Nollamara Development - Stage 1 (DA) WooHoo!!

[MTR]

I think the other important factor to include is the fact that he will be holding them all. I dont know that market very well over that way but it might be that the yield will be a much better position with 6 apartments than 3 villas. While also getting the 4-5-600k equity to leverage off for his next project.

Also i think the other determining factor is the staged development so there will still be an income coming in. And a bit of risk management only having to comit to half the project/outlay and being able to pull the pin if the first half blows out.

The numbers wont lie so it would actually be very interesting to see both senarios side by side to see the pros and cons and timeframe

Cheers

Hi HA

Dave purchased the block at a great price, I suspect at the time of purchase villas (3x2) in Nollamara were not selling for anywhere close to $500,000, perhaps its time to revisit/review all the options.

I can not tell you how many times I have done this, working through the process to achieve best outcome.

MTR

 

[Daveh]

Hi all,

thanks for all your thoughts, it's great to know you all care enough to reply to my post and to also help us understand our options.

Just to put you in the picture this is our first development. We didn't come into this lightly and knew it was going to be tough, but that's where having the best team and having support really matters I'm sure you'll all agree. Let's hope I can stay this positive throughout the build

Mattnz, your idea re wadrobe space is great, something I'll defo put in as I think the more storage in these smaller apartments the better. I do agree that bed 2 is fairly small but I don't assume it would be used for a double bed as these units are only 2x2's. I suspect it would be used either as a study or single bed.

To everyone else, the idea of 3 villas was where I was at 6 months ago. I was planning to build one at the back then when finished demolish the front house and build another 2. I couldn't ever build all 3 at the same time, this was due to lack of funds. We were always going to be reliant on the front house giving us income. When I engaged Momentum Wealth things got interesting, here's the figures...

Building 3 villas stage 1...
Total House Value: $840 - (1 x $400 + 1 x $440 existing house)
Loan: $750 - ($500 (initial purchase + costs) + $50 (Subdivision) + $200 (Build costs))
Equity: $90
Rent: $800/wk - (2 x $400)

Building 3 villas stage 2...
Total House Value: $1.32m - (3 x $440 includes 2 years of inflation)
Loan: $450 - $50 (Subdivision) + $400 (Build costs)
Total Loan: $1.2m - ($750 (Stage 1) + $450 (Stage 2))
Equity: $120
Rent: $1200/wk - (3 x $400)

OR

Building 3 apartments
Total House Value: $1.55m - ((3 x $370) + $440 Existing House)
Loan Stage 3: $1.06m - ($500 (initial purchase + costs) + $50 (Subdivision) + $510 (Build costs))
Equity: $490
Rent: $1520 /wk

At this stage I have way more equity than building 1 house at the back and can move on in the market now that these blocks are A. harder to find and B. more expensive. You may ask however where am I getting the funds for this if I haven't got them to build 3 houses, well were going to refinance once the DA and subdivision is complete, this should give us enough to pay the deposit for the construction plus some of the construction re-payments.

Once I've done a couple of these I will then re-visit Nollamara and complete stage 4 (this may be 6 years down the track)...

Adding 3 Apartments to existing 3 rear apartments...
Total House Value: $3m - (6 x $500 includes 6 years worth of market growth)
Loan Stage 4: $590 - ($80 (demolish and site works) + $600 (Build costs + inflation))
Total Loan Stage 3 & 4: $1.74m
Equity: $1.26m
Rent: $3000/wk (6 x $500)

For us this works really well, we can gain access to equity now and land bank for the future.

I agree it's a large undertaking however I've got a strong team with the guys at Momentum Wealth, good mortgage broker plus great accountant.

PHEW!

Anyway any more thoughts on the designs? Or on my calculations ?

thanks
Dave

 

[Daveh]

Dave, How long will it take to complete the project.

Is this right, you do the first 3 rear builds then access equity for the front 3. so will you rent the rear units on completion after demolishing the front property?? Reduce holding costs?

Cheers MTR

2 years mate all up. Yes correct will retain existing house while renting rear apartments.

 

[Daveh]

ive got a bit of a different thought.

with the recent price rises, would it not be worth considering just doing the old boring 3 villas? if resale prices are around the 450-70k or so for good 3x2s (im not all that familiar with the area) then you could probably create equity around the 270-300k mark which is not a lot less than the 350k mark for the apartments, a hell of a lot quicker, less of a pain in the **** and less capital intensive

just a thought anyway and those are just rough figures based on quick mental math

apart from that, congrats on the big step and best wishes

Hi Sanj,

I've seen your name here a lot and know your well respected so I appreciate your ideas.

