Finding an investment partner - Northern Beaches Sydney

[EmD]

Hi,
I am very new to this site, and to forums in general, but here goes!

I have always wanted to one day be involved in a small development project, and have been researching the concept for about a year now.

I have found a block of land on Sydney's Northern Beaches (where we currently rent) that is zoned Medium Density (Multi-unit housing), and is a walk to the beach. It's a small block with an old house that would fit two townhouses comfortably. I have spoken to many builders and have estimated project costs for building. It seems no matter which way I do the sums - including council submissions etc - it would be an excellent investment, and an excellent way to end up with a four bedder with some yard at unit cost. However the only way I can do this is with an investment partner who would also like to build a townhouse on the Northern Beaches!

Does anyone have any advice? Is this something I could perhaps advertise? Are there investment facilitators or similar concepts around? Could a tender work?

And also, am I overly ambitious considering this as a first project? I am VERY motivated.

Thanks!!
Em

 

[evand]

Hi, i could be interested. Have you factored in selling into a depressed market in a year or two.......or three?

Can you tell us what research (DD) you have done. ie: purchase cost, fees, build cost, holding cost, contributions, sale cost, contingencies, worse case scenario etc etc

 

[asdf]

Give us some more details. No need for exact suburbs location but block size, costs to buy block, development costs. If you developed to torrens title, I'm sure there'll be interested parties to split the end ownership. I for one would be keen to investigate more. Have you read Michael Whyte's post? Getting a DA not easy up there.

 

[EmD]

Investment Partner - Nthn Beachs #2

Hi,

Okay, now is the time when I reveal my ignorance. As I said, this is a first project I'm considering!

I have looked at both Pittwater and Warringah Councils regulations. Subdivision of buildings is prohibited in both councils, so the only other option is multi-unit housing development, or in Pittwater Council dual occupancy development. Pittwater has an unusual zoning system which allows properties to be built as dual occupancies - two dwellings on one title - but never sold separately. I was interested in this for a while, but it's not useful as an investment concept, and not safe to do with investment partners as it would always be joint ownership.

So it was only the multi-unit housing zonings which presented options - and looking on the maps these zones are quite slim and prices seemed exhoribitant. However looking online recently I found a 400sqm block - relatively flat - for $680k.

I have spoken to about 6-10 master builders and project builders and estimates have come in from $300k - $600k ready to occupy. My best estimate would be $500k full project including landscaping, DA's, the new basics? levy etc. However as you can see, this is pretty shabby - general concept cost at this point. I haven't factored in purchase or sale costs (except stamp duty) and holding costs weren't significant for me because initially the property can be rented (around $500p/wk+) right until knock down, and we are renting so can manage the holding costs as we don't have other commitments.

So assuming (yes, this is very rough I know)-
680 purchase
30 stamp duty
500 build cost (total including all fees)
= $605k per townhouse

If you do a property search on 3 bedroom (I'd want to do 4) townhouses and units in the suburb I'm looking at - prices start at around $850 for absolute basic and reach to $1.5m, many are POA! It's hard to believe! This low-maintenance walk to beach lifestyle is a big ticket item!

In terms of getting a DA approved I understand from all feedback that Warringah council (where the block is), is much better than Pittwater.

And selling into a depressed market? Well, I've read so much on this and it seems to divide people. I don't know if there will be a seismic market drop, but certainly, I have noticed that 1. Northern Beaches is a far more resilient market because of a more 'blue chip' type of stock, and that 2. I don't know if it's just my perception, but it seems that because of the housing affordability crisis, people are now looking to courtyard units and town houses which as a result are reaching and even exceeding house prices.

I'm pretty green to all this, and I'm sure it shows, but I'm passionate and really want to investigate further and do my due diligence. But there is no point if I don't have a partner for the venture.

Thanks for the feedback so far.

Cheers,
Em

 

[Nathan]

can i ask?
no disrespect, why would someone do a multi million $ deal with partnership with someone that they never spoken to before off the net???

i dont get it.

 

[alexlee]

I'd also ask: how much resources do you have to support this project? Cost overruns aren't uncommon with this. 1.2m is a pretty decent investment. What will you do if costs overrun by say 100k?

Also, say someone partners with you. What are you bringing to the table?
Alex

 

[Simon]

I'd also ask: how much resources do you have to support this project? Cost overruns aren't uncommon with this. 1.2m is a pretty decent investment. What will you do if costs overrun by say 100k?

