Real timeframe for development completion

[bumblegoodie]

Hello all,

I was at the pub talking to a few somersoft forumites and i realized that many inexperienced wannabe developer like me thought the time it takes from acquiring a property, to construction, then sell , then settlement will take less than a year or last than 12 months.

Is it not correct. Is more like 24 months from start to finish.

Could the many experienced developers confirm this assumption?

This is how i see the timeline:

1. buy house/land (1st day)
2. Survey, plan drawn, DA, council approved (apporx. 3months)
3. Construction (8 - 12 months)
4. Sell via agent (2-3 months)
5. Settlement ( 1.5 months)
6. Profit in the bank (1 month)

total estimate months from start to completion is 1 year and 8 months.

I fully understand there are always obstacles with Council and other elements that may delay build and selling but to get an ball park figure would be appreciated.

My concern is the longer it takes to complete the development project, the more interest you will need to pay for both hold the land and construction loans.

BG

 

[Shahin_Afarin]

Point 2 will be dependent on the council you are dealing with, e.g. Leichhardt council are taking 4 months just for the initial assessment.

I would factor in 6-12 months for point 2.

I would factor in at least 2 years for the whole project if you are starting with a raw site.

Of course the complexity of the project will somewhat increase or decrease the above numbers.

Hot tip of the day - ask for a delayed settlement of say 2-3 months and work on your DA during this time. This will save you a bit of time and of course holding costs.

 

[bumblegoodie]

Point 2 will be dependent on the council you are dealing with, e.g. Leichhardt council are taking 4 months just for the initial assessment.

I would factor in 6-12 months for point 2.

I would factor in at least 2 years for the whole project if you are starting with a raw site.

Of course the complexity of the project will somewhat increase or decrease the above numbers.

Hot tip of the day - ask for a delayed settlement of say 2-3 months and work on your DA during this time. This will save you a bit of time and of course holding costs.

thanks Shahin.

your points cleared up alot of assumptions.

In case of some rough numbers for a simple duplex.

1. Land loan holding for 24 months on $1 million @ 5% interest now is = $100K

2. Construction loan holding or 24 months on $600K @ 5% interest now is = $60K

Therefore, being conservative it will total $160K from the net profit.

that is alot of money to lose.

 

[hpresident]

I agree with Shahin_Afarin point 2 depends on the council you are dealing with. With Brisbane city council, if you goes through RiskSmart/SealSmart things can be a bit quicker. It also dependent on the number of relaxation you are applying, that is the more conformed you are with council development code the quicker.

Upside is you could be smart about it, for example for the town planner start working on the plan on day 1 the property is under contract. Sell off the plan, ect.

I would say with experience you can do it in maybe 1 year or under.

 

[bumblegoodie]

I agree with Shahin_Afarin point 2 depends on the council you are dealing with. With Brisbane city council, if you goes through RiskSmart/SealSmart things can be a bit quicker. It also dependent on the number of relaxation you are applying, that is the more conformed you are with council development code the quicker.

Upside is you could be smart about it, for example for the town planner start working on the plan on day 1 the property is under contract. Sell off the plan, ect.

I would say with experience you can do it in maybe 1 year or under.

Thanks for the reply.

Yes agreed if all relevant code are met then it would be approved quicker.

Iam thinking some of the mum and dad developer h?ve factor into their calculations with holding costs and substantially eating away their profit.

 

[Roosters]

My timeline for a duplex:

Purchase house on 3 month settlement

3 months for plans to be drawn up, decide on finishes and obtain building contract ie upon settlement.
3 months to prepare DA.
Anywhere from 6 weeks to 4 months in Council awaiting approval depending on extent of complying.
About 9 months to build.
At least 18 months from start to finish if 3 months in council.
Interest payments on land tax deductible and interest costs on construction get added to cost base to be deducted from Capital Gain.
Many other pitfalls to be avoided with extreme due diligence.

 

[littletee]

My timeline for a duplex:

Purchase house on 3 month settlement

3 months for plans to be drawn up, decide on finishes and obtain building contract ie upon settlement.
3 months to prepare DA.
Anywhere from 6 weeks to 4 months in Council awaiting approval depending on extent of complying.
About 9 months to build.
At least 18 months from start to finish if 3 months in council.
Interest payments on land tax deductible and interest costs on construction get added to cost base to be deducted from Capital Gain.
Many other pitfalls to be avoided with extreme due diligence.

Am going through this now and all things going well it would of taken me about 22 months from when my house settled or 24 months from the time I started getting the plans designed.

I reckon if you're super lucky, you might get it done in 18 months but you'd need absolutely everything to go according to plan and that rarely happens.

 

[Roosters]

In this red hot market doesn't matter too much.... the holding costs for $1.2 land and stamp duty at 4.55% are about $1050 p.w with construction loan and total costs of $2.1 about $1700 p.w.

If you are looking at selling an product at $1.3 each or $2.6 return and the market is rising at a very conservative 5% then your end product is going up $130K a year or $2,500 per week to offset your holding costs. At 10% double its $5,000 pw capital growth.

See the example from the Caringbah duplex started 2 years ago at $950K estimated return almost complete now and he is looking at $1.2 each. $500K equity gain during the 2 years of construction.

 

[kitdoctor]

Two years unless you work your tail off and have no hiccups with DA...been there and done that.

In terms of where you end up. In today's market a developer is bringing product to the market in a rising market. Cast yourself back to the end of 2008, which is when we finished our double townhouse development - negative equity territory. We always were going to develop and hold and now we're sitting pretty.