All Topics / Help Needed! / First Development thoughts

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  • Profile photo of HarryMarcusHarryMarcus
    Participant
    @harrymarcus
    Join Date: 2012
    Post Count: 16

    Hi All,

    Having renovated apartments in the past, I'm now considering my first knock down/duplex build project.

    While it's a different kettle of fish, I'm currently working through the mechanics of a feasibility analysis (here) and I'mn to hear some recommendations around a potential path on the first project.

    I figure the options are:

    1. Go at it alone and seek a builder and independent contractors to complete (I.e. Project manage)

    2. Go at it alone and go with a complete turn key solution from a high volume building firm (I.e. Metricon?)

    3. Form a JV with an experienced developer (although not sure how to go about finding one)

    Given my lack of experience and relative time poverty I would assume the options are between 2 and 3 but am sceptical about how much margin would be eroded in option 2 specifically.

    For the sake of context, this is an attempt at an aggressive wealth creation plan with circa 200k savings and strong net cash flow (13k net per month with 4k outgoings).

    Any valuable advice for a newbie would be great.

    Harry

    Profile photo of markymarkdennismarkymarkdennis
    Participant
    @markymarkdennis
    Join Date: 2013
    Post Count: 5

    Yep, know your overheads and carefully plan what sort of numbers you need to make this work.

    By having your own tradies, you can save a sh*tload of cash rather than going the turnkey way, but if you don't know them, you can also get yourself a massive headache and even worse, cost you a lot of money or end up with a sub-par job.

    I would always go it myself and have had a few developments but there are some key points to remember:

    -Budget: Work it out and stick to it. I mean across everything from planning, to building to electrical. Then give yourself at least a 5% buffer

    -Revenue: Once you finish this thing, how much will it cashflow? Is it going to be worth it if the market stays the same? Can you afford to finish it should the market change between now and completiion?

    -Timeframe: If you don't have set targets, this thing will take forever. If you rely on the instant cashflow, maybe you should re-think. Just becasue these things tend to take much longer than expected…

    I know this is a quick recap but I hope it helps!

    -Mark

    Profile photo of Alistair PerryAlistair Perry
    Participant
    @aperry
    Join Date: 2004
    Post Count: 891

    Hi Harry,

    If you are just going to build 2 or three dwellings then get yourself a builder and manage it yourself. If you end up going larger then it may be worthwhile to get a project manager and tender out the work.  

    Regards

    Profile photo of CorieCorie
    Participant
    @corie
    Join Date: 2009
    Post Count: 113

    Hi Harry,

    Just thought I would offer my opinion and tell you about my plans. Unfortunately it is not the advice you are looking for but you may be able to take something away from it.

    A mate and I are also looking at doing a small development and we are in the very very early stages of planning, but we are going to look at trying to locate a block with a reasonable house on the front and subdivide the block and build something out the back. We have not dismissed the idea of buying something with an existing house and demolishing  the house but to start with we would just like to find something where we could keep the existing house and subdivide.

    My mate works in the building industry, although he is not a builder, he deals with builders on a regular basis. We are going to employ a builder and the project manage the development ourselves. By doing it this way it will be the builders responsibility to organise the tradies. The key to success with this strategy is having a rock tight contract with your builder to provide a house and set mile stones for the construction process. Obviously penalties if these mile stones are not met. Also by doing it this way if there are any problems or faults with the final product it is the builders responsibility to rectify these faults. 

    By the sounds of it you have more than enough capital and borrowing capacity to complete a project like this

    Not sure how you are performing your feasibility studies but I have a feasibility calculator from a friend of mine who paid big money to complete a developers workshop. One of the things she got from this workshop was this feaso calculator so if you want a copy PM me and I will send it to you.

    What areas are you looking at? We were considering around the clayton area purely because of monash uni and there is big demand for the smaller style homes. I think any area which has a large university nearby is a a good place to look.

    Corie

    Profile photo of Mark CoburnMark Coburn
    Participant
    @mark-coburn
    Join Date: 2006
    Post Count: 181

    My best advice is simply: Don't build anything unless you’re are a builder and are in the industry on a daily basis.

    Mark Coburn | Coburn & Co - Investment Advisors & Buyer's Agents
    http://coburnandco.com.au
    Email Me | Phone Me

    |Ph: 0405 243 547 | Property Investment Advisors |Mortgage Brokers|

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