Selling With DA Approval

Hi Everyone,

Currently looking at selling my property with the neighbour given zoning has changed in our area allowing for units to be built on our once single dwelling properties.

New changes
Density = R4
FSR = 1.2
Height = 16m (4 Storeys)

Some people are cashing in early selling S.T.C.A. My neighbour and I are in no major rush and looking at the DA route. This process will cost money and take time however ive heard it could be somewhat be alot more rewarding once sold as a DA Approved site. The site should be good for about 20 units

My question is do you think getting a DA Approval will be a worthwhile exercise? How much difference would this make overall. Has anyone had experience with this.

Cheers,
Darren.
 
Often selling with DA approval is pointless, it depends on following imo:
-how good your DA is - if your plans arent excellent then essentially your DA is worthless, this is especially true with a development of your size where u arent dealing with mum and dad investors/developers.

- how difficult it is to get DA with your council

-what stage of cycle your city is in, if when youre selling its a really hot market and developers will want to get on it asap they would be more inclined to pay extra for the DA.

Personally if youve never done this before id be inclined to just sell the 2 properties together, cash out and do something else with your money
 
I have just completed this in Melb, threw it on the market however the builders would not pay what I wanted, came close but not close enough so I will build myself now.

At then of the day I think the big one besides what Sanj mentioned is how much fat is in it for the builder, they want to make 20%, so if it does not have this margin builders wont be interested.
 
Oh yes of course it has to be profitable but whether it is sold as a site or with DA that will be the case.

With your melbourne site if builders cant make 20% why are you still going ahead? Whats the plan?
 
I will make around 25% profit if I build myself.

I placed it on the market at what I wanted/my profit, if I can make enough money without building happy to do so, and do it again or build.

Land has gone up in value since I purchased, that's my profit. Location I am told will also achieve higher end value.

Just sourcing finance now.

So it cost me $1000 in advertising to try my luck with selling DA, did not work so move on now, I thought it was worth a try.

MTR:)
 
I have just completed this in Melb, threw it on the market however the builders would not pay what I wanted, came close but not close enough so I will build myself now.

At then of the day I think the big one besides what Sanj mentioned is how much fat is in it for the builder, they want to make 20%, so if it does not have this margin builders wont be interested.


I would think the target market for a DA approved site is not a builder but someone who doesn't have the experience or risk profile to find a site and get it through design and DA.

Personally I would only buy one if the design was very good.
 
Thanks guys.

I think we might market the 2 properties raw to begin with and see how it goes. The DA process could be lengthy and somewhat difficult as its new zoning and alot of activity happening shortly.

I wouldnt want to throw say $100k and wait a year or two to only get the same as a cash out now deal or less. Unless i was sure it would be worthwhile.
 
I will make around 25% profit if I build myself.

I placed it on the market at what I wanted/my profit, if I can make enough money without building happy to do so, and do it again or build.

Land has gone up in value since I purchased, that's my profit. Location I am told will also achieve higher end value.

Just sourcing finance now.

So it cost me $1000 in advertising to try my luck with selling DA, did not work so move on now, I thought it was worth a try.

MTR:)

Awesome result, yeah I agree worth a punt at $1000
 
Just remember with your 25% profit that you put the value of the property at its current market rate and not what you bought it for or think its worth. Sure you might make 25% but 10% of that profit could be from the land which technically is not from any value you add via building.

Its all got to do with opportunity cost.
 
Awesome result, yeah I agree worth a punt at $1000

Thanks, this is net, these were the original figures but I believe end value is higher now. We will, I just did not want to be bothered building, but it actually makes sense to do this now.:)
 
I would think the target market for a DA approved site is not a builder but someone who doesn't have the experience or risk profile to find a site and get it through design and DA.
QUOTE]

Perhaps, but not from my experience the last one I sold was DA for 8 unit/apartments and builder purchased this, from my conservations with re agents in Melb in the main its builders.

I think the inexperienced would not pay the premium, they don't have the same margins as builders.

The builder wants ongoing projects, time is money, and if they can see fat in the deal and not having to go through red tape with council etc. it makes sense.

Not sure that DA works in Perth market, I think its a different beast.
 
Just remember with your 25% profit that you put the value of the property at its current market rate and not what you bought it for or think its worth. Sure you might make 25% but 10% of that profit could be from the land which technically is not from any value you add via building.

Its all got to do with opportunity cost.

Absolutely, I think that is exactly what happens in a rising market, the land goes up, and that is the point. Do you take the money and run?? or do you build.

I make much more with the build, however I then have to pay GST and don't get the 50% discount on CGT and it will take 7 months to build.

I think the perfect scenario is do both, you have some builds and you also sell a couple of DAs which is easier and shorter timeframe.
 
Absolutely, I think that is exactly what happens in a rising market, the land goes up, and that is the point. Do you take the money and run?? or do you build.

I make much more with the build, however I then have to pay GST and don't get the 50% discount on CGT and it will take 7 months to build.

I think the perfect scenario is do both, you have some builds and you also sell a couple of DAs which is easier and shorter timeframe.

Check with your accountant MTR but I was of the understanding that selling with DA made it a development not an investment so would also attract gst and income tax/company tax. What I had read suggested gaining a DA showed intent to develop and selling it with DA same. I'm not 100% on this though as it's not a situation I have spoken to my accountant about for myself.
 
Thanks for the heads up, I was told otherwise, will be meeting accountant in Feb so will clarify further.

MTR:)
 
I personally think there could be some value in it. A developer wanting to pick up a site quickly may be willing to drop there profit margin of it means not having to deal with the aggravation of the DA process.
The issue becomes risk versus reward, you will need to spend money doing this and then may find your inflated sales price is getting you no interest.

Also remember except for the point above most people are keen to pay a lower price and do the process themselves so they are the ones making more profit. I know I would never by a dev site with plans already done.
 
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