Property Development Help Please

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From: Projects .


I would like to try a two house development and subdivision in Melbourne. I would appreciate any advice on how to approach this from a feasibility point of view and any tips, traps or hidden costs that I should be aware of. Also, is there a prefered structure to use from an asset protection and tax point of view. What are peoples thoughts about registering for GST and the margin scheme. Suggestions for methods of financing the purchase of the land and the building costs to help cashflow would also be helpful. I realise that each project is different and books could be written on this subject but as yet I haven't found one so your collective input would be of valuable assistance.

Thanks,
Projects

There is more than one way to climb a mountain.

 

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Reply: 1
From: Troy J


Well where do you start. Probably the best place to approach the development side of things is to look at what new development places are selling for and then find out what the original price of the land was. Usually developers try to make about $25,000 per dwelling (this figure can vary a lot) so you can get an estimate of the approximate costs involved. But be aware because if the developer is also a builder then the costs are obviously way less and it may not be possible for you to get the same return. If you have built a house (or houses) then you would have a fair idea of the cost (per m2) to build and can then use that as a guide.

Things to take into consideration when determining the feasibility of a development:
Purchase costs of land (purchase, stamp duty etc)
Preparation of land costs (demolition, fencing, titles (the cost of titling the dwellings can vary a lot depending on the type of title you choose))
Building costs (this includes the actual construction, internal flooring, air conditioning etc)
Completion costs (landscaping, paving, security etc)
Holding costs (take into consideration the holding costs of the land while getting council approval, as well as the cost of holding the dwellings after completion if they don't sell straight away)
Selling costs (agent's fee's etc).

Hope this helps

Troy