My little Mona Vale development update - Phase 3

[aussierogue]

Legendary effort...

If there was a somesoft hall of fame you would get my vote as a 'somesoft living legend'.....services to the community. Maybe get the Hoff to present the initial inductees.

Im freaking out over a small reno....kudos Micheal!

 

[MichaelW]

Thanks Guys, especially Peter,

But you're too generous. I've got as much back from Somersoft over the years as I've given. More so.

Another day, another issue. Things have really ground to a halt and we're trying to kick it back into gear. Trying to line up a meeting for Friday but they're not available. So asked if Monday suits. All hard work.

Also just got the kitchen layouts. I've personally reviewed them against the adaptability report and note that quite a few changes now need to be made to comply with the adaptability requirements. That's tonight' work. Print out all the drawings and get the red pen out. Tomorrow I'll scan the results and write a cover letter and send it back to the builder to rework.

We'll get there, but it has already taken far too long. Can't wait until i can post up that its all complete.

Cheers,
Michael

 

[Oscar]

Hi Michael, just caught up on this thread, and can't believe it's taken this long to complete.

On reflection, have you considered the gains you could have made by having judiciously passively invested in simple IP's between 2006 and today, and could you perhaps have been further ahead by now taking that course?

This developing thing is not for me given the passive cashflow and CG opportunities that are out there.

 

[MichaelW]

Hi Oscar,

Yes, that is certainly a consideration. But passive IP investment is still a lot of hard work to do it correctly. In effect, I have been invested in the market even while I construct. Any capital movement for the product I am building is built into my end price over that period. And I am, in effect, seriously leveraged into that market by virtue of it being a development with development progressive funding.

And don't forget that at the end of the day I still get by developer's margin out of the project on top of any capital growth through the period. So, all in all, I am still very happy with the approach. In hindsight though, I would never develop remotely again. Not that it was ever my intent to do so on this development.

We're coming down to the wire now. I had a very productive meeting with my builder to iron out our disputed items. We've almost signed off on all of them now so are moving forward actively to practical completion. At this stage, its looking like a late July completion.

We've also had our REA look at them and he says he'll comfortably rent them out for between $800 and $900pw each. That's on the upper end of our estimate so our yield will be great as well. He also said they'd value for more than we thought at the outset. So it is all working out very well for us. Its just been a rough ride at points, but noone ever said development was easy.

In the future though, I might stick to owner builder single resi developments where I can keep the builder's margin as well as some of the trade margins that I do myself. My current owner builder project in Bardon QLD is looking great. Should yield about $200-$300K margin on that single resi build when complete. That's a lot more managable than the $800K odd margin on the multi-unit build in Mona Vale and in a fraction of the time. Also, our former PPOR in Nth Narrabeen just had a very positive valuation of around $1M done by our REA and it cost us $650K to build in 2002. A decade on and we're very happy with that growth, some of which was builder margin at the time of build.

Passive buy and hold is not my thing. But developing on a smaller scale is where I think its at.

I know you can get better margins in passive buy and hold, but I'm not good at speculating. I much prefer the certainty of my 20% at completion and try and pick the areas where I also get the benefits of being invested in a growing market.

Cheers,
Michael

 

[Oscar]

Thanks for the response Michael, and congrats on your $1MM assessment for the old PPOR. Good Luck.

 

[MichaelW]

Hi Everyone,

Well, we had a very productive meeting in Sydney on Wednesday and have agreed resolutions to the Disputed Items with the builder. We conceded some ambiguity in the contract Specification and Scope of Works with regards to the funding arrangements for certain elements. The Dispute centered around whether or not certain elements fell within the contract sum or provisional sums and as such, whether they should be funded by the builder or by the owner. We were also in dispute over several other areas with regards to progress on site and intention to complete, all of which have now been amicably resolved.

That's a big weight off our shoulders and both us, as owners, and the builder are now fully committed to completing all the required outstanding works in a timely manner now that the commercials are resolved.

Its hard to convey just what a big issue this was and how much effort from both parties went into its resolution. We had to formally engage a project manager which cost me $15,000 to date to assist with the process. At one point it appeared we had reached an irreconcilable impasse and that the builder would fail to complete. Thankfully, that was averted given our concessions with regards to the funding arrangements which are now mutually acceptable and agreed.

So, now we're back into completion mode!

Our revised Practical Completion date is still the end of July, but it will then probably take another couple of weeks to allow the paperwork processing by our certifier and other consultants to allow the issuance of the Occupation Certificate. So, hopefully, we should be all done and dusted with tennants in by the end of August. I know I should never right stuff like that down as it will no doubt come back to haunt me, but there you go. Line in the sand drawn.

