Opinion on Metropole

[preacher_naric]

Hi all,

I was hoping if anyone could give me their opinion of Metropole's services. Has anyone used them before and did you end up making a profit from the development?
I'm thinking of using them and was hoping to find out if they do a good job and weather it's worth it.

Any help would be appreciated.

Thanks again all.

 

[Rickardo]

Hi all,

I was hoping if anyone could give me their opinion of Metropole's services. Has anyone used them before and did you end up making a profit from the development?
I'm thinking of using them and was hoping to find out if they do a good job and weather it's worth it.

Any help would be appreciated.

Thanks again all.

Hi,

there was a very long and interesting thread about Metropole a few years back, you can find it here:

http://www.somersoft.com/forums/showthread.php?t=7959

 

[Twitch]

I question the profitablility of a fully-paid-for-fully-managed 2 townhouse development that Metropole tend to promote. I think either 3+ townhouses are needed or the investor needs to do a fair portion of the work themselves (eg manage all the approval process) on a 2 t/h dev to make it worthwhile.

 

[redwing]

Here's another thread with some numbers from TomL I for one liked the property

 

[Dazz]

I question the profitablility of a fully-paid-for-fully-managed 2 townhouse development that Metropole tend to promote.

I suppose it depends twitch whose hat you are wearing at the time.

When you say "the profitability", do you mean the investors involved, or Metropole's profitability ?? There's probably a very good reason why Metropole tends to promote one angle instead of another.....and it has nothing to do with the investor.

 

[Ahmad Azimi]

I've never dealt with them but I saw Michael Yardeny at the Property Expo in Sydney few months ago. We had a stand there so I decided to go check it out when he was speaking at the seminar.

I must say I was abit of a fan of him until that moment. At the end of the presentation he basicaly listed all the investment products you shoudnt buy exept for the ones he was selling himself. I found his advice to be very biased. I'm not against developing your own property but dissing off other types of methods or products to sell your own is just abit too much.

 

[APerry]

I question the profitablility of a fully-paid-for-fully-managed 2 townhouse development that Metropole tend to promote. I think either 3+ townhouses are needed or the investor needs to do a fair portion of the work themselves (eg manage all the approval process) on a 2 t/h dev to make it worthwhile.

It is particularly difficult to find a dual occ development in a decent area with strong margins, this has nothing to do with whether you use a project manager or not.

I haven't dealt with Michael myself, but I have read a few threads here from his customers, such as those already mentioned. The profit margins mentioned were really quite good for these types of projects, in my opinion. Of course if you move up in value you would expect more.

Regards
Alistair

 

[Twitch]

It is particularly difficult to find a dual occ development in a decent area with strong margins, this has nothing to do with whether you use a project manager or not.

I haven't dealt with Michael myself, but I have read a few threads here from his customers, such as those already mentioned. The profit margins mentioned were really quite good for these types of projects, in my opinion. Of course if you move up in value you would expect more.

Regards
Alistair

Hi Alistair, in your experience what do you think the minimum profit margin should be for the investor, for a 2 t/h development, if they are going to a have a one-stop-shop to handle the full development process? 10%, 15%, 20%????

thanks

 

[MichaelW]

Hi Alistair, in your experience what do you think the minimum profit margin should be for the investor, for a 2 t/h development, if they are going to a have a one-stop-shop to handle the full development process? 10%, 15%, 20%????

thanks

As an investor or developer I'd want a minimum 20% of the gross realisation of the project as my profit margin. If Metropole can skim a bit more above this return then they're welcome to it, but if they're chewing into that margin then I'd leave it alone.

i.e. If the gross realisation of my project is $2.5M then I want $500K margin above my costs. In that case my total costs cannot exceed $2M, and I'm happy for Metropole to form part of that cost base if they deliver the project for me.

I wouldn't even look at return on investment as that dilutes the margin and is a nice way to hide the true cost. i.e. Maybe I invest only $400K as 20% of the $2M cost and borrow the rest. If I make a margin of $500K on the development then my ROE is 125%. Some companies might focus on this return and say "Wow, look I can give you an ROE of 50%!! In reality this means your margin has reduced to $200K and they're probably eating $300K of your pie.

Cheers,
Michael.

 

[Twitch]

Thanks Michael, good to have your perspective

I think an important point is what the estimated profit margin figure should be pre-development. We all know costs tend to escalate during the development; so a x% margin might sound OK at the beginning, but it doesn't take much to get erroded quickly during construction. I think the TomL & AL threads illistrated that. 20% sounds reasonable to give you the extra fat.

 

[preacher_naric]

Thank you all very much for your responses. Much appreciated, really!
I value this forums feedback greatly and wish all of you the best of luck with what ever the investment pursuits.
In regards to profit margin, in my opinion as with any business I think if you're making at least 12% profit as an investor then you're doing a good job. I have a dilemma in regards to making extra cash to buying my next PPOR home in an suburb that I really want to move into, however my current financial situation has me pinned in a corner and making the move into that particular suburb will force me to make repayments to the extent where I will have little or no extra cash for living expenses.
I don't see any other choice but to bring my cash levels up in order to buy into the actual property to bring the loan amount down so the repayment are lower also.

