Forums / Property Investing / Help Needed! / Per sqm build costs – bigger units than budgeted.

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  • Profile photo of benofbrisbanebenofbrisbane
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    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Hi All – looking at putting up 5 x 2 bedders in Bris (though maybe 4 x 2 bedders and 2 x 3 bedders).  Anyway I had my calculations done on a certain square metreage. The architect/town plannner now tells me that I can fit bigger units on the site then I had originally budgeted for.  If I had budgeted $2000 per sqm and the units are going to be 10% bigger than budgeted does that necessary mean that the extra metres are going to cost me $2000 per sqm?  I was thinking that maybe they would cost less, because afterall the kitchen and bathroom will be essentially the same, they will just have sort of 10% bigger living areas/bedrooms.  Do you think therefore that it will cost less for the 10% than $2000 a sqm or should I still use that figure?   Thanks Ben

    Profile photo of Scott No MatesScott No Mates
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    @scott-no-mates
    Join Date: 2005
    Post Count: 3,850

    It depends. You are going to have your construction costs increase but you will end up with less of something else & the savings will be reflected there eg less landscaping/paved areas/parking/roads Etc…….

    Profile photo of christianbchristianb
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    @christianb
    Join Date: 2009
    Post Count: 386

    A budget of $2,000/m2 is fairly generous. Generally, conventional town-houses can be delivered for closer to $1,500/m2. Of course, you may have something a little special and that's a decision you – as the developer – need to make in the context of costs, sales and margins. To answer your question, the figures need to accommodate the prevailing rate. The additional metres may be a little cheaper, but in the scheme of things it will make little difference.

    Profile photo of benofbrisbanebenofbrisbane
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    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Thanks ChristianB – can conventional units be also delviered for around $1500 sqm (two level walk up).  The top storey does not have to be fire rated. Thanks for your time.

    Profile photo of christianbchristianb
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    @christianb
    Join Date: 2009
    Post Count: 386

    The answer, unfortunately is yes and no. If you control the design process you can control the costs. That is to say, if your brief is to deliver dwellings for $1,500/m2, that's a reasonable directive. This may come at the expense of parts of your wish list, but it can be done. Volume home builders can deliver dwellings for $1,000/m2 as long as they build enough of them and the design doesn't  change. They rely, as the name suggests, on volume. There is not a lot of difference in a $1,500/m2 dwelling and a $2,000/m2 dwelling, especially if you are building for development profit or as an investor for ongoing yield.

    mattnz
    Participant
    @mattnz
    Join Date: 2007
    Post Count: 574

    As a developer your goal is to maximise your profit margin, by meeting the market’s needs at minimal cost.

    Your key levers are:

    1. maximise the number of units – I have seen DAs for 5 townhouses on a block which was large enough and had the right zoning to fit 8.

    2. minimise the floor space – especially wasted floor space. I have seen terrible layouts with lots of wasted floor space and others that are fantastic.
    You don’t want to have any wastage from hallways, poorly positioned stairs, wasted living space that is unusable etc. A great way to use space is to do a 2nd living upstairs, instead of a hallway. The hallway may have taken 8 sqm, while a 3x4m second living at the top of the stairs may add huge value for the cost of an extra 4 sqm. At $1500 per sqm that extra $6k cost could add $30k+ in value. I just used this layout to fit a 4 bed, 3 bath, 2 living townhouse on 130 sqm, (excludes garage) its amazing what an efficient use of space allows.

    3. Minimise your cost per sqm through selecting the right builder, using inexpensive materials that achieve the right look. If you can build at $1,500 per sqm, why spend $2,000 per sqm, as that is probably half your profit margin.

    I hope this assists.

    Cheers,
    Matt

    Profile photo of christianbchristianb
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    @christianb
    Join Date: 2009
    Post Count: 386

    Matt,

    I like you post above, and the considered approach you are suggesting is instructive.

    I would however take care with the first point. A greater number of units – in my experience – does not always generate a greater profit. I think there are a few reasons for this; a) there can be increased infrastructure and contributions costs, and car parking can get expensive if you need to go underground, b) the value of the completed dwellings may be diminished by the density, that is to say that 4 dwellings on a lot may be perceived (and priced) differently to say 8 dwellings on the same allotment, and c) there are less builders competing for the work once you get above say three units on a site.

    Profile photo of benofbrisbanebenofbrisbane
    Participant
    @benofbrisbane
    Join Date: 2007
    Post Count: 62

    Thanks for your comments guys.  Very helpful.

    I had been using $1,500.00 a metre – but thought I should I use $2,000.00 of the units, as I understand that units are generally more expensive.

    In the market I am looking at there is a lot of competition.  Most people are building the smallish 2 bedders, with high density.  This is fine as it is a price concious market.  However, there should be a market for something a little better as well – the site is in a good position and the final product will present well from the street.  I guess I have got to look at what the market is for those units that are slightly better and what it is actually going to cost to get them up.   Are you talking $1,500.00 for the entire square metreage of the build or just the GFA of the units?  It seems that people use different figures. 

    I appreciate your comments, I have looked at a lot of plans over the last few weeks and I appreciate the comments regarding wasted space, it is amazing how poorly some of the places are designed.  I am fortunate to have a good architect, so this should not be a problem.

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