All Topics / Help Needed! / Sub Division calculations

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  • Profile photo of SimkySimky
    Member
    @simky
    Join Date: 2011
    Post Count: 23

    Hi can someone please help me understand the facts and Figures.

    We are looking for a IP that we can subdivide and were looking at the following figures.

    Buy Price              $435,000
    Stamp Duty          $  20,880
    Legals                  $    5,000
    Interest                $  64,523   
    Plans and Permits  $  15,000
    Misc Costs            $   15,000
    Rental received   -$   33,280
    Building costs        $250,000

    Total costs            $767,123

    Estimated Sale cost House A . $ 380,000
    Estimated sale Cost Unit  B     $ 460,000
    Less Agent comissions   $ 16,800

    Nett Sales $ 823,200
    Nett Profit $   56,077

    I know I have asked similar questions before but I keep feeling like I am missing something as a friend of ours is an agent and he keeps telling me we would gain over 100,000 and yeah you would if you didnt factor in the interest paid.  Seems Like alot of work for very little profit and what happens if the figures blow out etc ??

    We plan on using a town planner to help with our first few developments, shoudl I be expecting more costs here ??

    Any advise woudl be greatly appreciated. Oh BTW ( the figures are very rough)

    thanks Simone

    Profile photo of BreeceBreece
    Participant
    @breece
    Join Date: 2011
    Post Count: 43

    Hi Simone,

    Just looking at your calculations from a purely Town Planning perspective, you may want to get some more accurate price ranges for your development.

    $15k for plans and permits is incredibly ambitious. (Remember you will need more than just a Planner.. You will also need a surveyor and architect/draftsman as the bare minimum)

    Without knowing your site specific issues, there is no way of knowing what you’re up against.

    A good Town Planner will help you assess the application process in a more holistic fashion. For example, do you have significant trees on site? You might need an Arborist. What about Cultural Heritage? We might need to guide you towards a Heritage advisor.
    Have you got a reliable surveyor? An Architect/Draftsman you can trust?

    Contact some local town planners, architects and surveyors in your city. They will happily give you the advice you need.

    All the best with your development,
    Breece

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

    Simone,

    It could be better or worse than your projections!
    For example there are CGT and GST issues to consider.

    Often the margin is directly related to the initial land value.
    That is to say, the costs for subdividing expensive land are similar to the costs for cheaper land.
    The building – in essence – just creates a purpose for the land.

    Subdividing a $1m allotment will cost a similar amount to subdividing a $300,000 allotment.
    If we assume that amount to be say $50,000, then this helps explain it.

    If after subdivision each allotment is worth say 80% of its original value then:

    $300,000 x 2 x 80% = $480,000….less $50,000 = $430,000….margin = $130,000 (before adjustments)
    You may not make any additional profit by building on the land.

    $1,000,000 x 2 x 80% = $1,600,000….less $50,000 = $1,550,000….margin = $550,000 (before adjustments)

    Added to this are the complexities around the value of any building retained, the cash flow, and holding costs.
    But probably most important (in terms of margin) is the density yield. If you can develop three allotments, the yield will be demonstrably higher without the costs being too dissimilar to a proposal for two.

    Profile photo of SimkySimky
    Member
    @simky
    Join Date: 2011
    Post Count: 23

    Thanks Breece and Christian ,

    As far as I can see there is no heritage overlay and it is a Z3 according to the town planning website. There are amazingly no trees either :), there is an easement that runs at the very back at the property but this could be worked around.
     
    The front property is in very good condition and would just need a new kitchen. 

    I will be having a look around for a town planner and as for the others I do not have any contacts for a  Surveyor or draftsman/architect.

    I am very very new to this game and I am trying to learn as I go along, plus doing a course in investing.

    It is so overwhelming I am so out of my depth.

    Simone

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

    No worries Simone,

    A planner or designer will have all the contacts you need.

    Keep learning, and keep going along!

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