Development Feasibility Methods

[Paul B.]

Hi all,

I just wanted to get an indication of how much information you gather before committing to purchasing a block of land. Although it is necessary, it is quite the gamble to undertake preliminary studies (geotech, contamination, concept design, costings) only to find out the development isn't feasible, or someone else buys the land before you.

Any tips would be great.

 

[A Jeremy]

The answer is all information. Rarely do you need geotech or contamination studies for a development. Once I find a potential block I will check the Council requirements for the block and design one or two preliminary developments.

At that point I undertake a comprehensive feaso to find out what the development will cost which then tells me what the value must be on completion has to be and how much rent it must generate to be a viable investment.

I have a spreadsheet for this purpose that is full of formulas and takes into consideration interest rates, GST, the margin scheme, holding costs and all construction costs broken down and sale/value estimates. In a place that I know the planning scheme back to front this is very easily achieved in a few hours. Somewhere that I have absolutely zero knowledge of the building code it could take a few days of reading documentation.

Leave nothing to chance.

 

[MelbInvester]

HI

May be this give you some idea...


MI

 

[Paul B.]

Thank you guys. Do you have a useful rate guide for costing development? Like typical square metre rates?

 

[Shahin_Afarin]

I find that one of the biggest things that will affect a development and its feasibility is the structurals. So you need to factor this in.

 

[Paul B.]

can you elaborate a little Shahin? I don't quite understand.

 

[A Jeremy]

I prefer not to use a square metre, or any other compound, rate as it is a method that sacrifices accuracy for speed of calculation.

If you want a comprehensive feaso you need to think about a building/investment/development and consider all costs. They can include:

- land
- legal fees
- council fees
- taxes
- stamp duty
- bank fees
- holding costs
- interest
- real estate sale/PM costs
- other associated fees
- consulting
- architectural
- drafting
- engineering
- development fees
- certification fees
- Council infrastructure charges
- demolition
- earthworks
- retaining walls
- foundations
- footings
- sub floor
- slab
- frame
- cladding
- electrical
- plumbing
- air conditioning
- data
- fire services
- other services
- walls (frame, block, other)
- internal and external cladding
- insulation
- roof
- solar panels
- skylights
- doors
- fitout
- waterproofing
- floor coverings
- paint
- cabinetry
- vanities
- benchtops
- shower screens
- bathtubs
- wall tiles
- curtains
- external concrete and asphalt
- stairs
- landscaping (turf, plants, gardens, paving)
- fences
- mailboxes
- clotheslines
- sheds

If you receive a quote from a builder you can cross the things off the list that are covered in the quote, or aren't applicable to the development, and get prices for the remaining aspects.

What Shahin may be talking about is how some builder's advertise prices for particular designs on their websites because from the slab up nothing should change. The wind region of the area will affect certain parts of the structure however by the time you find the price you have likely chosen your region or the builder only builds in a limited area.

The main variable with structural is the type of land that is being built on. The foundation and footing requirements for the same design in two different regions could vary immensely and translate to a price difference of tens of thousands of dollars.

 

[Mindmaster]

I prefer not to use a square metre, or any other compound, rate as it is a method that sacrifices accuracy for speed of calculation.

If you want a comprehensive feaso you need to think about a building/investment/development and consider all costs. They can include:

- land
- legal fees
- council fees
- taxes
- stamp duty
- bank fees
- holding costs
- interest
- real estate sale/PM costs
- other associated fees
- consulting
- architectural
- drafting
- engineering
- development fees
- certification fees
- Council infrastructure charges
- demolition
- earthworks
- retaining walls
- foundations
- footings
- sub floor
- slab
- frame
- cladding
- electrical
- plumbing
- air conditioning
- data
- fire services
- other services
- walls (frame, block, other)
- internal and external cladding
- insulation
- roof
- solar panels
- skylights
- doors
- fitout
- waterproofing
- floor coverings
- paint
- cabinetry
- vanities
- benchtops
- shower screens
- bathtubs
- wall tiles
- curtains
- external concrete and asphalt
- stairs
- landscaping (turf, plants, gardens, paving)
- fences
- mailboxes
- clotheslines
- sheds

If you receive a quote from a builder you can cross the things off the list that are covered in the quote, or aren't applicable to the development, and get prices for the remaining aspects.

What Shahin may be talking about is how some builder's advertise prices for particular designs on their websites because from the slab up nothing should change. The wind region of the area will affect certain parts of the structure however by the time you find the price you have likely chosen your region or the builder only builds in a limited area.

The main variable with structural is the type of land that is being built on. The foundation and footing requirements for the same design in two different regions could vary immensely and translate to a price difference of tens of thousands of dollars.

Hi A Jeremy, A very impressive list of costs for your feaso.

I'd probably get bogged down in details, looking up costs, getting quotes etc and take ages to come up with a profit margin.

How do you complete your feaso quickly and painlessly?

 

[DexV2]

Brendon, I think I'm in the same boat as you at the moment. The way A Jeremy gets his feaso done so quickly is essentially by experience from what I've gathered. The first few times would be a pain in the butt but once you've found reliable tradies and good places to source your materials, just about rejigging the numbers to suit the particular block? Am I on the right track?

 

[A Jeremy]

Experience plays a big part. I've done a few developments but I've undertaken hundreds of feasos. When I'm looking for my next project I run feasos on everything that looks like it could satisfy my criteria and if it takes me until the feasibility is completed to find out it won't work, that's just more experience.

Taking the things off the list that my builder doesn't cover, or isn't applicable to my development style, I am left with:

- land
Prices are advertised

- legal fees
Once you have used a conveyancer/solicitor you will know what they charge

- council fees
Council fees can generally be acquired in person, online or over the phone

- stamp duty
http://www.realestate.com.au/blog/stamp-duty-calculator/

- bank fees
Lenders must disclose these in their PDS

- holding costs
A combination of rates, water and insurance

- interest
Rates are available on lender's websites

- real estate sale/PM costs
Ask agent's what their rates are

- engineering
Ask for a quote the first time, experience and quotes from then on

- development fees
Development application fees can generally be acquired in person, online or over the phone.

- earthworks
Ask for a quote the first time; experience and quotes from then on. I know what my guy charges.

- retaining walls
Calculate materials and request a quote from supplier or if not building yourself ask for a quote the first time; experience and quotes from then on.

- electrical (additional lights)
Calculate required fittings and source prices from suppliers or implement it into the builder's contract.

- floor coverings
Calculate area and request a quote from suppliers or implement it into the builder's contract. I know how much I pay at my tile shop.

- curtains
Either implement into the builder's contract or get quotes from suppliers. I add a 'curtain allowance' per opening now.

- external concrete and asphalt
Calculate the area and request a quote from suppliers and/or have as much as possible implemented into the builder's contract.

- stairs
Calculate materials and request a quote from supplier or if not building yourself ask for a quote the first time; experience and quotes from then on.

- landscaping (turf, plants, gardens, paving)
The costs of a variety of turfs are a phone call away. The same goes for plants, garden edging or paving. A lot of these things can be implemented to a turnkey build.

- fences
Calculate materials and request a quote from supplier or if not building yourself ask for a quote the first time; experience and quotes from then on.

- mailboxes
This can be found by a quick trip to the hardware, a look online or by asking your brickie for a quote to use the leftover bricks and make a mailbox with them

- clotheslines
This can be found by a quick trip to the hardware store or a look online.

- sheds
This can be found by a quick trip to the hardware store or a look online.


Knowledge is power and experience is invaluable.