Development newbie questions

[evan1875]

We are still waiting to lodge our DA for four townhouses. I'm not bothered though as we have so much else happening to keep me busy.

To the original poster, we are newbies at development and new builds. I'd be so much more comfortable renovating the existing houses (which we will do as part of this build). We have two blocks, back to back, two street access with DCP houses that cannot be removed. (I know we could push to remove one, and probably a developer could remove one, but we are pushing other things already... that could be a push too far.)

Anyway, after reading this thread, a couple of things stand out for me.

1. Our designer has drawn up two townhouses, and another two townhouses. The area between them has a sewer, so it will be courtyard space.

2. We own the house with the yard that the services must come through, so approval to run power and water/sewer down the slope into the main should be much easier than if we have to seek permission from a neighbour.

3. We are asking for approval to be in stages to allow us to build the first two, get occupancy certificates, get them rented, refinance them to get finance to build the second pair.

4. We are not working, so need to finance the first two ourselves (or get an asset lend), then we "should" be able to pull money out of the built ones to do the second pair.

5. Was told we would be hit with 6 x $27K headworks charges for the whole block and all that is on it, but due to having two existing houses, we don't pay for those and the paperwork would show them being credited back to us, ie. we would have to cough up $27K per each new three bedroom townhouse approved.

Assuming we get approval, we then need to do the figures for all the different scenarios mentioned by westminster (already done them before going into this, but will do them again once we know firm costs and what is approved... or not).

My figures prove to me that four townhouses is better for us than two stand alone houses on battle-axe blocks behind each house.

With so much else on our plates right now, I'm fairly worn out and the thought of actually building these is not something I'm embracing right now. Once the dust settles on our other plans, that may change, and our DA may take 3 to 12 months to get through council anyway.

We may simply get the DA approved and sell the block with the DA. We will make money, and a builder can make some money on the build too.

A developer we know told me he would have pushed further with our block and put three level townhouses on. We did ask for this at the pre-lodgement and were told a very firm "no". I don't know if a seasoned developer would have been able to get this through? Our town planner is ex-BCC so knows his stuff.

Hi Wylie,

Thanks for posting your development because that is how we all learn. I am very new at this but here are my thoughts.

If your intention is to flip on with a DA then the only way to make money is to get a DA that is good, a DA that in itself increases the value of the land because you are essentially still selling land.

A site with a DA for a developer is only worth X more than a raw site.

X = cost of obtaining DA + holding cost of obtaining DA + Y (premium)

Y = Quality of the DA + Degree of uncertainty the DA eliminates

From what you are saying there are developers who after seeing your plans and said that they will push harder to get one of the DCP houses removed or go three storey, so that they can essentially get land at a more wholesale price (per unit site) than what you are trying to achieve. You need to compare selling your raw site (adjoining with two street frontages) vs selling your site with a DA that developers may not see as highest and best use, ie. value.

I would be concerned that you might not make more from flipping after doing the DA yourself. But if you do decide to lodge the DA with the intention to flip, I would try to push the boundary with the council to the max.

If you are definitely building this thing then it is different. You might have acquired these blocks a long time ago that no matter what you end up building you will make money. And you might decide to hold some or all of your development. Building houses, two level townhouses or three level walkup for your blocks will have different profit and risk profiles. You take on higher risks but your margin will be greater.

 

[wylie]

Happy to PM when I get home.

 

[wylie]

Hi Wylie,

Thanks for posting your development because that is how we all learn. I am very new at this but here are my thoughts.

If your intention is to flip on with a DA then the only way to make money is to get a DA that is good, a DA that in itself increases the value of the land because you are essentially still selling land.

Intention was not to flip, but to do the build. It is only as time goes by and I've got other things to occupy me that I wonder if this is what I should do, or sell the block with a DA. It will be probably three to nine months before we get approval, so I have plenty of time to sort my head out and make that decision (with hubby) by the time we get approval.

