Demolishing and developing - What are we in for?

Hi everyone,

We have an opportunity to buy a large block of around 2000sqm with an existing house for $419K.

We want to demolish, and build ten units or townhouses.

What is the process we have to go through to find a builder? Would we have to advertise for Tender? Also, what would it cost and would it be worth it? We certainly think it would be.

We would love to hear your stories of similar experiences in these opportunities.

Thanks.

GRM

You may need to speak to a few consultants: town planner, architect, structural engineer, civil engineer, traffic engineer, surveyor etc  all before you get to speaking to a builder.

I am opinionated. Take me at face value, read between the lines.

http://www.reao.com.au/forum/entry.php?80-How-bright-is-your-agent

Wow 10 huh? Have you done all your numbers on how much it will cost to build and how much you can sell for? Has someone (architect or town planner) said you can definitely fit 10 units? If you speak to an architect they are able to advise you as to exactly what can fit on the block, how and where. They can also give u an aproximation as to a build cost.

Scott is right on about the speaking to people before the builder. If you get a good architect they can help you find a builder and negotiate price at that stage. maybe call a few people ask them what they think something like this would cost. I'd also call the council and tell them the address and the ideas that you have and see what they think. They may tell you that in that part of town they are not happy with medium density or they might say great idea it is likley to be approived (this doesn't mean definitiely)

In the contract you may want to negotiate a longer settlement 120 or 150 day to save you in holding costs while you get approvals and you may want to get a due dilligence clause inserted as well to give u something like a 2 week window to do more research and an out if you find you can't do what you want on the block.

As for costings for example (very rough)

$420k land
$70-100k for asscociated costs such as demolition, permits and approvals, intitial drawings, working drawings (for builder) holding costs and any other misc costs
$1.2 build cost (you would need to try and get as accurate here as possible)
$60k minimum for lanscaping, fences, blinds, etc
100k contingency for unforseen costs, longer waiting times from council resulting in higher costs, or for application fee for commercial finance as you will need to have a different level of finance for 10 units.

So say total of 1.8- 1.9 mil cost.

So if you could only sell these at 200k each you would barely break even. If you could sell them each for $350k you would make a killing.

Get some good advice from people who know what they are doing with this because if you do it right it is fantastic, done wrong and it is a mess.

Good luck let us know how you go and also where about the property is (no not street addy ) There are some great people on this site who can probably add further to this and if you do a search on this subject you should find a HEAP of posts outlining it further. Another great resource if this is your first development is a book by Ron Forlee on residential development (man I should get royalties from all the plugging I give that book!)

D

Work Smart, Not Hard.

GRM,

This sounds like a very inexpensive property to support that sort of density. You need to get some very basic, high level planning advice as to the feasibility of your proposed project - particularly in terms of the likelihood of the Municipal TP department getting behind your project. Great advice from Scott and DWolfe, understand what it is you want to do, what the numbers are, get your idea in front of the local town planners, then work on the process.

There are also other considerations as to the suitability of the property type you are proposing, and less may indeed be more! Is there demand for the type of project you envision? All that said, get some advice and press on.

Design & Build Consultant
http://brutalart.com.au

That's really true Christianb if there is not demand there is no profit and if most sales in the area are 1/4 lots with single dwellings then you may be looking at putting something there that is not feasible. The other thing I forgot in my previous post is the location. Are you walking distance to shops, trains/buses, schools/unis something that will draw in couples or people without kids. TH's narrow your market slightly and the majority of people who will want to rent/buy them will want everything at the doorstep so if you are 20 clicks outta town you might be in the wrong spot for something like this.

Keep us posted,

D

Work Smart, Not Hard.

You will need to talk to the bank on how to fund the development in the first instance. Due to the current lack of liquidity banks are reluctant in funding new developments. However if you have lots of equity or presales then you should not have a problem.

DE Homes/ Developers Edge/ DE Realty
www.developersedge.com.au
"Helping you select,develop and profit from property"

Banks are still lending if the developers have experience, a strong balance sheet and plenty of equity. Pre-sales required in almost all instances. If your a first time developer you should cut you teeth on something a little smaller to start with.

Lots of people lose money on these deals