For Nollamara the units selling prices for a 3x2 are about $400 with double storey town house going for just above that about $440. Not enough in it for us, I've detailed my costs etc. in an earlier post.

thanks again
Dave

 

[Daveh]

I think the other important factor to include is the fact that he will be holding them all. I dont know that market very well over that way but it might be that the yield will be a much better position with 6 apartments than 3 villas. While also getting the 4-5-600k equity to leverage off for his next project.

Also i think the other determining factor is the staged development so there will still be an income coming in. And a bit of risk management only having to comit to half the project/outlay and being able to pull the pin if the first half blows out.

The numbers wont lie so it would actually be very interesting to see both senarios side by side to see the pros and cons and timeframes.

Cheers

I agree Chase and thanks for your thoughts, I've just put the numbers in the post, there not 100% accurate but should be close enough.

your spot on with the staged development, if things really hit the fan I can always...

Sell entire block with DA
Sell Rear block after subdivision with DA
After building on rear block sell front block with house and DA

All of these should make us some cash.

Dave

 

[eyespy]

what funds and backup funds do you need before attempting a development like this.
so land price 471k.
cost to build , say 600k
total: 1071 000

so you'd need 20% deposit/equity = 214200
and interest = $42840 pa (presuming it takes a yr to build and 80% lend)

what minimum buffer in funds would be safe to have in case there are problems ?

 

[Daveh]

Yes 3.0 x 3.0 plus robe. Here is another pic of the same sized room from another angle. Just the right minimum size.

I like it.

I'll ask to see if the builder can do something with the smaller rooms, I suppose there's no harm in asking

thanks
Dave

 

[Daveh]

what funds and backup funds do you need before attempting a development like this.
so land price 471k.
cost to build , say 600k
total: 1071 000

so you'd need 20% deposit/equity = 214200
and interest = $42840 pa (presuming it takes a yr to build and 80% lend)

what minimum buffer in funds would be safe to have in case there are problems ?

Were paying the subdivision using cash, once it's complete we'll use the equity to pay for deposit of construction loan, prob around 85% mark plus leave some over to pay for construction costs.

 

[MTR]

Hi Sanj,

I've seen your name here a lot and know your well respected so I appreciate your ideas.

For Nollamara the units selling prices for a 3x2 are about $400 with double storey town house going for just above that about $440. Not enough in it for us, I've detailed my costs etc. in an earlier post.

thanks again
Dave

Hi Dave

Thanks for posting the figures, I think what you are doing is very gutsy, good for you.

Check out the Cobham in this link, apparently one of these villas sold close to $550,000 achieved highest price in Nollamara, this is not double storey but the spec is outstanding.

http://www.promenadeconstruction.com.au/#!/page_feature

It was this builders villas I checked out in another location in Nollamara which are almost finished and he has buyers at $500,000 not double storey around 150 sqm each, he uses Mark Anthony for the designs. An investor is building these and uses this builder all the time, sticks a sign at the front and sold prior to completion, saving on selling costs also.

I agree units sell very cheap in Nollamara but these will be around 135 sqm, not utilising the land to full potential and typical spec builder homes, no fruit. Every man and his dog are building these, hence lower prices of around $400-445,000 bog standard villas, this is not the product I would build because as you stated the numbers don't stack up. I think the only people making money from these will be builders due to their margins.

My point is if one builds quality villas at the right price one will achieve a far superior result, more $ in your pocket and there is certainly evidence that this is actually happening. To be conservative I would say with the right spec somewhere from $475,000-500,000.

All the best with your project moving forward

MTR

 

[Daveh]

Hi Mtr,

thanks for your reply. That's great selling prices, if I were to be selling only I'd defo consider it. However since I need access to equity I'm reliant on the banks valuations and you know what they're like, they hardly ever take into account recent price hikes. For example only recently did I get a valuation on Nollamara, about June ish, and the bank estimated it was worth the same as when I bought it in November - $471, that's just rubbish for I could have sold it for at least $520...boo. Plus the cost of building the higher spec units would be harder for me to achieve possibly having to delay the project by about another 6 months.

cheers mate
Dave

 

[MTR]

Hi Mtr,

thanks for your reply. That's great selling prices, if I were to be selling only I'd defo consider it. However since I need access to equity I'm reliant on the banks valuations and you know what they're like, they hardly ever take into account recent price hikes. For example only recently did I get a valuation on Nollamara, about June ish, and the bank estimated it was worth the same as when I bought it in November - $471, that's just rubbish for I could have sold it for at least $520...boo. Plus the cost of building the higher spec units would be harder for me to achieve possibly having to delay the project by about another 6 months.

cheers mate
Dave

Yes, I totally understand this.
Bank valuations, I know all about it, just had 2 vals and very disappointing, both in boom areas and they came under what I expected.

