Our 1st Development

Discussion in 'Adding Value' started by Thunder, 19th Nov, 2014.

  1. Thunder

    Thunder Member

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    Hi all

    After heaps of researching we?re embarking on our first development of 2 townhouses and thought I?d share our journey. Brave or crazy we?re not sure but here we go!:eek: Appreciate your thoughts.

    We?ve purchased a small corner block (563sqm) in a regional city with an old house that has demo approval. Have been through set up of a trust structure, settlement and now working on prelim plans. Already hit a speed bump with our draftsman and dropped him like a hot potato. We?ve connected with a local builder and working with his drafty, so far so good.

    The rough numbers estimated at outset:

    Land $212k
    Purchase Costs $32k
    Build Estimate incl demo $495k
    Working drawings $40k
    Contributions $48k
    Contingency $25k
    Interest $38k
    TOTAL $890K

    SALE/VALUATION $1.2m
    Project Profit $310k
    Tax @37% $114k
    NET PROFIT $196k

    • Our intention is to hold so tax is worst case.
    • I?m expecting the contributions to be more, call me sceptical.
    • Build estimate based on 2 x 186sqm (20sq) @ $1300. With the prelims in hand the sqm size is bigger than I expected would fit, so already looks tough but expect upside in the valuation at the other end.
    • Sale/Valuation based on a development 500 metres down the road, sold for $600k each @ 18 squares.
    • Target for this market and location is downsizers and professionals.
    • Conservative rent estimate is $515 pcw each so if we have to hold should yield circa 5%.
    Attached are our draft plans, respect and appreciate your feedback.

    Cheers,
    Thunder
     

    Attached Files:

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  2. gradeng

    gradeng Member

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    Hi Thunder,
    My initial, inexperienced opinion is that your contingency is very low. For a first development I would feel far more comfortable with an 8-10% contingency.
    Congratulations on taking on your first development and good luck!
     
  3. devank

    devank Why why why?

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    Good luck with the project!

    600K for a VIC regional Townhouse? Who said Sydney is expensive? :)

    Few comments about the design.
    1. Beams add construction cost. Is there any chance you can avoid it by aligning both levels?

    2. Bed 1 - Why large WIR & Ensuite in the ground floor? It would suit family with grand parents. Is it possible to make it 'common' so that you can drop the 2nd toilet?

    3. Stairs - You need to walk all the way to the Meals area to go upstairs. I personally don't like the triangle shaped steps. We got a square landing area. It actually stopped our kids rolling all the way down couple of times!

    4. Laundry - It seems a little far away.

    5. Upstairs Bath + toilet - Is it possible to make it 3-way bath room so that the vanity is still available even if someone is using the bath or shower. How can anyone wash their hands if the bath is locked?

    Would it be better if you
    - change the lounge + study into a master bedroom with attached en-suite + WIR
    - Open up the Bed 2 and make that lounge.
    ?

    Sorry to sound so negative... hopefully few points provide few alternate views :)
     
  4. speary

    speary Member

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    Have you considered the effect of GST in your costings?
     
  5. LeoT

    LeoT Member

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    Hi thunder,

    Contributions 48k for two TH?

    Really? seems like a lot..
     
  6. serendip

    serendip Member

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    With a target market of retirees / downsizers I think the main bedroom on the ground floor is a great idea. As it gets harder to climb the stairs they don't have to. This is what my parents have done & they're very happy with the design.

    Agree a bathroom design with loo separate would save having 2 downstairs.
     
  7. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    Working drawings for 2 x townhouses - 40k :eek:
    Why so high?
     
  8. westminster

    westminster P Plate Developer

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    Wow a $212k block that you can divide, build and be worth $1.2? Holy smoke, that must be somewhere like Geelong and be a major regional town or seaside somewhere.

    Your costings look about right for Melbourne but I'm wondering where demolition is included. If you are worried that council contributions might be more than I would probably have a better contingency %.

    I quite like the design but I think for that price/end value I would expect a few things different
    - no kite/triangle stairs
    - laundry in the house
    - I too would try and line up some supporting walls in the ground floor to the upper floor to try and save some money.

    I do love a development thread so keep it going please!
     
  9. sanj

    sanj Member

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    Drafty fees are way too high, I think you need more contingency and you also need to take into account selling fees and gst but overall looks like an interesting one. Good luck
     
  10. albanga

    albanga Member

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    Where is the location? 212k for land with a finished end value of 1.2m? Call me skeptical but how is that even possible? New townhouses in airport west where I live sell for that so how could a regional get that price (without being an extravagant build ofcourse)?

    Also where are subdivision costs? Are they included in your build sums?
    Also the working drawings seem ridiculously high? I've got working drawings done for 3k.
     
  11. Thunder

    Thunder Member

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    Thanks gradeng, I used 5% based on what I had read but you're right I should up this for the first development. ta
     
  12. Thunder

    Thunder Member

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    Thanks devank, not negative at all, happy to hear any feedback.

    The master suite downstairs is very popular with the older retirees and the comps I'm basing on all had this type of design. They don't like stairs, triangular or not:D. In fact it was 2 couples in their 70's who paid the $600k price for 2 townhouses around the corner. Local RE agents said master downstairs is a must have.

    On the topic of beams, thanks for the nudge I'll go back to the builder for a chat. We had discussed but yep they don't appear to line up.:rolleyes:

    The laundry I'm not keen on in the garage and thought about making it a euro facing the lounge. Both the builder and RE reckon this is fine for buyers with half the local builds being done this way now, and the euro into the lounge a no no. I decided not to sweat this one.
     
  13. Thunder

    Thunder Member

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    Ummm:rolleyes: sort of! Okay so tax is my kryptonite. I suspect we'll end up holding for more than 12 months, maybe more than 5. In that case we'll have the CGT exemption and plenty for GST with the budget I've allowed. The numbers are with the accountant now and we'll make a decision on sell/hold.

    Thanks I'll add it in.
     
  14. Thunder

    Thunder Member

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    Hi LeoT, rediculous but it's on par with other builds nearby. There is some other smaller numbers mixed in there, but a fair chunk of that is the water contribution.
     
  15. Thunder

    Thunder Member

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    Thanks Ace, good question. I've wrapped a few things up in that number, essentially that's what I'm estimating will cost us to get to the construction stage. In addition to the drafty's fees it includes subdivision, engineers, building surveyor, site re-estab, soil test, drainage plan etc etc.

    We've already saved by switching the draftsman.
     
  16. Thunder

    Thunder Member

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    Thanks Westminster, love your work so appreciate your comments.

    The location is....:p yeah not telling:D It is a large regional and our block is well located on the CBD finge close to great facilities and transport. I just about choked when I saw the comps and there's several examples so I don't think $600k is a stretch. Of course we didn't hesitate to jump in.

    I put in $10k for demo in the build costs, its a tiny 2br weatherboard, I could blow it over.

    See my reply's above re contingency, beams, laundry and stairs.

    Thanks;)
     
  17. Thunder

    Thunder Member

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    Thanks Sanj, will def pop in a figure for selling if we decide to go down that path ;)
     
  18. LeoT

    LeoT Member

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    So pretty much for the DA :)
     
  19. LeoT

    LeoT Member

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    Amazing! well done mate!
     
  20. eggnog

    eggnog Member

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    How come tax is at 37%?