I own a property in Perth [Tasmania] in a favourable location. I plan to construct 15 2 bedroom units the market being retired couples. The sales will be strata titles and I am seeking advice regarding the best means of financing their construction. I have set in place the issues of design, planning and building permits. I estimate construction costs to be $90-100000 per unit and they will be marketed at $135000 per unit. Potential profit margin $300000.
Any ideas?Hi Russell,
Thanks for your post and welcome to the forum.
I don’t have a lot of experience with developing property as such, however I think that getting the finance green light will have a lot to do with how many pre-sales you can orgainse, or how much of your own/investor’s money you plan to put down.
Maybe give The Money Shop a go as they are advertsing that they will lend for these kinds of deals.
Finally – is $300,000 enough of a project margin? Seems a little tight to me.
Would love for yuo to contribute some more figures in your budget to the discussion in which case I might be able to help you further.
Bye,
Steve McKnight
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Russell
We have done a few of these deals recently where the loan obtained was 70% LVR based on the end value of the property.
In your case if they are valued at $135,000 x 15 = $2,025,000, then we could lend 70% of this figure = $1,417,500 (or $94500 per unit).
Terry Waugh
Discover Home Loans
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I am also planning to develop 10 townhouses in sydney. I have heard quotes of $120 k per townhouse and $850 psm. I am looking to sell at around $300k. the block of land is valued at $900k. So thats a profit margin of $900k ( not including other expenses like selling properties , demolition of existing houses etc)
does anyone have any advice on who i should talk to? esp. builders and financiers. Has anyone had experience in this sort of developing? This is my first time so would love to learn from anyone who has any advice.
Hi Russell,
Your post is slightly limited in information to help you with your costings and profits.
Do you actually own the land or is it mortgaged? If it is mortgaged you will need to take into account the amount owing on the property in your calculations.
You don’t say much in regards to your other costs such as D/A, architect, legals or selling costs etc. so I have to assume that you have those covered.
I have to agree with Steve to say that your profit seems a little thin. Margins are generally reffered to as a % and not a $ amount, so if you calculate a profit of $300000 (gross or net?) then based on the construction costs you mention it works out at about 20% margin.
Most developers that I know look to achieve a minimum of 30% for a deal containing this amount of units. This may vary depending on demand and availabilty of units in the chosen area, but is a general guide.
Some more figures would certainly help to provide you with more information.
Cheers,
Mathew.
Cloudus
I am located in North Sydney. if you want to chat, give me an email for further details:
Terry Waugh
Discover Home Loans
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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