feedback on feasiblity for sub division

[primaus]

Just wanted to get a sanity check on a number of calcs I did to figure out if subdiving and building 2x townhouses on a Melb metro block stacks up...

here it goes..

Land value: $640k
Build cost per townhouse: $272k (approx. 160sqm @ $1700 per sqm - mid level finish incl all professional fees)
No. of townhouses: 2
Total build cost: $544k

Project duration (from pre-planning meeting with council to practical completion): 12months

Interest rate: 5%pa
Total interest: ($640k + $544k)* 0.05 = $60k


Expected sell price per townhose: $700k

Therefore, potential profit = ($700k x 2) - $640k - $544k - $60k = $156k
Margin is 12.5%


Do these numbers stack up to proceed with the project if you were the developer?

Someone people have said if you cant make 15-20% margin then its not worth doing.


n.b. I have approx. $680k of financing lined up for this project. There is also potential to build 3x smaller townhouses (1x 3BR 2x 2BR) STCA

 

[westminster]

Does that costing include demolition, architect/designer fees, council contributions, headworks (sewerage , electricity and phone for each block)

At 12% I wouldn't. There just isn't enough money to cover contingencies or items you haven't considered.

 

[primaus]

Does that costing include demolition, architect/designer fees, council contributions, headworks (sewerage , electricity and phone for each block)
.

Yes included - demo not required as it clean block. I have included all those costs in $1700 per sqm rate

 

[westminster]

What are the sums for doing 3?
I suspect it will up the profit margin significantly to around 20%

 

[Shaneelastic]

What about gst, and cgt

 

[FFChaser]

Yes included - demo not required as it clean block. I have included all those costs in $1700 per sqm rate

good thead Primaus!

u mentioned that u already included all costs into the 1700/sqm, but how do u pre determine the headwork costs?

 

[Telejazzer]

12% margin is fine if you can definitely realise the deal in 12 months or less but thats not the case more often than not.

There also seems other costs not included as already mentioned.

Based on what's been provided (and not), it seems like this deal is risky IMO.