Look forward to more of your posts.

Cheers
MTR

 

[HD_ACE]

Yes, I totally understand this.
Bank valuations, I know all about it, just had 2 vals and very disappointing, both in boom areas and they came under what I expected.

Look forward to more of your posts.

Cheers
MTR

I hope these were not in perth ?

Looking to get a couple re valued in the coming months.

Cheers

 

[MTR]

I hope these were not in perth ?

Looking to get a couple re valued in the coming months.

Cheers

One in West Syd which is booming and the other was in Perth which was OK but not as good as expected, and getting another one today in Perth and am very worried about this one because its over 1.5M not sure what it will come in at cos this market has not faired well over the last 5 years.

Cheers
MTR

 

[HD_ACE]

One in West Syd which is booming and the other was in Perth which was OK but not as good as expected, and getting another one today in Perth and am very worried about this one because its over 1.5M not sure what it will come in at cos this market has not faired well over the last 5 years.

Cheers
MTR

Best of luck with It. They may suprise you.

 

[westminster]

From a design point of view I don't like where the bins are. For front unit 1 they are close to the master bedroom and I think could be stinky plus noisy when people are putting stuff in. The back unit 1 has similar problem but not as bad.

Solution? Perhaps move the store room configuration around. You could put front unit 1 storeroom in that spot and have it access from the area outside the master bedroom. Put the bins perhaps where the storeroom is that's in the foyer area.

With front unit 1 I'd put a sliding door to the outside.

I don't mind the laundries in bathrooms I am doing this in 2 of my units. What I am doing for these units is not doing a trough - it's not needed and then the washer dryer will be in a tall cupboard.

 

[Daveh]

From a design point of view I don't like where the bins are. For front unit 1 they are close to the master bedroom and I think could be stinky plus noisy when people are putting stuff in. The back unit 1 has similar problem but not as bad.

Solution? Perhaps move the store room configuration around. You could put front unit 1 storeroom in that spot and have it access from the area outside the master bedroom. Put the bins perhaps where the storeroom is that's in the foyer area.

With front unit 1 I'd put a sliding door to the outside.

I don't mind the laundries in bathrooms I am doing this in 2 of my units. What I am doing for these units is not doing a trough - it's not needed and then the washer dryer will be in a tall cupboard.

Hi Westminster,

good ideas for sure, I don't however think the bins are something that needs to be done prior to DA however I'll still get them moved, I agree it would be noisy and possibly smelly and something I totally overlooked, it's a good pickup. The stores were originally access from outside but I wanted them accessed from the garage to provide more security and feel more safe to the tennent. What I'll prob do is ask to have them (the bins) located behind the stores and access will be via the foyer and they (the bins) will then also be hidden without the extra cost of the fence in the original design.

For the laundries I'm defo gonna change them however I do like the idea you have of not supplying a trough and put the machine in a cupboard. I'll check out what the designer can do.

thanks
Dave

 

[MTR]

From a design point of view I don't like where the bins are. For front unit 1 they are close to the master bedroom and I think could be stinky plus noisy when people are putting stuff in. The back unit 1 has similar problem but not as bad.

Solution? Perhaps move the store room configuration around. You could put front unit 1 storeroom in that spot and have it access from the area outside the master bedroom. Put the bins perhaps where the storeroom is that's in the foyer area.

With front unit 1 I'd put a sliding door to the outside.

I don't mind the laundries in bathrooms I am doing this in 2 of my units. What I am doing for these units is not doing a trough - it's not needed and then the washer dryer will be in a tall cupboard.

Thought you were o/seas, never let that stop you jumping on SS

 

[SOP]

Similar units being sold off the plan in Balcatta.

http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/WA/Balcatta/?adid=2010638512

I like your design better though.

Would the construction costs and timeframe be the only thing holding these types of developments back?

I guess as they become more common the cost of constructions may also reduce.

 

[westminster]

Thought you were o/seas, never let that stop you jumping on SS

Selemat pagi

 

[Daveh]

Similar units being sold off the plan in Balcatta.

http://www.domain.com.au/Property/For-Sale/Apartment-Unit-Flat/WA/Balcatta/?adid=2010638512

I like your design better though.

Would the construction costs and timeframe be the only thing holding these types of developments back?

I guess as they become more common the cost of constructions may also reduce.

Awesome, I've asked Bell Merenda to give us prices on the units already sold, they manage the existing property in Nollamara