Opinions on deve site suitability/numbers- Woodbridge WA

[Skuttles]

Hi all

While I am not currently in a position financially to proceed with this exact site, I want to keep advancing my researching/education now so I am further along the path when I do want to commit to something. (hopefully within the next 12 months)

Proposed property is here; http://www.realestate.com.au/property-house-wa-woodbridge-116162015

Reasons I like the site;
- walk to high and primary schools, river, train, shops.
- MidlandGate just up the road, Bunnings/home improvement type shops etc not far away either.
- site backs onto park
- I think Woodbridge may be an up and coming suburb, given its proximity to Guildford and the river, plus all the infrastructure spending going on next door in Midland (without it actually being in Midland).
- front house has some nice period features, seems well kept and very rentable (just from pics), plus when I sell it I think it'll be a great entry point/location to be attractive for a first home buyer/young family.

My thoughts were to retain the dwelling, rent for 1 year after a small reno (kitchen, paint, floors), subdivide 2 more blocks out the back, build two 3x2 2 storeys on the back overlooking the park, with their entry off the rear laneway. Sell the existing property after the subdivision to help fund/service the build of the two out back. Then sell the two new builds on/after completion (probably in differing tax years)

My rough numbers are;
purchase (incl stamp) 620
reno 10
sub divide block 30
sewerage, power, xover for front 15
interest yr 1 33.75
build 2 townhouses 500

interest yr 2 26

total costs 1234.75
add contingency5% 1296.4875

rent 1 year 19.2
sell front house after 1 year 400
sell 2 townhouse 1100
total income 1519.2

nett +222.71


In addition to some of the numbers above, things I am unsure about are below;
- I assume I would have to provide for parking for 1 car (just 1?) at the front of the the existing house given I am removing the current parking accessed via the rear. This would need a need crossover cut in, have no real idea of costs for this.
- There doesn't seem to be any similar developing going on in this pocket, most homes appear to have their original block sizes. Not sure if there is a valid reason for this in a negative way, or if its an advantage for me.
- Midland next door seems to have MANY new multi-dwelling developments done/being done, could lead to an oversupply?
- would I even be able to have the 2 new builds fronting an old laneway? (current laneway isnt exactly pristine bitumen). What would the new addresses be/mail delivery etc? Is there a process to have a laneway 'registered'?
- is my 5% contingency prudent? 10% more realistic, esp for a first project?
- the sale proceeds of $550k each for the new builds is a best guess, finding it hard to find comparable sales. (range seems from $650k for nearer to river vs $450k for being almost on the trainline)
- my numbers show a potential 17% return, I keep reading here that its an initial return of 20% on paper or move on as a good yardstick. Especially for a first project, should I shoot for a higher potential return up front, giving me more padding to absorb all the costs I will undoubtedly 'learn of' along the way?

I also did a similar numbers exercise for demolishing the front house and doing a standard triplex development, the final numbers seemed to be very similar. If they are in fact similar costs vs return, I prefer the idea above of selling the existing house half way through the process to help service the loans.

Thanks in advance for any feedback peoples (good and bad).

 

[westminster]

Skuttles,

You are getting my 9:30pm brain which isn't it's brightest time but I'll try and speak English

I like Woodbridge as I think it's nicer than Midland. However your sums are inadequate for the deal

My rough numbers are;
purchase (incl stamp) 620
reno 10
sub divide block 30
sewerage, power, xover for front 15
interest yr 1 33.75
build 2 townhouses 500

- Midland has Clay soil in many pockets and Woodbridge might too - possible extra $30k site works for each unit
- sewerage and power is more likely to be around $25000 depending on whether there is a western power dome for the front house or not.
- build 2 townhouses turnkey is more likely to be 300-350k each

Laneway - I love a good laneway but if it's still a dirt track then some councils say NO to a development application unless you bitumenise it from the nearest road - hence no one wants to be the first applicant - unless you are the corner house.

They would need a pedestrian access/footpath to first ave from the rear houses and their letterboxes would be on first ave.

I think I just used up all your profit or more

 

[D.T.]

$30k per unit westy? holy ****

 

[westminster]

$30k per unit westy? holy ****

I'm sure that was what someone on here recently found out. Let me see if I can find the thread

 

[westminster]

$30k per unit westy? holy ****

I'm sure that was what someone on here recently found out. Let me see if I can find the thread.

Here it is - MTR said $30k
http://somersoft.com/forums/showthread.php?t=97652&highlight=clay

 

[Tano]

I was told up to 30k per site if it's class M soil

 

[MTR]

I'm sure that was what someone on here recently found out. Let me see if I can find the thread

That's correct $30K, I know someone who actually paid this so its experience, and you are getting my early morning brain, 2 cups of coffee and counting.

Skuttles

I also like Woodbridge far superior to Midland. Not sure though how period homes are viewed as there are many in this pocket, its important to check this out, make sure it can be demolished.

I personally believe there is an oversupply of apartments in Midland, when the big players are having problems selling then you know something is not quite right. The only way they get their numbers to stack up is by building apartments.

At the end of the day the numbers are a little lean and I am concerned about the end value of villas/units in the area, that's why in part I don't play in this area, its too high risk for me.

Cheers
MTR

 

[Aaron Sice]

woodbridge has to take into account the 1:100 year flood levels for the stream to the rear.

it may not affect you here, but be aware - this generally means a very poor soil type.

it looks like it's not a gazetted lane to the rear so i would say rear access looks shaky without demolition of some description.

i mean, it's there, but it might be a private ROW - it's difficult to ascertain at this level.

 

[Skuttles]

Thanks for all the opinions/feedback given to date.

Agree that some of my numbers may be quite lean/ambitious for this one, too many unknown variables at the moment, not an ideal first timer's project for sure.

Amazed that soil type could potentially affect each dwelling by $30k, just goes to show how tight the margins can be on development projects if you dont try and reduce all the variables as best you can at the start.

Skuttles

 

[MTR]

Thanks for all the opinions/feedback given to date.

Agree that some of my numbers may be quite lean/ambitious for this one, too many unknown variables at the moment, not an ideal first timer's project for sure.

Amazed that soil type could potentially affect each dwelling by $30k, just goes to show how tight the margins can be on development projects if you dont try and reduce all the variables as best you can at the start.

Skuttles

You will also find that if you can identify areas that have a high end value for your product, not necessarily blue chip this will also help the bottom line, build costs will be the same.

On the flip side Balga has such a low base, I have seen new product shy of $400K to $440K and so much product on the market, for me it becomes a high risk proposition. Also the amount of stock that is on the market, is there an oversupply? Are villas/units flying out the door or are they sitting, if they are you can bet they will start to fall back? What's your competition building???