HELP, Suggestions, advice: property development in Ovingham, Adelaide

[BenCH]

Hi All,

Firstly, what a great forum this is. Wish I had stumbled on this many years ago.

I'm a noobie as you can tell and to development and just wanted some pointers and tips. Situation is that one of the neighbours has approached me to say he is putting his property on the market and is offering first dibs at if i'm interested. Each block has about 15m frontage and about 49m long. So total is about 1400sqm combined.

The local council at Prospect has recently changed the zoning and has allowed for high density living along main arterial rds linking to the city. Meaning the minimum requirement is 2 storey and up to 4 storey. It can be either residential or commercial, or a mixture of the 2 combined.

Down the road, a block of 6 townhouses were built and took a while to sell all 6. I think they fetched about hi $300's to low $400's. There's also another big project further down advertised as EOI:

http://www.realestate.com.au/property-apartment-sa-prospect-115615767

So my question is where do I begin? Do I do a feasibility study first? Approach agents or builders? I've read that a town planner is useful? Any reputable builders?

Next would be the approx. costings? Subdivision, demolition, build cost, interest, agent fees etc. What else should I factor in and roughly how much to expect?

Thanks in advance!!

 

[Mamaof3]

Hi BenCH,

I've done quite a bit of research around that area in recent months and although the medium density being encouraged, from a developers point of view (i'm referring more along the lines of medium scaled apartments such as the one you supplied a link to) don't really work.

Was speaking with an architectural firm that has done alot of the medium rise apartments (4-5 stories) in Mawson Lakes, Adelaide, Northgate, Brompton etc and because he also assists them with the feasibilty and tendering process for the construction, he was saying these developers were mainly working on a 15% return

I know we all work on different returns but for us, there's no way in hell we'd risk doing something of this scale for 15%. Those sites they've got apartments on along Churchill Rd didn't work for us when we crunched the numbers....minimal margins.

Apartment build costs are also very different to you standard residential. Everything is more expensive from your engineering, drawings, build costs etc. We've been developing your stock standard courtyard homes for around 8yrs now and even we were surprised at whats involved with apartment construction. I would not recommend it as a first project unless there was some serious profit in it so even if a number of things went wrong you'd still be safe and not be in the red if that makes sense.

In terms of the block you have however, maybe consider getting the planning approval for the site and sell it to developers to make your margin....not much risk and relatively quick turnover. Just a thought.

Is it on the main Rd? If not and that zoning allows for it maybe run your numbers on townhouses?

Best of luck!

 

[BenCH]

Hi Mamaof3,

Thank heaps for your input and insight. I thought that a medium to large sized project would be a bit of a risk as no big projects have launched as yet. I guess everyone is waiting and sitting back to see the first person to take the plunge, and if they float and survive, then everyone else will tag along.

Good idea you mentioned about selling the whole block to developers. So what would you suggest I go from here? Would I be working with the developers or builders, or just solely sell the land to them? I guess they would what it for cheap. I know a similar block size sold for around $700K, and now there's 6 townhouses built.

It is on the main road, so was thinking of building maybe 6-8 2-storey townhouses. Would love to hear your thoughts again. and thanks for the input again.

 

[Mamaof3]

You could go to a draftsman (architects are much more expensive) and get them to draw up concept plans for you.....then go get prelim planning approval and you can pretty much then add a margin on top and sell the site with the planning approval ready for a developer to come and snap it up. Be careful not to add too much of a margin though because you need to leave money in the deal for the developer otherwise it's a pointless exercise. The idea of this is to sell your site for more than what it would typically sell for, to make a bit of money with little to no risk in a relatively short time frame in comparison to the other option of going through with full construction of the development which costs time and money but on the upside potentially allows you to make a tidy profit.

Crunch the numbers and see what the difference in profit is and then maybe that will allow you to consider which way would be more worthwhile.

Don't forget if you're considering to go through with the construction, make sure you see a good Broker to make sure you wont have any problems getting the funding either..no point wanting to develop the site when you can't get the loan for it...unless you're fortunate enough to be cashed up to pay for it all yourself