Property and Shopping Centres
- Thread starter D_One
- Start date
That makes sense, I had been wondering what is wrong this property I am currently looking at. The price is about $100k less than the one down the road. They are both development blocks. Do you guys think it will affect the resale value of the developments being that close? I guess yes, if the value of the block is already affected.
As Mr Fence has alluded, there may be commercial upside. Even if land isn't earmarked for something like a Masters or a Bunnings, there may be scope for professional space (offices and the like). Check zoning with council and look for precedent. I'd be delighted if it were on a main road and opposite a shopping centre. Better if on a corner too.
Everything comes down to supply & demand equation. The reason why its worth less is because there is less demand for it in comparison to others a street or two away.
The two proposals are completely unhitched, other than yourself linking the two as the potential developer.
What you are currently looking at as a potential developer is a development block. The only reason you are looking at it right now is because you are a developer.
The people who are likely to buy your end product after the development has finished have absolutely no interest right now in the block because they are not developers.
If it is on a (non main road) right across from a shopping centre, I imagine the Buyers who would be very much attracted to the finished product (brand spanking new and ready to live in) would be a long line of people with mobility issues and elderly folk who no longer have or need a car. They might very well pay you a premium for having great access to shopping facilities.
Isn't that the ideal situation - low buy in price and high sell price after you have finished the development ??
The location obviously won't change, but changing the use of the land from ugly 1950's dogbox on a big block of land to many attractive villas could very well change the desirability of the location from low to high.
The Buyers who will be attracted to the developments at the end do not have the funds or expertise to capitalise on the low cost of the development block.
Don't wear your hat as a developer and think the Buyers will wear your same hat and assess the location in the same format. They don't.
To me it sounds fundamentally good - comparatively low price to buy in as a developer is a known, and you have the potential to charge a higher price once the development is finished to people (elderly and lack of mobility) who will be attracted the position who would not be attracted to a new villa / unit / townhouse / whatever a few streets back as they can't get to the shops from back there.
NB : I've never developed anything in my life, so I'm probably talking out of my hat.....despite having a very close relationship with hundreds of property owners in the situation to which you describe.
Dazz is pretty much spot on, location would be desirable for elderly etc... big + and at the end of the day its a numbers game, what will the Land+build and what is the end value and cash flow on completion, will they be cash flow positive on completion???What is the estimated profit on completion %
Make sure you research recent sales comparing apples to apples. Also, developments can take upto 12-18 months depending on size of project, that is the down side.
MTR
Make sure you research recent sales comparing apples to apples. Also, developments can take upto 12-18 months depending on size of project, that is the down side.
MTR
My initial plan was to go two storey townhouses. After reading Dazz's post, I thought, perhaps, a villa will be better, no stairs for the elderly. Unfortunately, there are not many comparables for villas and the only villa I found has low resale value. So I'm going to stay with townhouses, which with current calculations should give approximately 27% return.
I always try to stick to villas, not townhouses unless end value is high, townhouses in Perth will cost around $2000 sqm as opposed to villas/units $1200 sqm. As I said its a numbers game, you need to research what people want in the area first, no point building and getting stuck with a lemon. Contact some of the local agents find out what is selling, what is desirable, for example I know if the bedrooms are too small they will be very difficult to sell, this is just common sense but nonetheless you will be surprised what people build. Specifications of the build is very important, I am finding in my particular market buyers now expect stone benchtops, full tiling in bathrooms etc.
27% return noice, does that include completely finished, holding costs, headworks etc
Cheers
MTR
For the mobility impaired and elderly folk a 2 storey townhouse would be immediately ruled out. You wouldn't even get to the starting line with these Buyers to discuss price.
So the question remains, who is going to buy your end product.....and will they pay a premium due to the location, or be seeking a deep discount due to the location ??
I'd be building a product that attracted the former, not the latter.
The return is based on about $1400/sqm build cost. Includes 5% contingency. All the hard cost I can think of. I know these values will likely change as all this calculations are estimates at the moment.
I guess like you mentioned, I should be asking local agents what sells around the area, and take that into account for my feasibility study. The 2011 census shows that the median age is less than 40 years old, townhouses also appear to be more popular.
I guess like you mentioned, I should be asking local agents what sells around the area, and take that into account for my feasibility study. The 2011 census shows that the median age is less than 40 years old, townhouses also appear to be more popular.
