All Topics / Help Needed! / What prices do developers pay?

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  • Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi all,
    Yeah, yeah, I know – strange title – but here’s the situation.

    I currently own a large Queenslander on a good-sized block of dirt less than 3Km from Brisbane CBD. It is high on a hill, with city glimpses (city views from 3rd storey upward). We have a block of flats next door going to 6 levels. Our place is in a DCP, but I believe recent changes have occured, and the phone has started ringing re selling the place.

    Here’s my question :-
    Do developers pay “over the odds” when compared to home buyers, or do they low-ball? I have heard both schools of thought, but have never actually been involved with any such deal in the past. Or is the simple answer “It depends?”

    We have had our place on the market through much of 2013, and the prices being offered were almost insulting (6′ to mid 7’s). We took it off the market late last year, thinking that the recent interest in Brisbane will likely lift the prices to a point where I am prepared to sell. And last week, we had a RE call, mentioning that she “works solely for developers” and mentioned that they would likely offer us the kind of price that I would say Yes to. (We are looking for $1m plus).

    Our block is zoned LMR, which I believe allows a number of units to be built – land size is 809m2. Best offer from “home buyers” this year have been up to mid 8’s.

    Is the RE agent just “getting me on the hook” by mentioning a possible $1m+ offer? Or are the developers more likely to be landbanking with prices expected to rise more?

    Any thoughts? I am meeting the RE agent later this week – all thoughts appreciated, and thanks,

    Benny

    Profile photo of superAndrewsuperAndrew
    Participant
    @superandrew
    Join Date: 2014
    Post Count: 188

    Did the RE actually mention $1m+ for your block or blocks in general in the area?

    The block of flats next door is most likely zoned MR for them to be able to build 6 levels. LMR is restricted to 3.

    To answer your question: What prices do developers pay?
    Like everyone else, the lowest possible. They need to keep their costs as low as possible and the land cost is a major development cost.

    It would be worth to get a valuation done on your property as englobo land. This would give you an indicator of the fair value of the land as a potential development including the developers margin.

    Cheers
    Andrew

    superAndrew | Property Analyser and Finder Tool
    https://property-analyser.com.au

    Profile photo of Nigel KibelNigel Kibel
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    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    It may be worth speaking to a town planner and see what you can do with the block. Once you know you could get a permit for the site a developer will certainly pay you a premium for that

    Nigel Kibel | Property Know How
    http://propertyknowhow.com.au
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    Profile photo of JpcashflowJpcashflow
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    @jpcashflow
    Join Date: 2007
    Post Count: 575

    Hey Benny,

    I think this is a really good topic.. I am no expert but my business partner and I just purchased our first ever multi unit site.
    We were looking for at least two months before we made our first purchase:

    I thought it might be a good idea to provide you with some points on why we bought this property and not others, I am sure there are other people who might be able to provide some more information.

    1) We where not going to pay more then what the actual block / house was worth: We are trying to make an X amount of margin at the end of the project.
    – Some developers may pay a bit more if they need projects or you may find the complete opposite.

    2) We had a certain criteria to meet: A developer may say does this land suit what there trying to do….

    But since this is a real estate person calling: I would be asking her straight out, how much do you think you are going to get? + if i had a section 32 ready are you prepared to put a offer in writing subject to no conidtions…

    Jpcashflow | JP Financial Group
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    Your first port of call in finance :)

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Thanks for all of the replies thus far. Interesting point about LMR and its restriction to 3 levels. On 809m2, would this allow something like 12 units?

    @nigel – “Once you know you could get a permit for the site a developer will certainly pay you a premium for that”
    Hmm, the RE agent is talking like SHE already knows they CAN get a permit.

    And, the house next door was sold about 6 – 8 months ago (half the size of ours). But if the same developer had bought it, and was now wanting to buy ours, it increases the value of the whole site, or at least makes it more easily possible to add extra units. With ours being the larger block, its purchase would be worth paying “over the odds” perhaps?

    It gets interesting-er and interesting-er !! :p

    Benny

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hate to say with the change in the BCC Town Plan there are dozens of potential development sites now available.

    We are certainly not paying over the odds for any potential site.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

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