Hi
I am new to developing, have bought a house to demolish and build 3. My questions are about order and to see if I have missed anything.
Get surveying done, blocks pegged and land drawn up, submit to council
At same time
Get house plans drawn up
Soil tests
Engineers reports
Submit to councilOnce have approval
Demolish house
Get builder to buildCosts
Purchase 284000
Buy costs 17000
Subdivision 22000
demolish 10000
Build 3 x 140sqm house 420000
landscape, drive, fence etc 30000
footings 10000
rates etc on holding for year 4000
interest on holding 50000
TOTAL 847000
Expected sale price 960000Have I missed anything in costs or in order or works?
Thanks in advance for help
Assuming you will be using the Margin Scheme what about GST.
Advertising and selling costs
Concil Contributions
Insurance – Both Construction and PI
Assuming they are going to be a small lot body corporate – BC contributions from registration to settlement.
Title fees to DNR and legal costs.Cheers Richard
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Out of curiosity, what is the $10k allocated for footings?
Yes I had planned to use Margin scheme about 7K per house.
Insurance is included in costs, so are council and legel fees. 10K allocated to footings was per house over and above basic footings in builders costs.
Is order OK?
Do sums add up to anyone who has done this before or is it too skinny?
Cheers
Hi Misty,
Have you obtained a town planning permit/Development Approval. If not this should be your first step. You can’t really do anything until you have permits. I’m not sure about other States, but in Victoria this process alone would take at least 3 months, but it would be smart to budget for 12 months in your due diligence.
If you already have permits your time frame may be ok, although it still seems a little short. If not, you should add another 12 months of holding costs to your due diligence.
Regards
AlistairAlistair
Wow wish i developed in Victoria in Qld and expecially Brisbane DA can take 6-10 months.
Hence most projects are purchased on Option or extended settlement.
Would never purchase a property with a DA in place.
Cheers Richard
[email protected]
http://www.yourstatefinance.comSpecialising in US & IP finance.
Richard Taylor | Australia's leading private lender
Hi Richard,
3 months is absolutely best case scenario, usually closer to 6 months. It takes closer to 12 months if it goes to VCAT.
Regards
AlistairOriginally posted by misty:Get surveying done, blocks pegged and land drawn up, submit to council
Costs
Purchase 284000
Buy costs 17000
Subdivision 22000
demolish 10000
Build 3 x 140sqm house 420000
landscape, drive, fence etc 30000
footings 10000
rates etc on holding for year 4000
interest on holding 50000
TOTAL 847000
Expected sale price 960000**Wow**
It looks extremely skinny.In the first instance, you can get the block surveyed and a plan drawn up for submission, but there is no sense in getting pegs placed before demolition ( for obvious reasons. ) Surveyos usually come back after the block is cleard and peg it out.
Secondly, the numbers do look very skinny.
On the face of it the return is only around 13%.
What if costs and timelines blow out? That 13% return could disappear all together.Is the end stratey to sell on completion, or are you holding for long term cg and rental income ?
This would determine if I went ahead with it in the first place.
kp
The deal is skinny, as it is only 11% margin however the experience you gain is something that cannot be valued.
We all have to start somewhere so good luck
Thanks everyone – thought it maybe a little skinny but we went in with the thought that we did not think it possible to lose money and if we did not make very much then at least we had the knowledge for next time.
After all knowledge and action get results in the end.
Yes, in hindsight you are right.
I recall the first couple I did in the early 90’s the return was in the 10’s of thousands of dollars.
I hadn’t even figured out how to work it out as a percentage return on investment.
In fact I didn’t have much of a clue….it was just a matter of ‘get on with it’I took the same attitude that as long as I couldn’t lose money, it was worth doing.
As it turns out, the experience was invaluable.Good on you Milly, for deciding to go ahead despite any negative feedback ( guilty as charged…)
Also, the query I had about selling or keeping, once you get into the habit of building the ones you want to keep, you will realise how much better off you are compared to buying on the established market, due to the upfront equity you get when you build ( in the example above, that is the $113,000 you have achieved between your cost and the market value )
kp
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