Once I get the photo uploading function working again I'll post some latest images of the fitout.

Cheers,
Michael

 

[Ace in the Hole]

Hi Michael,

Good to see you're almost there.
You going to set up strata title and body corp at completion?

Our first multi unit development is due to complete end of June, and finding strata/body corp set up to be a bit overwhelming for a first timer.

 

[MichaelW]

Hi Ace,

Is your build complete?

Yes, I just fired off the approval to my surveyor to kick off all the Strata Certification work. There's a fair bit involved, but we're close enough now that we can kick it off.

Still moving along slowly but getting closer every day now. We've got all the internal floors down and the kitchen carcasses in. The perimeter fence is being erected and the soft landscaping quote locked in. Its really coming down to the wire now but probably still another 4-8 weeks of work to do.

I was thinking of coming back to Sydney at completion to install curtains and dishwashers and the like, and thought I might even throw a special open home to my good friends on Somersoft who want to come round and inspect the finished product in person before we hand over to the property manager to let all three out.

Here's some shots taken today:

Cheers,
Michael

 

[Philip Thomas]

Wow Michael, you have come a long way with your Mona Vale development.

Congratulations, you have done really well. This is a good looking development & a great idea sharing it on Somersoft for others to benefit.

Kudos to you!!!

It only seemed like yesterday when you were embarking on this project.

 

[MichaelW]

Hi Philip,

Many thanks!

We're not quite home yet but we're getting close. I understand from talking to all my professional friends in this space that one of the hardest things to do when developing is "finish" the job. I'm still struggling to get the builder to approriately resource the project or to acknowledge their obligations to complete certain elements required of them under the contract.

I know there's only about 4 weeks work left on it if they threw resources at it, but based on their track record it could take months yet. I'll persist and when I have more info to provide on the actions I have taken to expedite matters I'll do so.

I really appreciate the support of everyone here at Somersoft. Its been invaluable in keeping me afloat mentally through this journey. The development will be a great one when complete and I know I can get it across the line, but it has been a difficult project. And I'm not there just yet...

I'll probably throw an open house just for Somersoftians when its all done and turn up in person for a Q&A session. Give everyone who's supported me on this journey an opportunity to see the outcome and share in the success.

Many thanks,
Michael

 

[Rockstar]

I understand from talking to all my professional friends in this space that one of the hardest things to do when developing is "finish" the job.

Too true mate! I haven't learnt yet. I always seem to underestimate the final few weeks. Maybe next time I will learn to double the estimated end date when I'm almost done. 2 weeks to go always becomes a month in reality. Landscaping is a pain in the rain!

Going for my final cert on Monday for my present project and am moving in at the end of that week.

Hope it comes to an efficient end for you. Good luck with motivating the builder.

 

[mattnz]

Did you have a penalty clause in place for completion past an agreed date, so they had as much interest in completing the project as you do?

 

[matto_]

Hi Michael,

Just found this thread. Sounds like a monumental task.

Have it ready to read over a cuppa later today.

Have you done updated figures - seeing as you are so close to the end (apologies if it is already linked within your thread).

Cheers,

Matto.

 

[MichaelW]

Too true mate! I haven't learnt yet. I always seem to underestimate the final few weeks. Maybe next time I will learn to double the estimated end date when I'm almost done. 2 weeks to go always becomes a month in reality. Landscaping is a pain in the rain!

Going for my final cert on Monday for my present project and am moving in at the end of that week.

Hope it comes to an efficient end for you. Good luck with motivating the builder.

Hi mate, congrats on your completion! Great work!! We're almost there, and just working with the builder now on the final landscaping piece and anticipate we're still a month or two away unfortunately. But its close. If they throw resources at it it could be 3-4 weeks, but will likely be two months.

Did you have a penalty clause in place for completion past an agreed date, so they had as much interest in completing the project as you do?

Yes we had LDs but they were capped at $10,000. The builder wouldn't sign unless we capped them. My holding costs are now that much a month. The project is coming up to its two year anniversary on a 10 month contract.

Hi Michael,

Just found this thread. Sounds like a monumental task.

Have it ready to read over a cuppa later today.

Have you done updated figures - seeing as you are so close to the end (apologies if it is already linked within your thread).

Cheers,

Matto.

