Most Profitable Development

[m.evt]

Hello all,

You've recently acquired a property adjacent to your PPOR, the details are as follows:

- market value of each block is 400k
- single detached home on each
- the dwellings were constructed in the 1960s, well kept
- each block has a frontage of 15.2 m
- length is 46m
- combined area 1400 square metres
- blocks are perfectly rectangular
- north facing
- no side street
- within 10 km of Melbourne CBD
- area is steadily gentrifying, many townhouses going up, renovations being done, a few flat blocks
- no easements
- council will most likely approve of subdivisions
- for the sake of discussion let's say you can access about $1.5 million.

What do you develop on these two adjacent blocks to maximise your rate of return?

The parents are in the position above and have been arguing about what to do with their properties for some time now, so I thought it time to enlist the help of SS, what do you think?

Christina x

 

[softmonkey]

A lot depends on specific council rules so you need to consult the local council planner. Sometimes even if the blocks are adjacent all you can do is subdivide each of them in half separately - ie. getting no actual benefit from them being adjacent.

 

[Ausprop]

exactly, zoning is everything. if developed to max density what are the retail values, the cost to build, tax position of owners, etc? a lot more information needed.

 

[Wunderbar]

Apartments is always the most profitable. They cost about $2,000 per sqm to build.
Townhouses are next, cost to build depends on quality.

Like previous posters have said it all depends on zoning, whether any recent developments have taken place etc. From your description I am guessing you are talking about Preston/Thornbury?

 

[Ocean Architect]

Agree with everyone else, zoning is the main factor, with demand for different products and everything that goes with that being the other.

Maximum profit scenarios range from renovating and onselling the existing houses, to subdividing, to building flats/townhouses/highrises, to building a hotel, to building a mcdonalds.

 

[sanj]

not just zoning but also what the area demands.

for example at the moment im renovating a 1930s home and putting 2 smaller townhouses at the rear instead of just bulldozing it and putting 3 larger townhouses simply because the area prefers older homes.

it often isnt the case of simply knocking down and sticking as many new properties on it as possible

 

[dog]

Wunderbar is correct re: build costs for apartments but I'd like to add my 2c worth and add that (depending on the councils planning department and their agenda for the area) res 1 code stipulates that the minimum block size is to be 300m2 for a dwelling.
This would mean a VERY easy 4 townhouse site and that's possibly the easiest to obtain planning for - however, if you find a local architect with local knowledge and preferrably experience with successful applications for more dense living (ie apartments) you may find that the pain and expense in the planning stage is very much offset by the end sale prices of apartments.

Do very careful research and find similar projects done in the area (preferrably under construction or just recently completed) so that you can enquire and enlist the same team of architect/project-town planning companies to act on your parents behalf.

 

[m.evt]

I didn't mean to complicate things, the zoning point is indeed valid. It's zoned residential 1. Logic would suggest that one should cater to the market in a particular area. From walking around and doing a bit of research there seems to be a majority of single free standing houses, however, I've been keeping track of changes in streetscape and demographic shifts in the area and it would seem that there is certainly a move to higher density living evidenced by the surge in interest in townhouses and units in the suburb.

I only intended to ask a general question, in the sense that, demand being equal, whether or not it would be more profitable to have 6 townhouses, 4 houses with a shared driveway or a block of X number units; and which configuration would be most profitable from a positive cash flow point of view (capital gains are of secondary importance.

3 townhouses just went up from around the corner from my parent's place on a a block of about 700 metres, although it was a corner block.

Do you guys reckon townhouses or units? How many units do you think would be able to go up on a block of 1400?

Christina x

 

[stevenyoung]

Higher Density = Higher profit, when there r demand for smaller unit in the area. Apartment is always the best when it comes to development profit

 

[Change of Plan]

In response to an earlier post, there is no statewide minimum block size for a house, and furthermore I have seen some recent examples of units with less than 300m2 for each lot.

As well as the market research I would suggest looking at the planning policy side. Most inner councils have a policy around which area/areas they prefer increased densities. I would suggest either ringing up the council to find out what area your site is in or looking up the relevant policies (for some light reading) from the appropriate planning scheme: http://planningschemes.dpcd.vic.gov.au/index.html

Hope this helps!