Small Subdivision Opportunity

Andrew are you sure you can demolish that building? It looks to me like a building of heritage significance.

I'd also be very worried about having that stream close by - this generally means higher engineering costs etc.

You may need to have retaining of the blocks if there is any slope to the land - I would expect there is down to the stream. Buyers usually expect flat ready to build blocks. Retaining costs money as does the clean fill to bring them to level - of the cut to make them level.
 
If someone beats me to it

I somehow dont think they will at this advertised price.I have actually looked at this property before,it is 5 minutes from where i live.I have seen the council requirements and they are extreme to the max,the hoops they want you to jump through on that property are radical.The home i believe also has historical significance so that will not be going anywhere,and the agency.........well enough said.:(
 
After looking at the plan, some of your costs are way under.

Driveway & assoc. drainage make your $10,000 more like $50,000
Interallotment drainage for lots $7,000
Engineering design and consultants $7,000
Any works needed in the street frontage, ie new kerb and gutter, footpath $?
Lot treatment, filling, remediation $?
Engineering survey and final title plans $10,000

I don't want to dampen your enthusiasm but when you deal with Councils and subdivisions, there can be a lot of obstacles and unforseen events. That's what contingencies are for.

Also the plan showed 3 lots, not sure if that is just a proposal or approved. You are basing your returns on 4 lots which brings in a whole series of uncertainties and costs on getting Council approval.
 
Last edited:
today oc1 mentioned that due to rock on his site it has taken 3 days to dig trenches for storm water when normally it would take 1 - and this was in a brand new subdivision where you wouldn't expect the land to be so rocky as usually nice new subdivision have a lot of clean fill in them. These rocks have caused him extra time for other items too. Once you find the rock though it's too late - this may add 7 or more days of labour to his plan and take from the bottom line. As a builder he has access to trades so pays 'wholesale' rates for trades - you may have to pay 'retail' and my bobcat drivers etc charge $80-110 an hour. 7 days of a labourer like that and that's $5000 - this is what we have contingencies for.
.
Doesn't the trench digger's quote hold firm, regardless of contingencies?
However, if the trench digger is also the developer.....
 
Doesn't the trench digger's quote hold firm, regardless of contingencies?
However, if the trench digger is also the developer.....

The "trench digger" naturally does not allow for boulders. It's a variation. This is one reason you need fat in your profits and the understanding of this concept.

Oscar
 
Andrew are you sure you can demolish that building? It looks to me like a building of heritage significance.

I'd also be very worried about having that stream close by - this generally means higher engineering costs etc.

You may need to have retaining of the blocks if there is any slope to the land - I would expect there is down to the stream. Buyers usually expect flat ready to build blocks. Retaining costs money as does the clean fill to bring them to level - of the cut to make them level.
I'm not sure about the heritage value of the building. An offhand remark by the agent gave me the impression that the council would favorably consider a plan for demolition and subdivision into 4.

The stream is about 2m below land level. The land is flat, and there's a flood prevention embankment about 1m high on the edge.
 
The "trench digger" naturally does not allow for boulders. It's a variation. This is one reason you need fat in your profits and the understanding of this concept.

Oscar

Fair enough. It reminds me of the old repairer's statement - "We don't know what we;re going to find until we take it apart."
 
I'm glad I wasn't the only one who immediately jumped on the net & located the house (rather easily I might add - try not to give out so many specifics if you're wanting it to remain a secret!).

Hmm.
I thought I was being vague..
Good thing I wasn't serious about this place.
 
An offhand remark by the agent gave me the impression that the council would favorably consider a plan for demolition and subdivision into 4.

Andrew Andrew Andrew,this came from a real estate agents mouth,and you believe it?? A lot to learn my friend..............................................
 
I'm not sure about the heritage value of the building. An offhand remark by the agent gave me the impression that the council would favorably consider a plan for demolition and subdivision into 4.

The stream is about 2m below land level. The land is flat, and there's a flood prevention embankment about 1m high on the edge.

When looking at a development site, the agent is the last person you should listen to for such things.
 
After looking at the plan, some of your costs are way under.

Driveway & assoc. drainage make your $10,000 more like $50,000
Interallotment drainage for lots $7,000
Engineering design and consultants $7,000
Any works needed in the street frontage, ie new kerb and gutter, footpath $?
Lot treatment, filling, remediation $?
Engineering survey and final title plans $10,000

I don't want to dampen your enthusiasm but when you deal with Councils and subdivisions, there can be a lot of obstacles and unforseen events. That's what contingencies are for.

Also the plan showed 3 lots, not sure if that is just a proposal or approved. You are basing your returns on 4 lots which brings in a whole series of uncertainties and costs on getting Council approval.
$50K for a driveway? I doubt it. The land's pretty flat and I calculated the driveway at 400 sq m.

As for the other costs, sure, I could be under.
I would get firm quotes before I signed anything.
I just wanted to see if I was in the ball park with a workable plan.
 
Revised Plan

After having my ideas pummeled and battered, I've revised the costings on the project at 16 Adelaide Rd.
You can see it here:
http://andrewscottmusic.com/downloads/property/16-Adelaide-Rd-Business-Plan.xls
During the revision I gained a bit more compassion for Wayne Swan.
The GST knocked the figures around a little, so I slightly increased the price of the blocks.
And the agent told me that the owners had received a written offer 3 weeks ago, which I assumed to be around $360K, vs the asking price of $370K.
Even after including provision for GST and allowing 7.5% of sub-development costs for contingencies, the project still returns an outstanding 105% cash on cash return for an investor who puts up only a 10% deposit on the property.
So, thanks to everyone who contributed their advice and warm wishes. I'm now much better prepared for the next plan.
The spreadsheet is available to anyone who wants a formula into which to plug their costings and projections.
 
Andrew Andrew Andrew,this came from a real estate agents mouth,and you believe it?? A lot to learn my friend..............................................

No, no, I didn't believe it enough to put money on it! Just enough to incorporate it into my cash flow projection. If I was really serious about the plan I'd double check it with the council.
 
After having my ideas pummeled and battered, I've revised the costings on the project at 16 Adelaide Rd.
.

This is a friendly property investing forum. No one would ever think of pummelling or battering. Think of it as helpful friends playing devil's advocate. And if the comments above led you to revise your estimates then I would say they are of significant financial value.

As you can see the forum is full of real people with strong opinions, and some very relevant knowledge. Thats why I like it here.
Best of luck with the research;)
 
This is a friendly property investing forum. No one would ever think of pummelling or battering. Think of it as helpful friends playing devil's advocate.

Of course. I do appreciate your advice. The GST and the contingency suggestions were vital components of my plan that I didn't know about.
 
Telejazzer, your username and avatar suggest you might be interested in this product.
http://www.ebay.com.au/itm/261237759754?ssPageName=STRK:MESELX:IT&_trksid=p3984.m1586.l2649

Ha, ha. Thanks but I already know how to play. It's practice that I need.

Also, I'm more interested in this one http://www.ebay.com.au/itm/Benedett...04425580?pt=Guitar&hash=item20d484c96c&_uhb=1 or this http://www.ebay.com.au/itm/Fender-U...uments_Instruments&hash=item1c2f292422&_uhb=1

But I'd rather use that as part of my deposit for a property at the time being :)
 
Back
Top