A Desire to Develop - Newcastle NSW

Hi Team,


Firstly, let me apologise for the undoubtedly novice and open-ended questions coming. I haven’t explored a development opportunity in great depth before, but I strongly believe this is what I want to do and I thought I would see if there was anyone out there that was willing to share their experiences and knowledge with me.


At a very high level, I am aware of the obvious items. Maybe I don’t understand these as well as I should and if you think that could be the case, please pull me up or challenge what aspects I could have overlooked.

- Initial purchase

- Zoning, Subdivision/ Consolidation, Geo-Tech, Council Fee’s

- Development Costs (Build, Renovation, Knock-down, Landscaping, Driveway, etc)

- Development Contribution


Figuratively speaking – I purchase 2 homes on 2 lots for 100%. The instant rental return is conservatively 5.2%/ annum. Zoned R3, I get to work on consolidating the lots which will enable the development of 2 further homes working under the 200 square meter criteria. Taking the expensive route, I knock down and rebuild 4 dwellings for an additional 125% of the original cost price. Also allowing for an additional 25% to cover, fees etc. Total cost – 250% of purchase price.

My estimates at this time indicate the final value would be worth somewhere around 325% of the original purchase price and returning 6+% Yeild. I believe in Newcastle I will need to build Townhouses or separate dwellings, I don’t believe units/ apartments will achieve these type of returns – Located outside the CBD.


And so I guess the questions I have and the rather generic nature I warned you of;

Are there any common issues new developers encounter that pose large problems not commonly allowed for?

Has anyone had problems with Lake Mac council previously – Developments, 2 story builds, etc?

Are joined or separated homes generally preferred in this situation? Why?

Any major concerns I appear to be overlooking?



Thank you for any responses, your assistance is greatly appreciated!! Cheers!!

 

ROTFLMAO

 

Alright, I dont get this one, what does ROTFLMAO mean ???

 

I wanna say "Rolling On The Floor Laughing My A** Off"

 

Hi mate, Civil works is commonly underestimated, councils and other authorities may require you to upgrade existing infrastructure before allowing you to connect into it, each dwelling may require on site detention etc. Recently had a job where consulting hydraulic engineers designed a concept stormwater design and Council's engineer's disagreed and required 2 x underground concrete detention tanks for a dual occ (to the tune of 80k the builders were quoting, I personally thought it was a bit expensive but builder's premium and some trick excavation near some protected trees will do that) tank size required by council were excessively large.

Had a few jobs in Port Mac, mainly two storey dwellings, one in Beaches Catherine Hill. No issues but I do know they have very specific finished floor level requirements for dual occs and medium density.

As for attached VS detached, really depends on site.

 

@tomlemke

 

Thanks for the response Gavin Ng. Certainly something I probably haven't considered strongly enough. based on your experiences only, what percentage of developments require upgrades (reasonably extensive upgrades) such as these? On site detention, Sewage, Electrical mains, Etc.

 

@Gavin Ng - Please see above.

P.S. Do we have the ability to edit a post or comment? Am I missing something super simple?

 

You can edit, for about 15min, then it is locked, saves people changing post well after the fact

 

Taking things right back to step one, you need to do a BOE feaso to see if this type of development roughly stacks up, If a BOE shows potential then you need to do a more detailed feaso factoring in the major costs, land and construction plus contingencies, then using end sale values from similar stocks sales to see what kind of return on TDC you may be looking at. Initially, you can use a sqm rate for a spec level that you think you will need to accomplish for the target market. But first I'd do a BOE feaso to see where you stand.

 

This one. LMCC has a reputation for being notoriously difficult for developers to deal with.

 

Hi Josh,

It’s too hard to say because it depends on the existing situation. Sewerage, water, gas and electricity you can get away with more or less just tapping in for metro areas for small developments but even then connections and design with its associated fees for engineers and civil contractors cost money. Also depends on the size of the project. An additional lot or two is not going to cost as much as a larger development. Also a big factor is how far away the existing mains are.

A simple dial before you dig can tell you a lot about where the existing infrastructure is.

Stormwater is the big thing when it comes to developments. Golden rule of engineering is water can’t travel uphill so if it slopes to the back and there’s no existing council infrastructure to connect into, you’re at the mercy of your neighbors providing an easement and even if they provide it, you might have to rip up 50 Metres of concrete driveway to get the pipe down.

Also before connecting into council’s stormwater infrastructure, council’s engineers want to see detention tanks slow down the flow before it goes into their pipe. That’s the purpose of detention.

When you’re just starting off it doesn’t hurt to look up the DA’s on council’s website for similar developments and look at their stormwater concept plans and other documentation prepared by consultants. Then you get a good idea of what sort of work and consultants are needed to be engaged. A lot of council actually have the files for the DA’s posted online for public access.

 

Enjoying the rollercoaster I see

 

Start poping these down and don't stop till your dev completion

 

Now that's optimistic What's the normal return on a big standard resi property in the area? (Hint: it's closer to half in most areas, generally on the low side if there is a development upside).

 

The properties in question are currently returning 5.2% as quoted. One of the properties is being rented to the owners friend at a discounted rate. I can't see any reason why this rent couldn't be slightly increased.... None the less, thanks for the comment. I'm not exactly a local and if rental returns are in the vicinity of 2.5%, I need to explore this some more. Cheers!!

 

Imho that's one of the least significant issues of why you should be very cautious with this ( developing) idea.

 

Are you willing to share some of the more significant issues I should be concerned about? I certainly don’t claim to be an expert thus joining this forum to seek guidance and support. Cheers!!