Development Feasibility Spreadsheet

There is a Development Feasibility Spreadsheet here:

Five-pack townhouse development case study: Part one – feasibility

and a write-up on it here:

Five-pack townhouse development case study: Part one – feasibility | PSD Magazine

Anyone able to provide comment on the suitability of this for initial feasibility?

Note - my interest is only in going to the point of doing a DA for a site. I know enough about excel to tweak it but would like some guidance as to what might be wrong with it.

 

Looks decent however its still just a means for calculating data. Put in the wrong data and the spreadsheet won't help you.

 

The feasibility has all the usually problems I see in almost all feasibilities.
1. The land interest is calculated on the loan amount only and does not include the cost of funds supplied by the investor.
2. The interest is calculated for 12 months when it is only an 11 month project.
3. The stamp duty is a guess at 5%. Too lazy to look up the correct amount.
4. It does not calculate how much money the investor needs to actually do the project. It assumes a 100% loan for construction and costs. This may be possible but unlikely. This is a major shortcoming in any feasibility calculation.
5. The interest calculation on construction are a complete mystery.
6. The end result is close enough to be correct.

Use a decent program, not this.

 

That's a good layout..If you can screw down the development time frames and depending on the start up price per sqm and location ..

 

What's a decent program John?

Thanks
MTR

 

Thanks - appreciate that garbage in is garbage out from a numbers perspective.

I've started research to get better numbers for my situation, at least to get something through the DA stage. I've got some quotes in hand for town planning and drafting to both preliminary and DA level of detail. My ultimate aim is to work out some scenarios for end-value based on different development options. Will then try and calculate planning, approval & construction costs in order to determine any builder's margin/profit that might exist.

Intent is actually to monitor the market over a few years and consider whether (i.e. if) it is worthwhile pursuing to a DA and then selling the site to try and extract profit. Property is cashflow-positive and so holding the property is not the issue. With a single income I am unlikely to be able to get finance for anything beyond 2 townhouses/units. Initial indication is that this site will need 3 or more for approval.

 

It depends on the size of the project. If you are constructing more than three dwellings then you will likely be involved in Commercial Financing and the one I would suggest is Estate Master. It is expensive but the banks love it and understand it and they have some confidence in the output.
There are two others and I mention them in https://drive.google.com/file/d/0B-vEWrt-d9lsUDZGYVh3TlFicFk/view?usp=sharing which I suggest you read.

 

Wombat777, you are wrong about your finances. If you can get 4 or more on the property then this can be done with commercial financing. This means you do not have to service the loan, the interest is capitalised on the loan.
Commercial financing is based on either a percentage of total development cost or gross realisation, not on your ability to fund it. If you own the property already and have a good level of equity then you may find you can do the work without having to contribute any more of your own funds. The banks will want security for the debt but this can be achieved with your equity or pre-sales. You may need to supply funds to get the DA but you will get that back as soon as the banks come on board with their financing.

 

Here is my LMI calculator. Paste into excel the data in cell A1 in a sheet named 'LMI Calc'

Min Values $300,000 $500,000 $600,000 $750,000 $1,000,000
80.99% 0.45% 0.54% 0.89% 0.93% 0.93%
81.99% 0.48% 0.54% 0.89% 0.93% 0.93%
82.99% 0.49% 0.57% 0.92% 1.07% 1.13%
83.99% 0.62% 0.80% 0.92% 1.07% 1.13%
84.99% 0.65% 0.86% 1.15% 1.32% 1.39%
85.99% 0.83% 1.00% 1.15% 1.32% 1.39%
86.99% 0.83% 1.01% 1.39% 1.60% 1.69%
87.99% 0.99% 1.27% 1.39% 1.60% 1.69%
88.99% 0.99% 1.37% 1.92% 2.18% 2.29%
89.99% 1.31% 1.72% 1.92% 2.18% 2.29%
90.99% 1.97% 2.58% 3.03% 3.58% 3.69%
91.99% 1.97% 2.64% 3.03% 3.58% 3.69%
92.99% 2.23% 2.98% 3.40% 3.78% 4.09%
93.99% 2.23% 2.98% 3.40% 4.03% 4.09%
94.99% 2.47% 3.30% 3.40% 4.37% 4.58%

Cell O3 = LVR
Cell L2 = Purchase price excl stamps

LMI Formula :=index('LMI Calc'!A1:F16,match(O3,'LMI Calc'!A1:A16,1),match(O3*L2,'LMI Calc'!A1:F1,1))*(L2*O3)

*use at your own risk. I think it works*
*data in table could be old and im not sure if its Genworths data or another provider*
*also does not take into account if your a FHB, investor etc*
*its a good enough calc for me*

 

Stamp Duty Calc (for WA Land) - Investor (buying) an established home
Stamp Duty Calculator For WA - Finance & Loan Calculators - reiwa.com
Cell F1=Purchase Price excl stamps

=(IF(F1<=120000,F1*1.9%,IF(F1<=150000,(F1-120000)*2.85%+2280,IF(F1<=360000,(F1-150001)*3.8%+3135,IF(F1<=725000,(F1-360000)*4.75%+11115,IF(F1>=725001,(F1-725000)*5.15%+28453))))))

 

Interest calculator for construction payments: Just pass in the total contract amount and project duration
Its not that accurate since there are project delays, variations and also the time it takes to do a stage of construction and the % of total money they claim each contract varies widely but its more accurate then calculating the interest from Day 1 at 100%

Construction Cost Calc

 

Perhaps you should check out RAMS lo doc, I just completed a 4 unit townhouse development as servicing loan was an issue, this was resi and worked much better than commercial loans and no hoops to jump.
It would need to be in a Trust/company

 

Thanks for the suggested improvements. I'll look at incorporating these when I get a spare moment.

I was not aware that commercial finance was so different and will look into it.

@MTR, I'll look into Lo Doc but think that with only a single income it will be a struggle. Equity on the current property is quite low, although I can potentially tap left-over released equity from my PPOR.

Early days for me yet. Still need to determine what I can potentially do with the site, although it is zoned for townhouses or apartments. Immediate thing is to understand what costs are involved and then finesse these towards greater accuracy.

Some food for thought. Yes I'm an engineer by trade but in a completely different field. I'm familiar with developing complex estimates, although in a field that tends to load them up with too much risk and contingency. I also appreciate the importance of realistic inputs, ideally based in quotes.

Edit - now rolling my own narrow-format spreadsheet for quick side-by-side option comparisons. A good way to learn the costs/principles involved.

 

Try Auswide, sharp rates at the moment (3.99%) - we just got 4 TH on one title through @ 3.99% - 70% LVR and there is a trick to serviceability. This was in a company name also which is pretty pretty..... pretty good.

La Trobe is another option for those struggling with serviceability however rate is quite expensive which can hurt your overall return....so complete the project ASAP.

Cheers Ivan

 

What is the trick to serviceability with Auswide when buying in a company name?

 

Having just designed a spreadsheet for development feaso using nested 'if' functions based on drop down menus etc, I can 100% appreciate this little formula!

Thanks for supplying!

 

Thanks for the tip Ivan will check it out, there are always options if you look outside the square

 

Is there any chance of reuploading this calc?