numbers on a villa project

[lisag]

Just wondering if the experienced developers can run over these number for me.
Considering a development in the outer newcastle area, may be using a experience project manager, to help with the first devel.

Two possible senarios
1) project 1
purchase exisiting older house on block no smaller then 1000m2 $200000
stamp duty etc $8000
renos to exisiting house $20 000
build 2 x 2bd units/villas on block $320K
water and council dveloper charges $6k
subdivision cost $10K
total around $564K

After completion
renovated house = $190K
2x2 units = $245 each
potential equity $680K

Rental return older cottage weekly rent $220p/w
villas $250 p/w each
approx $37 440 per yr in return , yield around 6.6%

2) project 2
Purchase vancant land $160K
stamp duty $7k
build 2 x 3bd units $400K
water and council dveloper charges $6k
subdivision cost $5k
total around $578k
on completion approx
2x 3bedder units/ villas @$340K each
potential equity $680K

units to rent out at $350 p/week
annual return of $36000
yeild of 6.3%

Do these figures look about right???
please any comments.

 

[lisag]

No comments yet?????

 

[Rockstar]

Lisa,
The profits on both are close to 20% which is the normal bottom limit for developers.

I posted this (below) for Soyabean recently which lists the items you need to consider. I didn't include project management. I notice you have not allowed for some of the costs set out below. Run the figures again.
There are two ways you can run the books. 1. As a developer. 2. As an investor. I have always set mine up as an investment which means that my intention is to hold the properties if possible. If I need to sell I will get a 50% CGT discount. All of my holding costs are tax deductible. I am not so familiar with the other way but you don't get any CGT discount and you need to work with gst

BTW which areas are you looking at. I have spent 12yrs in Newcastle.

You will profit if you play it safe and ensure your margins are carefully calculated. Go through the obvious costs, Land (+purchase costs, SD on land and mortgage, legals to purchase, etc.), consultant costs (geotech, contours, etc), Construction costs - (contract to build, landscaping, fencing, etc), selling costs, finance costs and interest, your labour costs to organise and oversee, cgt, and finally contingency costs, (normally 5%).

Go to a local agent or two and show them the planned development and get an appraisal of what the finished product would sell for in the current market. Then make your own judgement on the viability of the development based on the profit margin.

 

[RightValue]

build 2 x 2bd units/villas on block $320K

How big are these units??

I valued one today where they are building a 120sqm 2 bed plus study 1 bath rear unit and he quote was $136k which looked about right.

build 2 x 3bd units $400K

so an additional bedroom (average size 16sqm- no additional wet areas) should cost an additional $40,000???

You really like your builder don't you?? ... when you see him drive by towing the new boat ... smile .. as you paid for that.

The term .. lamb to the slaughter comes to mind......

cheers

RightValue

 

[RightValue]

Go to a local agent or two and show them the planned development and get an appraisal of what the finished product would sell for in the current market. Then make your own judgement on the viability of the development based on the profit margin.

Close.

Get the project independently valued by a valuer ... not an agent hoping to get a listing later.

Recently I had to value a unit in a development. Originally they thought they would get $350k for their units... they are worth maybee $280k each.

Taken nearly 4 years to get there. They will be lucky to break even after holding costs .. but years ago agents told them what they wanted to hear ...

Also remember to factor in the GST component, forgetting that kills a lot of returns.

cheers

RightValue

 

[Gools]

How come you're jumping to the conclusion that the only difference between the two builds is an extra bedroom. Lisa has quoted that the 3 bedroom villa's will be worth $95k more at completion so RV, I think you're heading down the wrong path.........

Lisa, your subdivision costs seem a little lean (compared to SA anyway). I thought we had some of the cheapest charges in the country and you've gone $5k under what we would normally bduget for.

Gools

 

[Mindmaster]

1) project 1
build 2 x 2bd units/villas on block $320K
2x2 units = $245 each

2) project 2
build 2 x 3bd units $400K
2x 3bedder units/ villas @$340K each.

How many square for your two and your 3 bedroom units?

I'm also getting prices for 2 x 2 bedroom, 2 x 3 bedroom and 2 x 3 bedroom 2 story.

Prices range from 145k to 180k for 13-14 squares for 2 and 3 bedrooms depending on the builder and whether the finishing is weatherboard and metal roof or brick veneer and tile roof.