It has been. Almost everyone I deal with sends me their condolences, but sometimes you just get thrown these hard tasks. We'll get it to completion but it will be very hard work. So hard we probably won't do another. We'll probably step back to owner build single residential type constructions. Or maybe even take a break for a while and focus on living a bit now that we'll have sufficient assets behind us.

As for the financials, they still stack up, but the margin is obviously much reduced. Still, in the current market, its good to be making some profit. It will be cash flow neutral at completion which will be nice. I get good deductions through my structure so will then take the next 12 months to build up my offset account and push it into +CF. We'll have a paid off PPOR in Bardon by then worth about $800K plus about $700K equity in this Mona Vale development. Not huge numbers by comparison with some on here, but enough for us to live comfortably. No personal mortgage / rent in a nice house in Bardon and a little bit of +CF income from the Mona Vale units. In time that +CF will just increase as rents go up and the mortgage is progressively more and more offset. I'm only 40YO so have a few more years of solid employment left in me to pay down some debt and get it into a nice CF+ position to retire off.

Cheers,
Michael

 

[MIZBUF]

My Little Mona vale development

Michael I have not contributed to this tread but have followed it.As it nears completion I must congratulate you on your perseverence and also your honesty in documenting this journey. Hope you make mega profits in any other enterprises you undertake or at least may the POG rise to $3k oz to let you have some "unearned income" though I belive there is no such thing All the Very best!!!

 

[MichaelW]

Thanks MIZBUF!

Still costing me sleep at night, but at least we're coming down to the wire now. Looking forward to having tennants in.

Cheers,
Michael

 

[warrioress]

In the future though, I might stick to owner builder single resi developments where I can keep the builder's margin as well as some of the trade margins that I do myself. My current owner builder project in Bardon QLD is looking great. Should yield about $200-$300K margin on that single resi build when complete. That's a lot more managable than the $800K odd margin on the multi-unit build in Mona Vale and in a fraction of the time. Also, our former PPOR in Nth Narrabeen just had a very positive valuation of around $1M done by our REA and it cost us $650K to build in 2002. A decade on and we're very happy with that growth, some of which was builder margin at the time of build.

Passive buy and hold is not my thing. But developing on a smaller scale is where I think its at.

Well done Michael - thank you so much for sharing. I too agree with your sentiments about developing over passive buy and hold.

With your experience in this development, and your own owner build projects, would you consider getting a domestic builder's license ?

Congratulations on everything to date and hope the next few weeks are relatively stress free

 

[handyandy]

I'll probably throw an open house just for Somersoftians when its all done and turn up in person for a Q&A session. Give everyone who's supported me on this journey an opportunity to see the outcome and share in the success.

Many thanks,
Michael

Hi Micheal

The place looks really good and would be very interested in checking the place out if the open day happens (and we are in Aust)

I know where your coming from the getting things finished - so frustrating.

Cheers

 

[MichaelW]

Hi Andreas,

Yes, we're definately getting close now. The fitout is almost finished with just little things like the balustrading, shower screens, external privacy screens etc remaining. We've moved onto external landscaping now with the hard landscaping well underway. Should have the paths all in and tiled within the next week or two, then get the pergola, internal fencing, flower beds etc all in and the soft landscaping to follow. Still need the entryway built at Pittwater Rd with the rendered walls, letterboxes, steel and hardwood gate, roof etc. But all coming along nicely.

Read the following article today in the SMH which was nice:

Buying and investing by the seaside

While the new TV version of Puberty Blues is taking us back to the beach, a fresh round of seaside suburb developments are proof that surfie culture has changed beyond recognition.

Forget cramped old houses huddled together along the front. These days, the new apartments taking their place are all steel and glass, and light and views, and luxury.

That article and the video within it refer to the Masters development in Bayview near Mona Vale. They all start around the $1M mark. That development is on the diagonally opposite corner to mine. My location is fantastic, right next to everything that Bayview and Mona Vale have to offer. I think it will really appeal to downsizers and has the level of finish of all these new developments on the beaches.

This isn't a "pump and dump", I don't plan on selling any of them for now. Its just nice to see some positive press after all the hard work and grind of getting it to near completion. The journey has been very hard but I think the outcome has been worth it.

Watch this space for the final completion notice and an invitation to an open house for Somersoftians. Might start a new thread at completion and invite everyone.

Cheers,
Michael

 

[Peter 14.7]

Hi All and Michael

Inspection Day would be great. A short presentation on the project like: the five things that went right, went wrong, and 5 lessons learnt for say 30minutes would be welcome.

Might even drag the "princess" up.

Regards Peter 14.7