Forums / Property Investing / Value Adding / beginners question

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  • Profile photo of tom123tom123
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    @tom123
    Join Date: 2013
    Post Count: 91

    Hi All

    I’m based in Melbourne Victoria and have no idea about developing and a RE agent said i could build 2 townshouses on this block of land which already had a property on it, was curious what costs were involved in this type of scenario and how long it would take to get permits and approvals and subdivide..

    600m2 block old house at front. and to build 2 small townhouses at the back. (for the scenario say the council would allow it)

    how much would it cost to subdivide and get building permits / approval from the council?

    so i could possibly advertise the property with permits / approvals to a developer / builder.

    I did speak to another RE agent and he said you would be looking at around 8-8.5% of (council costs) the total perceived value (when built)

    sorry if it’s a bit hard to read i have no idea when it comes to this type of deal.

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
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    you should get a town planner involved and talk to a few agents regarding design and what is selling in the area to make sure you make you land with permits salable. Once you have he permits your other option would be to look at the project as a joint venture with a builder. You would have to do your figures on what would work best

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    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
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    Hi Tom

    It isn’t necessarily the case that the site would be worth more if you sold it with permits in place. You’d likely need to go the extra mile and construct the additional dwellings.

    Jacqui Middleton | Middleton Buyers Advocates
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    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
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    Hi Tom

    Most likely the DA will increase the value of the land but make sure that you don’t over pay for the property.

    You’d get more accurate answers about the costs of a DA and the restrictions on the land if you just ring the council, ask to speak to one of the town planners and provide them with the address.

    Andrew

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    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
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    HI Andrew I agree with you but he would be better once he has spoken to the council to appoint a private town planner. It will cost a little money but generally you get a much better result. Then look at a joint venture or just sell the land with permits. You can get a builder to contruct however keep in mind that to go down this path you are generally paying retail for the contruction

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    Profile photo of RedwoodRedwood
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    @redwood
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    Hi Tom, don’t listen to a RE agent…..what do they know about developing?

    Chat to a Town planner (council or independent) or give a builder a call for a quick chat of what you can do based on the area you are in. Those two discussions will point you in the right direction to establish an effective goal to achieve profit.

    cheers, Ivan

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    Profile photo of xdrewxdrew
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    @xdrew
    Join Date: 2010
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    There are three sets of people you are going to need to speak to when getting the right advice re: developing a site.

    Selling/Listing Agent – Can give you ‘presales’ advice that does not check out with reality on the ground. But can also provide realistic details based on experience. Ask how he derives his knowledge and what he bases it upon. Cite recent WORKING examples.

    Local Council Land Management – These are the guys who will say YES or NO to any potential ideas you may have. And they usually have fixed guidelines as to what is acceptable and where. You’ll need to do your homework here before heading into any development or you can find yourself with a 75% complete development and no certification of occupancy. And that has happened.

    Other Developers you may know – or will get to know. These are the guys who have actually worked in the area or have completed a develoment within similar areas nearby. They are sometimes a good stopping point if you have purchased and have an idea for creativity.

    NOTE : DO NOT APPROACH A DEVELOPER PRE-PURCHASE – you think you are the only person who may be interested?

    Profile photo of tom123tom123
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    @tom123
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    you know how buying a house you can basically say you’ll need 10%, 5% for closing and 5% for a deposit. (for the average person)

    i was kind of hoping for that type of answer / a estimate in price / a ball park figure. because the RE agent main negotiation was that the seller is considering putting these permits in place to try and sell to a developer. but i had no idea how much it would roughly cost to do this and the time required to do this.

    as the vendor has just settled on another property.

    Thanks though for all your responses much appreciated!!

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
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    Hi tom123

    Maybe it might be too risky for you to purchase this property at this stage.

    You will need to do some more learning about development before.

    There are a lot of risks that can’t just be summed up with a %.

    From the agents point of view they can because:

    1. Agent wants to sell the property so they’ll throw anything that looks good in there

    2. Agent doesn’t know anything about development

    Andrew

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    Profile photo of tom123tom123
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    @tom123
    Join Date: 2013
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    Cheers Andrew for your reply.

    What i mean to say is that i’m not really interested in doing a development deal. i just want to know ball park figures because i was negotiating with the RE agent and the biggest point he had on his side of the negotiation was that the vendor is looking at putting permits in place to advertise for a developer.

    RE agent had also told me when i first met him that the vendor had just settled on another property and had to sell this one. so if i had a idea of how long it would take for permits and how much it would cost i’d be more confident and sound more reasonable when negotiating down the price with him, if that makes sense?

    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
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    OK got you. I can only comment on Brisbane figures since I haven’t been involved in any developments in NSW.

    In Brisbane it can take 2 weeks to 6 months. RiskSmart approved town planners can get you an approval within 2 weeks if it’s a straight forward development.

    For a multi unit development, DA fees range from $5,500 to +$10,000. There is also the cost of the town planner (around $3000), architect and traffic engineer if they are needed. Their cost depends on the development. Total cost could easy go over $30,000 or more.

    Andrew

    superAndrew | Property Analyser and Finder Tool
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