Hi,
Can anyone please tell me the equation they use to do a quick check if a development opportunity exists.
There are a few computer programmes out there but a hear a few people say they can do a rough calculation to see if its worth persuing.
Thanks.Hi Allen,
I wish such a program exists!
I'm afraid, hard research is the only way forward. Each development is a case by case basis. Where the development is is critical because every State, every council have their own fees. Some tradies or contractors also charged by postcode, believe it or not.
This is why you haven't got anyone to reply to your question. There are far too many unknown variables.
Give more info and perhaps more help will come.
Take care.
Angel
For a quick feasibility study to get a figure to work with
– for new building I allow $1500 to $2000 per m².
– tradies I allow $100m² (not including plumbers or sparkies)
– plumbers and sparkies upwards of $8000 for a house eachQuantity surveyors use Cordells or other costing programs then add a percentage for the relevant postcode
try this link
http://www.homedesigndirectory.com.au/calculators/ConstructionCostEstimatorPage2.shtmlI hope this helps. Cheers
It can be quickly if you know your figures back the front. From building prices, project managers fees, council lodgement fees, time it will take to go through council, pre sales period, land tax, rates, building time frames, finance fees, broker fees, interest over the period, gross sales etc etc etc. The only stumbling block will be council contributions but if you allow 22k – 25k that usually covers most councils.
As said above hard research and time is your best tool!
Hi Allbyallen,
If you go to http://www.theblockblog.com and scroll down to the 'Property Development' links on the right hand side. (Rookie Developer.) Clink that link. It will give you the opportunity of obtaining exactly what you are asking for either via The Block site or directly via Rookie Developer. In particular, a complete property development checklist and a 5 minute deal cruncher that you can use to evaluate any and every potential development opportunity.
Best of luck.Hi,
"Quantity surveyors use Cordells or other costing programs then add a percentage for the relevant postcode"
Luv it!!! Made me laugh
Angel
Thanks sapphire.
The rookie developer sells this for $400.00. I was wondering what simple formula most use to determine if a potential development is worth investigating further. I read a formula IF: Purchase + costs X 1.25 IS LESS THAN sales / 1.2 then worth investigating further. But I wasn’t sure why the figures of multiplying the costs by 25% and dividing the sales by 1.2 are used??Multiplying your costs by 1.25 is to give you a 25% profit margin (this is what developers will aim for), and I'm guessing dividing the sales by 1.2 is to allow for a reduction in sales price below what you were hoping, if this becomes necessary. That is, to get a 25% profit in a "bad case" scenario.
I recall reading an interview with a prominent investor/develop – it may have been Harry Triguboff (maybe not!) – and his take was working on a 3/3 principle: 1/3 for the land, 1/3 for the development costs, and 1/3 (before taxes) for the pocket.
I would think these would be rare and well researched opportunities and perhaps this is why it works.
A simple strategy backed up by rigorous analysis.
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