A site with a DA for a developer is only worth X more than a raw site.

X = cost of obtaining DA + holding cost of obtaining DA + Y (premium)

Y = Quality of the DA + Degree of uncertainty the DA eliminates

From what you are saying there are developers who after seeing your plans and said that they will push harder to get one of the DCP houses removed or go three storey, so that they can essentially get land at a more wholesale price (per unit site) than what you are trying to achieve. You need to compare selling your raw site (adjoining with two street frontages) vs selling your site with a DA that developers may not see as highest and best use, ie. value.

I've not shown any developers the plans. We do have a friend who is a developer. His comment was he would have pushed for three levels. We did try for three levels when we went for the pre-lodgement meeting, and were told a most definite "no". Our town planner is ex-BCC and I can only assume he would have told us to push harder if he thought we had a chance. As it is, we don't have 20m frontage, and it is not a definite "yes" as we are "pushing" some things already.

I also don't know if a developer would have been able to get more than four townhouses on our block. That is the "allowed" development for the block size, but you do hear stories of developers being allowed to get away with things that mere mortals cannot get past the planners. Are these just stories? I don't know.

I do know that if we pushed for five or six (even if possible), they would be tiny townhouses and I think four good sized townhouses are easier to rent and easier to sell, and that is also the view of the agents I spoke with when we were deciding sizes, number of bedrooms etc.

I would be concerned that you might not make more from flipping after doing the DA yourself. But if you do decide to lodge the DA with the intention to flip, I would try to push the boundary with the council to the max.

If you are definitely building this thing then it is different. You might have acquired these blocks a long time ago that no matter what you end up building you will make money. And you might decide to hold some or all of your development. Building houses, two level townhouses or three level walkup for your blocks will have different profit and risk profiles. You take on higher risks but your margin will be greater.

We have held one block for about 15 years and the other for about seven years, so effectively, we are building on "free" land. I know that doesn't mean we don't need to try to maximise and find "best use" for the block.

My comment about pushing for more was simply in relation to the stories I have heard about different developers being granted permission to build bigger, higher or more than someone else. Who knows if these stories are true, or if they are urban myths.

The first town planner we saw just after buying the second block, giving us enough to do townhouses did say he thought "some developers" "COULD" get one of the houses removed. Interestingly, the house he said he thought could be removed is the nicer of the houses, not fiddled with, and original looking. The other house has had the verandah enclosed with ugly sliders, is probably the ugliest house in the street, and I would have thought that it would have been the one we could push to have removed, due to it having been altered from its original look. However, remove a few weatherboards and sliding windows, and it is back to its original charm.

I also note there are several developments nearby where other developers have had to keep the DCP houses, so I'm not sure that if we had pushed for more townhouses, pushed for removal of the house etc, that we would have got anywhere.

I guess we could have gone down that track, but rather than spend our money on Plan A that has little chance of success, we chose the path that should see us get an approval.

Whether we build or not is something we will decide as time goes on. I know we can make a good profit if nothing goes wrong... but I also know a family who had things go wrong on exactly our size build, and it nearly cost them their marriage. I don't need money that badly.

 

[wylie]

I've been asked by en_ a few things and in the interests of helping anybody else, here are the questions, and my answers...

Appreciate the PM, I will still post questions via the thread for knowledge sharing purposes but will not give away the location.

The zone is CR2, which has a *allowing multi unit development if area is over 3000m2. Am I reading the zoning wrongly OR is there a 'negotiable' scenario for townhouses because of the inner city location?

It used to be zone CR (City Plan 2000), what was your original intention for buying both places? i.e. for CG?

Recently, whilst speaking with agents to find out what the block was worth to a developer, we had a developer walk the block, visit BCC and told us that we could not build townhouses, therefore wasn't interested. Our town planner reckons we can, and honestly, without sounding like we don't care, because we do, I really don't know what is going on the the zoning. What I know is that BCC has said yes to our pre-approval meeting. If that changes, and we get a "no" we will do something else, or I guess we could take it further as there are similar builds nearby that have been approved.