Also, say someone partners with you. What are you bringing to the table?
Alex

I reckon bringing a decent block is a pretty good start!

Have you spoken to family? This is often a good place to start with. Can be tough if things don't come to fruition as envisaged but in my experience family is how most JVs are done.

Another avenue might be to JV with a builder? Worth exploring but keep the block close to your chest otherwise you might just be left out.

 

[PrimeCommercial]

Does anyone have any advice? Is this something I could perhaps advertise? Are there investment facilitators or similar concepts around? Could a tender work?

And also, am I overly ambitious considering this as a first project? I am VERY motivated.

These forums as you have just seen, may be a place to find a partner, you could also speak to your accountant or solicitor as sometimes they have clients that are on the lookout for just the very thing.
I have seen people advertising for equity partners but I'm not sure how successful they are, I'd leave that as a last resort.

Its going to be very hard to get someone interested without giving specifics, ie site address, which posses another problem, they just beat you to the deal them selves.

Being green wont exactly be helpful in the situation but I dare say you should be able to work around it by doing more research to show that the numbers do stack up.
Over estimate your costs, under estimate your sale price, dont forget to factor in things like GST and all the different council contributions and fees.

The more research you do the more chance you have of finding a partner.

Good luck.

 

[EmD]

Fair enough questions. If you read my first post I was actually more seeking advice on whether or not this was an overly ambitious idea, and further if there are small development investors who work with individuals in things like this - and if this is something that commonly happens in the industry. I wasn't trying to directly source a partner from the forum. Having said that I like to keep an open mind.

In terms of budget overruns, for me this project would be an alternative to purchasing a home, and hence we could invest up to $675k (allowing for a $140k overrun, total project).

But perhaps I am too idealistic, and am being unrealistic. I am not an experienced project manager. Perhaps property development is for developers and not individuals. It just seems like such an opportunity.

Cheers,
Em

 

[EmD]

Thanks Shady and Simon,

Good advice! Much appreciated. Unfortunately no family are in a position for this kind of venture.

I'll keep researching, and consider securing the block myself - it is livable.

Cheers,
Em

 

[MichaelW]

EmD,

I'm flat out at work today so can't reply in detail to your thread, but I will get back to you on Monday if you PM me a reminder. I'm doing something similar already. I've got a DA approval to do three units/townhouses on a 700m2 MUH site in Mona Vale. Pittwater Council, so a bit harder than yours for DA.

My costs are:

Site: $700K
Build: $1.2M
Professional Fees/capitalised interest $200K
Total Cost: $2.1M

Gross Realisation $2.6M (3 x $850K)

If you do a search on "Mona" you will find my development thread which should give you some good background reading on what you're taking on.

My main concern with your numbers above would be around your build cost. If you can turnkey two for $500K that include landscaping and all professional fees and council fees and still get the level of spec that will realise $850K each then you're doing well. I had to excavate a basement to get the 7 carspaces on site that Pittwater required. That alone is $400K odd worth of development. Work on $2500 per m2 and you'll be in the ballpark. Assuming two dwellings each at 150m2 then the minimum you're up for is $750K with my rough numbers. Then add capitalised interest, architects, surveyors, landscapers, geotechs, traffic engineers, arborists etc and you're up for at least another $50K on top.

So, at $800K that's another $150K per townhouse on your costs gets you to $755K cost and a much tighter margin at an $850K GR each.

Cheers,
Michael.

 

[EmD]

Hi Michael,

I'm sorry I didnt' get back to you earlier, I've been away. But thanks so much for giving me some time. Perhaps the builders I spoke to were not realistic. It looks as if it's much more than anticipated - perhaps I better stick to buying not building.

The block allows for 3 story development, and as there would only be 2 townhouses, there would be no need for excavation for the garaging. But either way it would probably be high stress / high risk.

I spoke to the agent on the weekend and she said she has a couple of developers looking at the block - so someone will make the most of it.

Thanks again.

Cheers,
Emma

 

[stumunro]

Hi Michael,
It looks as if it's much more than anticipated - perhaps I better stick to buying not building.

If someone else can theres no reason why you can't. Keep educating yourself, and build up some confidence in yourself and goals

GOOD LUCK

 

[Cartoon]

sounds good but investigate your costs a little more.
i noticed the costs u had were from builders only and wondering did they include all the additionl costs like architects, engineering geotec's ect ect

Ask as many questions as you can to get all the information possible.
Im hoping to develop in the future my self and if i had the cash now i would be very interested