucking around with formulas if done longhand). I worked in an LGA which didnt charge much (about $7k a lot) but some of the Council infrastructure charges are outrageous !!!

Hang in there and land bank because change is coming. The Council of Australian Governements (COAG) is avtivley working to reduce these charges and it is the policy f the State and Feds to reduce them but Local Govt is hanging on because oftewn their ability to levy ordinary houshold rates is capped and they have to try and recover the money from developers.

 

[Fudge]

I cannot imagine how three townhouses could be put on, but a block nearby of just a whisker over 1000sqm has just had four two car townhouses built in the back with the front house also kept . I suppose being able to put four townhouses plus a house on a 1000sqm block is one way of a developer making money once all his costs are paid?

If this is approved, which I assume has to be, then this sets a precedent.

Could bode well for your plans.

You are able to put more than the allocated number of units on your plot (i.e. increase density), but this isn't going along the more 'straight forward route' of code assessible development.

Seems as though your neighbour would have gone down the impact assessible route, and provided that the intention of their development still meets the objectives and amenity of your area, then there would be no reason for the council to knock them back, especially when BCC are trying to maximise density in inner city suburbs.

In saying this though, I would float the increased density to council at pre lodgement to see if it has any legs. Provided that it doesn't exactly meet the specific outcomes of the planning scheme, doesn't mean it wont get passed (i.e. go down impact assessible).

F

 

[Fudge]

I cannot imagine how three townhouses could be put on, but a block nearby of just a whisker over 1000sqm has just had four two car townhouses built in the back with the front house also kept . I suppose being able to put four townhouses plus a house on a 1000sqm block is one way of a developer making money once all his costs are paid?

Putting this into context wrt my feasability in Moreton Bay Regional Council, if the guy has put in 4 townhouse (seperate dwellings), the infrastructure costs (i.e. not accounting for the physical works in connecting services) is up to 35k per dwelling. That is $140k!!!!!! before anything is done??

I know you don't need to worry about the existing dwelling, but for the other townhouses, it is extortionate.

This is the advice I am getting at the moment.

 

[wylie]

Thanks Fudge. We plan on waltzing up to the local council one day soon, find out what can done on which block/s to help us to decide which way to head. We don't have to make any fast decisions.

When we attended the pre-lodgement meeting (probably five years ago), our plan was to simply put a second house in the back. We had a plan drawn for the house by an architect friend. We didn't go ahead at the time, but wanted an idea of whether it would be approved, and indications were that it was a "goer".

Then we bought the house behind another IP, which gave us the double block on 72 perches. Best use of that block would be several townhouses. Some would get city views. The more we thought about it, the more we thought it is best left to someone who knows what they are doing.

The last thing I want is more money at the expense of our health and/or marriage. Neither of us want the stress of doing something totally new to us to make a bit more money. We will take our profit and leave some for a developer, if that works out.

 

[Fudge]

We have thought of reconfiguring the block and changing 36 perch plus 36 perch (906sqm each) to 20 perch plus one house and 52 perch and one house - and sell the 20 perch and one house, and still keep the big block which could be developed. This would mean losing the two street frontage, but I don't think that really matters.

.

The thing that attracts me to this is the market value of your current house and land will not dramaticaly drop due to reconfiguring your lot and subdividing the back.

I haven't done this yet (am looking at it though), but from the research I have done, it is surprising to see that by cutting the block up, the price for the bit of land with the existing house on it is fairly comparable to median values.........This creates extra bit of land that you can sell out back!

F

 

[wylie]

That is right Fudge, certainly in my experience for our local area. The prices don't drop much by halving the land content. And we would keep one house on a large enough block to make it desirable for a developer.

The downside, as I see it, is that these blocks subdivided would create a battleaxe block in the middle, or down the back of the single block, and that is not worth the same as a block with a street frontage..... but "almost" free land is better than nothing.

 

[Fudge]

We will take our profit and leave some for a developer, if that works out.

That is a sensible approach, which will allow your property to be snapped up quicker, especially if you know there is a bit also for the developer to make.

Are you going to the prelodgement with a town planner? I have approached one to do up a couple of scenarios for me (based on current town planning schemes) and another more gungho one (which provides a few more dwellings than allowed which will be assessed via the impact assesible route)

These guys, as they know what can be done, and also considering that they deal with the duty planners from council all the time regarding other DA's, could be a worthwhile alais if they go to the prelodgement with you.

Obviously, they charge hourly rates for this service.

If I go forward with mine, I would look at engaging their services for the first one, so that I see how it is done.

F

 

[wylie]

We were not planning on going to an actual pre-lodgement meeting, but just calling in to the BCC local office and asking some very basic questions like "how many townhouses can fit on this block" etc.

The pre-lodgement meeting we went to years ago was much more formal, but we need to know what will fit on which block so that if and when we sell, we have some idea of what a developer might be looking at putting on the block.