When we first bought, we could have split the single 906sqm block, but the town plan or city plan (whatever it was called 15 years ago) changed and we had to build the second house behind the current one, before being allowed to split it and sell one or both. Before then (when we bought it) we could have split the block and sold the back block.

That didn't really worry us because we knew we could always build a house at the back.

When the opportunity came up to buy the neighbouring block, we just jumped in, knowing we could do "something" with the bigger block. We saw a town planner at that time, who told us we could build four townhouses (from memory). We were not nearly ready to do that, and have just held on since, knowing we would one day do something, or could sell to a developer.

Over the years, we have had developers look at the block, and one was renting another house (same size block, same street) and he told us the block as worth the same to someone wanting a big block for a pool and a big renovation as to a developer. Ultimately, the block was sold to a family who did a big renovation and added a pool.

More importantly, mind sharing your investment strategy? i.e. is it buying properties for CG with a twist, such as potential for subdivision/ development?

Per the thread, I would like to do a development but undecided if it's going to be:
1. Buy and rent out for a couple years and let time/ compounding does it bit. Take the time to build up the DA etc before proceeding. Feel that this approach is safer and as time goes by and if I decide not to go ahead, I would have enjoyed CG and the place is still attractive for developers.

My answer... Apart from these big blocks, we just have bought what we could afford, with good solid houses, no real thought behind it. As long as it rents well, we are happy. We've done a lot of small to medium renovations over the years on lots of houses to give better rent, better houses.

If we don't do this build, we will possibly still raise and renovate the front houses and increase the rent substantially. We could still do that, sell the one we don't need to run power and sewer through to free up cash. We could well both, sell one or none. Do the build, or not.

In a way, too many options is more difficult to work with than only one option.

Our options are further limited or at least influenced by hubby being "retired" and me working only a little, certainly not enough to get a loan. Hubby could go back to work any time he wants, but neither of us wants that badly enough.

 

[en_]

Hi Wylie,

Re 4 good size townhouses better than 6 tiny ones, what size and configuration is recommended by the agent?

Around the Kedron/ Stafford area, it's apparently 3/2/2 that is ~170m2.

Do you have rough numbers for build cost per m2?

Thanks for sharing.

 

[wylie]

Hi Wylie,

Re 4 good size townhouses better than 6 tiny ones, what size and configuration is recommended by the agent?

Around the Kedron/ Stafford area, it's apparently 3/2/2 that is ~170m2.

Do you have rough numbers for build cost per m2?

Thanks for sharing.

I don't think we would have been allowed to build six tiny ones (?) but I was told by several agents that four bedrooms were harder to sell, harder to rent, and meant the living rooms vs bedrooms ratio was wrong.

We've always found that even with houses. People needing four bedrooms want and/or need a second living area, preferably a deck as well.

We were told that building a four bedroom townhouse would likely find us renting to four young people, four singles. We don't want that for a rental.

There are some four bedroom townhouses we've been in, with a small kitchen/dining/living area which I felt very cramped in. We didn't want that.

We asked for three bedroom townhouses, but they have studies as well that can be closed off from a second living area. We saw the initial plans, changed the layout considerably to make them flow better, and are happy with the plan.

I've asked one builder for a ballpark figure, but haven't heard back as yet. I cannot help with price per square metre at this stage.

 

[LJW]

Hey Wylie

To answer your questions RE: zoning, the old Character Residential area (under City Plan 2000) is now called CR2 i.e. Character (Infill Housing) Zone under City Plan 2014, not to be confused with the Character (Character) Zone. Units/townhouses are still supported in the CR2 zone at a density of 1 dwelling per 300sqm, similar to City Plan 2000. For a 906sqm lot, you are looking at 3 dwellings easily (assuming no other constraints), although you may be able to push for 4 dwellings depending on the location of the site, surrounding uses etc

Cheers
Liam