Stages of Development / Building & Finance

[MF35]

Hi All,

Just trying to do a basic feasibility on a small duplex building project possibility. In terms of calculating the costs (in particular the interest payable throughout the project) I need to know at what "stages" of a building project like this money is payable to the builder and as a result at what times the loan would increase to cover these costs. This would allow me to calculate the interest payable over the life of the project more accurately. Can anyone assist with this?

Also, can anyone point me somewhere to find out roughly what each stage costs (whether actual costs or general % of the total cost)? Eg - Demolition costs between, Slab complete costs etc.

Thanks,

MF35

 

[Cartoon]

pricing will all depend on many factors, slab alone can vary depending on the ground you are building on. the only info i can give you now is that you pay in progress payments nd hold the final payment untill everything is compleated to the contract

 

[Sailesh Channan]

I hope this helps:
5% deposit
15% Base stage
20% Frame
20% Pre enclosed stage
25% Enclosed
15% Fit out
10% Practical completion.

 

[MichaelW]

I hope this helps:
5% deposit
15% Base stage
20% Frame
20% Pre enclosed stage
25% Enclosed
15% Fit out
10% Practical completion.

Sailesh,

Are you suggesting every project will have a 10% cost overrun?

Cheers,
Michael.

 

[stumunro]

Sailesh,

Are you suggesting every project will have a 10% cost overrun?

Cheers,
Michael.

How much do you factor in your feasabilities for contingencies ?

 

[Sailesh Channan]

This schedule is what we use as our progress payment draws over the construction phase. It only covers the construction payment. Once a builder issues a fixed price contract all cost over runs are borne by the builder.

Other fees and charges and development costs will need to be allowed for separately. We sometimes can add development charges to the construction cost and then refund the difference back to the client at each stage draw.

 

[Sailesh Channan]

How much do you factor in your feasabilities for contingencies ?

While conducting a feasibility you may or may not need to add contingencies. It all depends on how careful you are with your abilities in researching costs and the length of the development.

The majority of our sites are low risk duplexes that either come with a DA or take very little effort to obtain a DA. We also recommend simple splitters or houses that straddle two lots and therefore, no DA is required. The majority of our projects are completed within 1 year which means cost escalation is kept to a minimum.

On a larger subdivision we allowed for 5% contingency which was sufficient.

Therefore, when developing you need to look at the unknown factors and calculate you percentage allowance for contingency based on this.

If you get into larger projects such as townhouses then your contingencies will need to be a lot higher as your site may be impact assessable. Larger developments such as these will have unknown development costs as well.

I came to the conclusion some time ago that only land bankers and builders can make town house projects work.

As a result we stick with just doing small projects that may be less glamorous but at least we know the risk is far less.

 

[Tools]

This schedule is what we use as our progress payment draws over the construction phase. It only covers the construction payment. Once a builder issues a fixed price contract all cost over runs are borne by the builder.

Other fees and charges and development costs will need to be allowed for separately. We sometimes can add development charges to the construction cost and then refund the difference back to the client at each stage draw.

What Michael was getting at is that your schedule adds up to 110%........

Tools

 

[Sailesh Channan]

What Michael was getting at is that your schedule adds up to 110%........

Tools

oops, sorry the enclosed stage should read 15%.

 

[MF35]

Thanks Sailesh and others. That gives me a starting point for calculating likely interest repayments on a loan increasing at various stages of the project.

MF

 

[Mamaof3]

don't forget to take into account the GST payable on a project as well....this can be a significant amount even when the margin scheme is applied.

we're not big developers by any means but our last BAS involved writing a cheque to the ATO for a $150K.

demolition costs vary depending on which state you're in and what sort of house/structure you need demolished.....we've paid as little as $5K but for a normal house, we normally pay $9K. Don't necessarily just go with the cheaper guy...he may end up costing you more money in the end if you're not careful. The builder's we've used (small private builders) don't usually take care of the demolition, so thats something you may have to arrange yourself.

 

[grossreal]

hi all
just to add a bit a lender will auto include a 5% contingency as a min into the build costs and holds that.
so when you do get your feaso from them
you will find a 5% cont in the calcs
I have not seen one that does not add this in.
its there buffer not yours.
and you will find when you calc the interest that the 5% is from day one also
so use it or not its there.
even fixed price its there.
for the price of it you should buy the devfeast 6 programme
I have a copy I think its a 7 now and you can get all costings using it and is very handy.
even fixed price there is alot that does not get included.
rock or stone if excavating, rainy days over runs, etc
also it usual for a builder on large projects to do a tripartate loan
I recommend you to try to get this as well as it ties the builder as well as you to the loan.
three things you must check before getting any builder to build anything.
building company name and who is building it.
( some use a building company name but the builder license is not the company but the builder so if the company goes west he still has the license and you have the sh-t) so check both if the builder and the building company is different and check both very very and I say very carefully.
and then give a call to the ato and ask if either the builder or the building company have any outstanding gst issues.
because the ato is the only group that can with draw money without your consent to pay gst
so if he owes 100k and you pay him 100k on his next draw down its gone to the ato and you have a stopped site.
now the ato ( I don't think they do it on purpose) do it every time when you are 80% complete why
its the most pain they can inflict.
and this one issue is the most common reason that builders come looking for short term money.
and last but not least
make sure that you control there workers comp and insurances.
if you don't have any control on these at all.
you are playing russian roulette and there is not one bullet in the gun but 3.
this is the most common way a builder end up liquidating.
this dept does not mess around and will liquidate straight away
so you again have a site that is not finished and you just lost you builder
again usually around the 80% complete stage.
again why
because
we are nearly finished couple of more months and lets save a bit of money
or they have a fixed price and run out of money.
either way the builder thinks thats ok we just won't pay it and by the time the dept fines out we will be long gone.
well thats the gun
but its at your head not theirs.
this is not to scare anyone I hope
but you need to check these out before hiring a builder
alot don't and there are alot of stopped site because of it

 

[ozruss]

don't get what you said no.3. Could you say it in more details? Thank you