Sunshine Development Diary In Detail
- Thread starter Mindmaster
- Start date
Hi Brendon
How's the build cost now with all the changes?
How's the build cost now with all the changes?
There has been an increase in the size of unit 1 and unit 2 by several squares from the plans used in the initial feasibility study to the final plans approved by council. There are also a few additional expenses such as a cross over and skylights so the change in building costs will be signifcant. More than made up for by increased value
Will not have an exact number till later when building plans etc have been finished. Will post the updated costs when I have them.
Making steady progress with everything so far on track.
Landscaping plans have been completed and submitted to council. The plans look very cool. PM me if you'd like a copy.
The PM will give the tenent notice next week to vacate within two months.
Will have all the paperwork ready the end of the month to apply for finance. There should be no problem with finance but can't rest easy banks say yes in triplicate.
Landscaping plans have been completed and submitted to council. The plans look very cool. PM me if you'd like a copy.
The PM will give the tenent notice next week to vacate within two months.
Will have all the paperwork ready the end of the month to apply for finance. There should be no problem with finance but can't rest easy banks say yes in triplicate.
Issues, construction costs and schedule
Been an eventful few weeks with soil analysis finished, building contract completed and application for finance in the works.
Soil Report
The soil report was bad and the site is classified as P which means the soil has abnormal moisture and a very expensive slab is needed. One of those expenses that can?t be helped and one of the reasons why you need a decent profit margin in the feasibility study.
Construction Costs
Building contract has been finalised and the construction costs is $476k compared to the construction costs of $420k in the initial feasibility.
The reasons for this difference are
-increase in size of unit 1 by 14m2 and unit 2 by 4m2 (roughly)
-second driveway and crossover for unit 1
-skylights for unit 3
-extra concrete for the easement at the back of unit 3
-ducted heating for Unit 1 and air conditioners for units 2 and 3
-stone bench tops for the kitchens
So given all the construction issues, changes and improvements, the cost is very good. Thanks to CDS or an excellent deal.
Costs Break Down and Numbers
$32k for planning permit and building documentation
$11k for demolition
$476k for construction
$15k holding costs
$15k contingency
$549k total
Plus $18k for subdivision. Not sure if I?ll do that yet.
Following the local market closely but end values are still very uncertain. Expecting
$380k-$410k for unit 1
$320k-$340k for unit 2
$310k-$330k for unit 3
So middle ground gives a value of around 1,040k
Paper profit of $140k and a profit margin of 16%
Hopefully this end value will be conservative and the valuations at completion will be higher and reflect the improvements in unit 1 and 2.
Schedule
Have submitted paperwork to my MB to apply for finance.
Given that finance is approved (looks fine so far) this is a rough outline of the remaining development schedule
20 Dec tenant vacates property
20 Jan Gas and electricity have been abolished
25 Jan Demolition starts
Feb Construction begins
June/July Construction is complete
July/August All 3 units are tenanted
Been an eventful few weeks with soil analysis finished, building contract completed and application for finance in the works.
Soil Report
The soil report was bad and the site is classified as P which means the soil has abnormal moisture and a very expensive slab is needed. One of those expenses that can?t be helped and one of the reasons why you need a decent profit margin in the feasibility study.
Construction Costs
Building contract has been finalised and the construction costs is $476k compared to the construction costs of $420k in the initial feasibility.
The reasons for this difference are
-increase in size of unit 1 by 14m2 and unit 2 by 4m2 (roughly)
-second driveway and crossover for unit 1
-skylights for unit 3
-extra concrete for the easement at the back of unit 3
-ducted heating for Unit 1 and air conditioners for units 2 and 3
-stone bench tops for the kitchens
So given all the construction issues, changes and improvements, the cost is very good. Thanks to CDS or an excellent deal.
Costs Break Down and Numbers
$32k for planning permit and building documentation
$11k for demolition
$476k for construction
$15k holding costs
$15k contingency
$549k total
Plus $18k for subdivision. Not sure if I?ll do that yet.
Following the local market closely but end values are still very uncertain. Expecting
$380k-$410k for unit 1
$320k-$340k for unit 2
$310k-$330k for unit 3
So middle ground gives a value of around 1,040k
Paper profit of $140k and a profit margin of 16%
Hopefully this end value will be conservative and the valuations at completion will be higher and reflect the improvements in unit 1 and 2.
Schedule
Have submitted paperwork to my MB to apply for finance.
Given that finance is approved (looks fine so far) this is a rough outline of the remaining development schedule
20 Dec tenant vacates property
20 Jan Gas and electricity have been abolished
25 Jan Demolition starts
Feb Construction begins
June/July Construction is complete
July/August All 3 units are tenanted
at only 16 percent big risk
True. I would be a lot more comfortable with a higher margin but at this stage with everything approved and construction costs locked in, the riskiest part is over.