 

[Twitch]

Thank you all very much for your responses. Much appreciated, really!
I value this forums feedback greatly and wish all of you the best of luck with what ever the investment pursuits.
In regards to profit margin, in my opinion as with any business I think if you're making at least 12% profit as an investor then you're doing a good job. I have a dilemma in regards to making extra cash to buying my next PPOR home in an suburb that I really want to move into, however my current financial situation has me pinned in a corner and making the move into that particular suburb will force me to make repayments to the extent where I will have little or no extra cash for living expenses.
I don't see any other choice but to bring my cash levels up in order to buy into the actual property to bring the loan amount down so the repayment are lower also.

I don't think development is the way to go if you want some quick extra cash to afford the PPOR you want. It's time consuming, it ties up a lot of capital, and you would be unlikely to pull cash out at the end without selling. Eg, if you can borrow the full amount for a development, finish it then be able to get it to standalone on an 80% loan (ie no cash out), that would be an extremely good result as it would represent a huge profit margin.

 

[Ausprop]

Twitch I would expect the dream scenario that you outlined should have to occur as a minimum... banks have various development funding criteria but in essence if it aint showing 20% you wont get finance anyway.

I worked for a group once that did promote the old "40% return on your money"... truly dreadful returns. Because they are so low geared they can afford to walk in and pay way above everyone else for their land because the project only returns about 5%!! the banks love it - safe lending. the land vendors love it - high prices achieved. the project managers love it - high fees for minimal work. it's a cricle of love. Of course the investors get eaten alive and any delay in the project sees you lucky to get a little more than bank interest on your investment.

 

[Ausprop]

actually Twitch i missed the point about the borrow the whole amount... yes you would need to chuck in 20%.

so its 20/80 split with the bank, refi at the end, get your 20 back and have 20 equityin the completed product. it does absorb a lot of capital but you may as well do something with your funds

 

[commercialman]

I question the profitablility of a fully-paid-for-fully-managed 2 townhouse development that Metropole tend to promote. I think either 3+ townhouses are needed or the investor needs to do a fair portion of the work themselves (eg manage all the approval process) on a 2 t/h dev to make it worthwhile.

not sure about that - i'm doing a dual occupancy development currently - looking at a cash proft of over $600K (after tax and all other expenses) - bought the property two years ago. If you buy in the right suburb (preferably blue chip) then the returns are there. my total project costs (land, construction, interest, archi fees) will be around $2.1M - sell each property for at least $1.5million each in todays market. The planning permit process is being done by the architect and myself (probably saving around $25K-30K here)

 

[MichaelW]

not sure about that - i'm doing a dual occupancy development currently - looking at a cash proft of over $600K (after tax and all other expenses) - bought the property two years ago. If you buy in the right suburb (preferably blue chip) then the returns are there. my total project costs (land, construction, interest, archi fees) will be around $2.1M - sell each property for at least $1.5million each in todays market. The planning permit process is being done by the architect and myself (probably saving around $25K-30K here)

G'Day Commercialman and welcome to the forum!

Do you mind me asking which suburb you're doing your duplex in. I'm doing a three townhouse/unit development in Mona Vale with similar numbers to yours. My total cost is around the $1.8M mark and my gross realisation should be about $2.5M. I don't plan on selling any at the moment so GST doesn't factor.

My plans are currently with council and I intend to do a lot of the detailed specification and CC work myself to save some dollars. My architect charged $20K for the DA plans.

Cheers,
Michael.

 

[APerry]

Hi Alistair, in your experience what do you think the minimum profit margin should be for the investor

I definately wouldn't do anything with a margin of less than 20%. Unfortunatley, unless you hold the land for a while, it is very difficult to find dual occ projects where you can get these margins. Hence Ihave no interest in dual occ's.

Regards
Alistair

 

[Twitch]

I definately wouldn't do anything with a margin of less than 20%. Unfortunatley, unless you hold the land for a while, it is very difficult to find dual occ projects where you can get these margins. Hence Ihave no interest in dual occ's.

Regards
Alistair

Thanks.

I have a property that is a candidate for a dual occ. Problem is the profit margin was projected at ~13%. Even after it was completed my holding cost would be higher than it is today.

So at this stage my sophisticated strategy is do nothin'

 

[JIT]

Why is 'Opinion on Metropole' under 'Innovative Techniques'? Shouldn't it be under 'General'?

GSJ

 

[preacher_naric]

It was submitted under General but it got moved for some reason.
Anyway, in my opinion if I can make 50-100K in 6 or so months then I'll be happy. Getting 12% out of a project is good and getting 20% is really good, in my opinion.
Hopefully it's possible, I suppose I just have dig around to get the right block for the right price.