Question for developers (Smaller development in better suburb or larger in others?)

[albanga]

Hi All,
I am a very fresh developer trying to learn as much as possible whilst I complete my first development to the rear of my PPOR. Thinking of the future though I am keen to know what developers think about the topic.

I think an example may help with what I mean . Two suburbs I am thinking of are East Keilor and Broad meadows. The price for development land in these 2 suburbs is around 200k difference (650m with a demolition job)

Now given my lending ability I would have 2 options. I could buy more expensive land in EK and develop 2 properties (I would not have enough lending ability for 3) or I could buy cheaper land in Broad meadows and develop 3 properties. The 200k I saved on land would be the cost for the additional townhouse.

I understand there are endless considerations to this scenario such as whether i would be selling/buying, future growth, rental yields, suburb analysis.etc.

But just throwing it out there. Apologies in advance if it seems like a stupid question.

 

[oc1]

Choose the one that will provide a decent profit in the quickest time at a risk level you are comfortable with. Also look at the financing side to make sure you can fund it.

 

[albanga]

Choose the one that will provide a decent profit in the quickest time at a risk level you are comfortable with. Also look at the financing side to make sure you can fund it.

Hey OC1,
Thanks for quick reply!
In regards to funding I was thinking it would be the same as in the cheaper land cost in Broadmeadows would allow for the additional dwelling to be built.

But I guess that is part of my question. Would it even be much more expensive to build 3 smaller townhouses as opposed to 2 larger ones? If you had the same land size, say 700m and fully maxamised the land, would there even be a drastic cost difference considering the 2 dwellings will be very similar in size to 3?

I guess more questions would be is it harder from peoples experience developing 3 as opposed to 2? I know town planning will be more a challenge but what about other factors?

And I suppose a final question (and in advance I know this has a lot of variables) on completion would you rather have 2 dwellings in a better suburb or 3? Is there benefits to owning 3 as opposed to 2? Or worse because more to sell. Ahhh so many questions!

 

[tcocaro]

albanga, you are approaching it the wrong way.

Its not about which is cheaper or which of the two sites can render a higher yield in terms of number of end units. The question should be

a) which of the two sites has a higher ROI
b) which of the two sites can you afford i.e. have the funding for

This is all you should be asking yourself, anything else is just noise.

 

[Erica]

fincancing the project

Keep in mind building 2 houses you can usually get away with standard residential finance, but building 3 or more may push you into commercial finance territory (I'm no mortgage broker though), any brokers like to elaborate on my point.....

 

[Brady]

3 usually no issues, 4 tough