From what I've read on the thread and what Mindmaster just wrote, what I understood was certain swing have been allowed in the feasibility where certain conditions or issues might happen where it did.
So yes, after riskiest part is over, the margin is still healthy in my opinion.
Mindmaster, I wasn't able to read the whole thread but have you pre-sold these properties?
maybe you forgot about the most riskiest part | selling at the price in the feasibility
I like your opinion
No. The plan is to hold all 3 units so no need to bother with presales, sales, CGT, GST and everything else. My LVR will be around 55% once the development is finished with a several hundred $ CF+ portfolio so a very comfortable position to hold.
Plan to hold one, sell the rest with my next development. A fair bit to do between now and then such as finish this development
I don't see selling prices as a risk because:
-the market for units/villas in this area is very healthy with strong growth
-the stage of the property cycle in Melbourne
-the estimated 10-20% increase in the price of development sites in the area over the last 6 months
Could be my inexperience talking though.
I like your opinion
No. The plan is to hold all 3 units so no need to bother with presales, sales, CGT, GST and everything else. My LVR will be around 55% once the development is finished with a several hundred $ CF+ portfolio so a very comfortable position to hold.
Plan to hold one, sell the rest with my next development. A fair bit to do between now and then such as finish this development
I don't see selling prices as a risk because:
-the market for units/villas in this area is very healthy with strong growth
-the stage of the property cycle in Melbourne
-the estimated 10-20% increase in the price of development sites in the area over the last 6 months
Could be my inexperience talking though.
I think you've answered more than enough and doing really well with your project.
I'm looking forward to the finished product and might even drop by to check it out. ;-)
still can't believe you have been duded to 16% return. in a risky adventure like development.this year Montgomery share fund has returned more with less headaches.!
Property is very forgiving in the long run and I am sure MM will do OK both in Sunshine and in Frankston North where, unfortunately, he was diddled into paying too much three years ago.
I wish I could have MM's mindset. In all his posts, he is always positive and never complains (as most of us would). Doing everything remotely from China must be trying at the best of times. I find it hard enough doing stuff interstate.
Chin-up MM, it will work out. 16% is not to be sneezed at. In the long run, it will be worth the headache.
May I ask for some detail on how much CDS charge and a breakdown of their pricing? I have read through your feasability and see nothing on this. Part of the reason I ask is I am in a similair boat to you, and at a similair stage (planning permit approved) and need assistance. I have been quoted by a competitor and the price is very high but they say the time commitment on their side will also be large.
I used CDS as well. Maybe best to private message Oscar directly
As mentioned previously the high risk part of the development is over. A comparison of this development's return to the return on shares is not relevant because of leverage/using OPM. Regardless I don't have your skill for choosing high return stocks so 16% is acceptable for me. Also as a wise man once said, you bank profits not margins
Hey GF, I'm flattered you know of my FN experience. Truth be told I was not didled with the FN purchase and the only reason it turned out to be a bad deal was due to my mistake.
Doing this remotely is rarely a problem. I have a great team and there is basically nothing that needs to be done in person in Melbourne.
The prices I listed in a previous post include CDS's charges. I don't have the break down but you can see their charges are very reasonable. As IMBi3 suggested, best to contact Oscar directly. His user name on the forum is oc1 and their website with contact details and other info is www.completedevelopment.com.au
As mentioned previously the high risk part of the development is over. A comparison of this development's return to the return on shares is not relevant because of leverage/using OPM. Regardless I don't have your skill for choosing high return stocks so 16% is acceptable for me. Also as a wise man once said, you bank profits not margins
Hey GF, I'm flattered you know of my FN experience. Truth be told I was not didled with the FN purchase and the only reason it turned out to be a bad deal was due to my mistake.
Doing this remotely is rarely a problem. I have a great team and there is basically nothing that needs to be done in person in Melbourne.
The prices I listed in a previous post include CDS's charges. I don't have the break down but you can see their charges are very reasonable. As IMBi3 suggested, best to contact Oscar directly. His user name on the forum is oc1 and their website with contact details and other info is www.completedevelopment.com.au
2yr projekt for 16%rtn.works out at 8%p.a..:
2yr projekt for 16%rtn.works out at 8%p.a..:
If you want to look at the return that way then the return is even better.
The development started roughly March 2013 and should finish July/August 2014, giving 18 months. The property was tenanted until Dec 2013 and had CG in that time. Apart from the minimal application costs of around 30k, there are only major expenses/costs for the 7-8 months and those costs are staggered due to payment at different stages of construction. 16% for 8 months......
Personally I prefer not to play with numbers and times and just use a simple profit margin and plain profit.