OC1’s development – in detail

Hi all,

I thought I’d share the details of my recently finished unit development (Dec 2012) with all fellow forum members. You will see below that a development of this size would be financially doable by most investors.

The property (located at Gippsland) was purchased as vacant land in 2011 and had been on the market for quite some time – over 6 months. The selling agent was marketing the site as a 3 unit site. Based on previous developments I knew 4 units would be ok without too much trouble. I made a call to the architect and after a lengthy chat we worked out that 5 two bedroom units would just fit. This was great as there was great demand, especially as rentals, for single story 2 bedroom units.

The block is an oddly shaped one around 980m2. I’ve upload the plans for viewing. I find these odd shaped blocks sometimes give the best results. The block is in an established area, close to schools and the major shopping centre. The block faces south which is ok as you can have all living areas north-facing. This is ideal from a planning point of view. Two units have garages while the other three each have a car-space.

Usually I would sell some and keep some. However, the numbers worked out very well. The idea of owning all units on the block appealed to me too – complete control.

Initial costs

In order to get the planning permits (DA):

Land: $95,000 (yes that’s $95,000)

Stamp duty/legals: $3,000

Town Planning drawings: $11,000

Council Application Fees: $1,600

Bank fees: $600

Survey: $2,000

Total Costs: $113,200

Construction

Total build: $402,000

Working drawings/engineering/soil report/energy report: $9,750

Subdivision (open space levy in Victoria): $5,250

Interest: $15,600

Bank app fee: $2,425

Titles & legals: $1,940

Total Construction cost: $436,965

COMBINED TOTAL (LAND & CONSTRUCTION): $550,165

The end value on all five units combined is around $880,000. That’s a profit margin of 59%.

I have leased all 5 units. Total combined weekly rent: $1,160. Gross rental return on costs is 11%.

Now, I’m a registered builder too (amongst other things), so naturally my construction costs are lower. Those using a builder would add say an 18% builder’s margin on the cost of construction – increasing construction costs by around $75,000. Profit margin 41% and rental return around 9.7%.

This is one of the lower-cost developments I have completed. The total build time was around 5 months. Many builds I undertake (including developments in Melbourne) have this sort of profit margin. I have one beginning around Easter time too. Feel free to ask any questions, I’m more than happy to answer and help out where I can.

Cheers

Oscar

Complete Development Solutions – http://www.completedevelopment.com.au

Successfully obtaining all permits and subdivisions for your developments