Development with Neighbour - Bad idea ?

Hi all,

The property next door to my PPOR sold recently, and the guy who bought it came over and explained his plans for the future. For him it's an investment property which he'll be renting out initially, with plans to build units on it in a year or two.

I assume he's serious about this as he said he's already had initial discussions with his town planner. He's a cabinet maker by trade so I assume he has connections with good tradesmen and would probably do some work himself to save on costs.

During our talk, he asked me if I would be interested in selling my property, which I am not. I only moved in 18 months ago. He then asked if I'd be open to the idea of developing both blocks to "maximise" it's use. I told him if there was a decent dollar to be made, then of course I'd be happy to look at it.

Some basic details :-
- suburb is 20km north of Brisbane CBD.
- 300m from train station, 100m from main road.
- Day care, primary and high school all within 300m.
- the zoning of the blocks could possibly be up to 4 storeys high, as that is what they are in the Moreton Bay MasterPlan. Not finalised yet as far as I know.

So onto my actual question. Can such a development be done whereby both parties can make a decent amount ? I'm assuming he can 4 or maximum 5 units on his block which is around 800 m2. Mine is 760 m2 so I'm guessing with the 2 together you'd get 12 or so ??

What would be a reasonable offer before I even entertain the idea ? I'm not looking to rip him off, but I'm not in any particular rush to sell either as my plan was to live in this house for 10 years or so, and then develop it myself one day.

Any suggestions, ideas or things to look out for are most welcome.

Thanks all in advance.
 
Have a chat to a town planner as his property may fit 5 for example but with yours in the mix it may fit 12 as opposed to 5 x 2 = 10.

This alone will improve your profit exponentially.

As with all JVs tread carefully as property development is about managing people and processes.
 
First step would be to rough out a feaso for yourself.

Based on your local knowledge of the area workout what a new unit/townhouse will go for and less total costs.
 
First step would be to rough out a feaso for yourself.

Based on your local knowledge of the area workout what a new unit/townhouse will go for and less total costs.

This

If it is feasible to develop yours alone and there is enough profit margin in it, then usually you can sometimes add another dwelling or two or bigger dwellings if both blocks are developed together as one bigger block.

You would split the cost of the additional benefit.
 
Guys, no offense intended but if I knew how to do a feasibility etc, I wouldn't need to ask the question on this forum.

What I'm asking for is what would be a fair and reasonable offer from him ? Are the profits be normally split 50:50 ? Is this normal ? Is it based on capital put into the project ?

What I'm trying to do is prepare for the scenario where he comes with some sort of an offer (he might offer to buy my property, he might offer to split profits a certain way or he might offer to give me x number of units at the end of the project) and I can then make a reasonable judgement on it.

Maybe it's too hard to judge without specific details ?
 
Nik, there are plenty of feaso examples on this site if you search. There are spreadsheets, discussions, references to books as well as courses (through TAFE/OTEN/Master Builders assoc NSW). Search this site to start.
 
Guys, no offense intended but if I knew how to do a feasibility etc, I wouldn't need to ask the question on this forum.

What I'm asking for is what would be a fair and reasonable offer from him ? Are the profits be normally split 50:50 ? Is this normal ? Is it based on capital put into the project ?

What I'm trying to do is prepare for the scenario where he comes with some sort of an offer (he might offer to buy my property, he might offer to split profits a certain way or he might offer to give me x number of units at the end of the project) and I can then make a reasonable judgement on it.

Maybe it's too hard to judge without specific details ?

A lot of pitfalls here. Most developers are concerned about keeping down overheads- and that is what you become as he will need to acquire your land ( or you both transfer to a third party) to develop on (unless the development occurs on both sides of the boundary line- in which case maybe you get to keep your land.
He's doing the building I would expect which means he's wearing the risk and will expect to get rewarded- so it may not be a 50-50 deal. Probably your best outcome is to let him see what he can do with both blocks and then sell yours at a maximum to him.

I've seen very few joint ventures go smoothly. People will say that a good lawyer can lock all the parties in but I don't think you can guarantee a result.
 
Guys, no offense intended but if I knew how to do a feasibility etc, I wouldn't need to ask the question on this forum.

What I'm asking for is what would be a fair and reasonable offer from him ? Are the profits be normally split 50:50 ? Is this normal ? Is it based on capital put into the project ?

What I'm trying to do is prepare for the scenario where he comes with some sort of an offer (he might offer to buy my property, he might offer to split profits a certain way or he might offer to give me x number of units at the end of the project) and I can then make a reasonable judgement on it.

Maybe it's too hard to judge without specific details ?

Everything is negotiable and you want the deal to be at least even and preferably in your favour.
 
If he is thinking about developing in a two years time.no point doing a feso now.

To do feso,

You can speak to town planner to see what can be build on your site.

Look on Re or domain for similar prop listing to ascertain end value of your future development

Then get an idea of rough development cost.

That's a start...and there are million other thing to consider
 
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