Duplex

[Nem]

I have a question to ask all you experience developers

I am thinking of buying older house and building duplex together with my mum so we both get to keep half. Its for our PPOR

I have no experience with building or subdividing, I am reading lots about it, different wordings, rules and etc and I understand its huge project that will require lots of time.

Can you please either encourage me its possible to do it, and maybe recommend some rules and steps to follow or tell me I am dreaming
What is reasonable amount involved in organizing all permits and building cost for duplex in Sydney southern area??

 

[Dimsh]

Duplex is the easiest of subdivisions you can do, no issues at all in most cases. If you don't want to spend your time on it, then simply hire a town planner who for $5k will do all the leg work.
If you want a step by step process then:

1) figure out if duplex will be allowed based on the zoning, block size and road frontage (in most places a min of 20m is required)
2) Get site survey and drawings done
3) Get engineering, soil test reports and apply for DA with the council
4) When DA approved calculate how much it will cost to build and with this information tender to a few builders, drive cost down and then build

If you need a more specific advice just PM me.

 

[Shahin_Afarin]

Its very hard making money on a 2 dwelling development in Sydney even if you were a builder.

Many things to consider when developing. Start of making a list of all the expenses and there are plenty of things you didn't know existed.

 

[monalisa]

1) figure out if duplex will be allowed based on the zoning, block size and road frontage (in most places a min of 20m is required)

20m sounds like one big frontage, and hard to find. Most blocks I have seen are around or just over 15m.

 

[Nem]

Thank you Dimsh!!

In area I am considering its 600m2 block with minimum 18m frontage...

 

[LeoT]

"Its very hard making money on a 2 dwelling development in Sydney even if you were a builder. Many things to consider when developing. Start of making a list of all the expenses and there are plenty of things you didn't know existed"

Hi Shahin,

Well our duplex in Sydney, near parramatta is showing us a solid 25% plus returns. Thats with conservative figures.. however we did buy really, really well about nine months ago. Land of 787sqm for 740k with 17m frontage.

Leo

 

[Shahin_Afarin]

"Its very hard making money on a 2 dwelling development in Sydney even if you were a builder. Many things to consider when developing. Start of making a list of all the expenses and there are plenty of things you didn't know existed"

Hi Shahin,

Well our duplex in Sydney, near parramatta is showing us a solid 25% plus returns. Thats with conservative figures.. however we did buy really, really well about nine months ago. Land of 787sqm for 740k with 17m frontage.

Leo

Im not trying to be condescending but a couple of questions:

1. Are you factoring in net profit (after taxes, GST, capital gains, etc)?
2. Are you factoring the return at today's rate or at the time of purchase? My point is that Sydney has increased a fair bit in the last 9 months so its somewhat easy to say you have made profit on a development in a moving market.
3. Have you finished construction and the money is in your pocket? Lots of unexpected costs arise from developments.

 

[LeoT]

1. Are you factoring in net profit (after taxes, GST, capital gains, etc)?

We worked out it will be around 20% return net.


2. Are you factoring the return at today's rate or at the time of purchase? Based on 6 months ago figures mate. Quite conservative to be honest.

My point is that Sydney has increased a fair bit in the last 9 months so its somewhat easy to say you have made profit on a development in a moving market.

We worked out that even if the market didnt move like it did, the project would still be worth while. Probably 15-17% return. To be honest, ive always prefered the more stable, average growth markets becasue you know more where you stand. More discounting, more negotiating power, and you can know if the deal is going to stack up right from the beginning without havingto worry of prices going down much as they are stable. Also easier to get good quotes on construction and almost everything else.

3. Have you finished construction and the money is in your pocket? Lots of unexpected costs arise from developments

No we havent finished the construction but most of the big ticket items are done and we still have 45k left over from contingency. I agree that the rise in sydney market was beautiful to have and increased our profits. But we worked out it would still be a good deal a year ago. Now its only looking like being a really beautiful little bugger

 

[Nem]

Well done LeoT!! Thanks for confirmation... I dont see how in areas around Parramatta duplex wouldnt be well profitable....

 

[LeoT]

Thanks Nem. We managed to buy at the right time and get a good price. The numbers stacked up even before the boom, so this 'boom' is an added bonus! I think to do it now, buy land now in that similar area and develop a duplex...would be much, much harder (if not impossible) as prices on sites inferior to the one we bought is now more than 130k compared to 9 months ago. If you bought now and developed.. the return on TDC would be much lower.

Leo

 

[Dimsh]

Its very hard making money on a 2 dwelling development in Sydney even if you were a builder.

Many things to consider when developing. Start of making a list of all the expenses and there are plenty of things you didn't know existed.

I agree that for most properties it simply does not make a sense to demolish and build a duplex especially given the current situation in Sydney. However, given the nature of the post I think it would be simply wrong to dismiss the question outright and advice to sit and do nothing. Success in property, especially in property development is a factor of capital and experience with the latter being the most important. The quickest way to gain experience is to evaluate a lot of potential opportunities ? it does not cost much, but it takes time and dedication. If duplex idea does not work out the knowledge gained researching it will allow Nem to identify other opportunities going forward.

To address another topic raised regarding unexpected development expenses ? I would say, with experience, you can budget for most of them.
Normally developers would budget for 25%+ in net profit on cost knowing full well that the realised profit will be in the 15-20% range if they are lucky. This is not a universal rule of course but this is what I have found in my projects. May not seem much but with bank borrowing it gives 100% return on invested cash with is not bad, basically doubling your money in 9-12 months on a project, where else would you get that?