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Adelaide Development

Discussion in 'Development' started by Spets, 20th Jun, 2016.

  1. Spets

    Spets Member

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    Hi all, long time lurker here. My property recently has been rezoned to a higher density in the Tea Tree Gully council, with the option of up to 5 dwellings to be built on my block. What would be the best way to go about market research and what people actually want to buy.
     
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  2. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Hi Spets,

    Recent sales + local real estate agents views is actually reasonable here.

    What's the end product looking to be like in terms of sqm/block width?
     
  3. D.T.

    D.T. Adelaide Property Manager Business Member

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    Get it financed in a way that allows you to hold onto them for good cash flow and tax depreciation. Corey above helped me do that on my own project in northern suburbs.

    What are you thinking of building there? Knowing that we can suggest end values / rents achievable.
     
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  4. MTR

    MTR Well-Known Member Premium Member

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    If the area has just been rezoned there may be very little development or no development in the area, this makes it a little tricky to work out end values and also what to build. This is where you need to research and contact local re agents for advice, but you also need to ask the right questions, ie what do buyers want, what sells, size of unit/townhouse, what is a most this sort after product.
    I would also look at surrounding areas that may have developments, what are they selling for? what are they building, what is in demand.

    If you want a successful project and to make money you build what people want and you make sure it hits the sweet spot in terms of $ value.

    Look at demographics in the area, who is buying, ie are they downsizers, young professionals etc. For example for downsizers if building townhouses you would always make sure the master bedroom/ensuite was on the ground floor. Lots of stuff needs to be considered that will make a massive difference to the end values and the success of the project.

    In the first instance I would find out exactly what I can do/fit on the block, a surveyor/town planner or draftee should be able to help you with this.

    Once this is established then its not just a matter of what you can do with the block but whether the deal stacks up, whether you can finance the deal and whether you have the cash flow to manage this project.

    Also look at build costs per sqm and what product is suitable for this suburb. Contact a few builders and work through this process, check out their builds/developments and their specifications.

    MTR:)
     
    Last edited: 21st Jun, 2016
  5. Spets

    Spets Member

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    Thank you for the replies, my block is 720 sq meters (18x39m), and I had a chat with a designer and a REA. Looks like first home buyers are the main target market at the moment.
     
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  6. Lara Lansell

    Lara Lansell Member

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    Great to see interest in Adelaide's North East - Simon Zybek recently called Modbury #1 in his list of "Top 10 Development Hotspots in Adelaide" - a lot to like - close to the hills, spillover from the Eastern Suburbs, O Bahn upgrade and Westfield TTP.

    We've got two sites in with CTTG at the moment - including one in the Growth Policy Zone. Big hurdle? Getting to Council's minimum density for the Growth area!

    Few of my views from the market DD that I put in -

    a) Street frontage / Torrens Title preference over Shared Driveway / CT
    b) Plenty of FHBs
    b) Modbury / Modbury North market will be long 1 into 2 subdivisions + 3/2/2 single storey project homes on ~9/10m frontages at / slightly above the median price (~$370) for 5092 as Mums and Dads knock down and subdivide the circa 80s housing stock
    c) Campbelltown (much closer to the CBD along NE Road) will be long 3/2/2 two-storey townhouses at the ~$450k price point owing to the favourable Regeneration Policy Area provisions
    d) Big surplus of late 90s / early 2000s 2/1/1 villa style in the Modbury rental market - makes a smaller 90 - 120m2 GEFA product hard to develop when the existing stock yields 6-7%+ at the ~$250k price point

    The last point d) makes it really tough to get to max density - 67 dw/ha on a 700m2 block whilst keeping construction Class 1 means competing with existing stock at the low-$200s - a tough ask!

    My pick? I'd crunch the numbers on a 1 into 3 single storey row configuration for your block - it'd ought to come in slightly below the median for Modbury and very competitive against the 1 into 2 project homes in the area on larger blocks, still be Torrens Title and less capital intensive than double storey.
     
  7. Xenia

    Xenia Adelaide Property Manager Business Member

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    Always target home buyers with sales as this will get you the highest resale price
     
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  8. Spets

    Spets Member

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    Thank you Lara for your DD input. The one into 3 single storey buildings may work out to be the most profitable.
     
  9. Spets

    Spets Member

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    Has anyone partnered up with a builder to do a development? So essentially I would get council approval for the subdivision and the builder do the construction.
     
  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    Not worthwhile in Adelaide. Different in other states of course.

    Generally better money in doing the sub then selling the blocks using the builders here. They don't charge any agents fees, they get a client via h & l package and you get your money. This nearly always works out better off than spending hundreds of K and 12 months building.
     
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  11. Spets

    Spets Member

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    So I'd get council approvals, subdivide, while the builder would market my land with their house & land packages? Is there anything I should look out for going down this path? My holding costs are minimal so I see minimal downside.
     
  12. R377

    R377 Well-Known Member

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    If its around Modbury / TTP there will be a MASSIVE oversupply of villas/townhouses etc. Seems every third or fourth block is getting bulldozed and developed....
     
  13. Lara Lansell

    Lara Lansell Member

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    Depends on the area - but for the majority of 1 into 2, I'd agree.

    A 18m x 39m would go into a 1 into 2 for a detached dwelling - almost all the volume builders will offer to market / list on REA.com without a commission as a H&L package. You would engage a surveyor to get land division consent, demolish the site, peg the site, and issue titles whilst they market the build. Circa $35k investment on your end to get it to two Torrens titles and timing wise, you could tee it up to only demolish once they've both been sold and then settle as soon as titles are issued.

    Assuming $200k per site around Modbury, that's approx. $365,000, 3 months, relatively risk free. From a stamp duty perspective, almost always out better to sell the land + have the buyer enter into a contract for the build - RevenuSA take a cut of only the land transfer price.

    Crunch the numbers on going to a 1 into 3 row dwelling though! Not many builders will offer to partner on that as due to the party walls, they'd all have to be built / sold together on completion so significantly more capital to go into it.
     
  14. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yep cost me about 23k to split into 2 Torrens titles, that's including council fees, state fees, surveyor fees and water fees. Water is the variable bit and requires some homework. Eg if mains or sewer is awkwardly placed they need to run or install a line to provide services to the new block = cost per metre = adds up fast.
     
  15. Spets

    Spets Member

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    I had a feasibility study done and the numbers didnt stack up for a development. They would stack up for just a 1 into 2 subdivision and sale of land. However I spoke to the council and they said because it is a new high density zone, they would decline a 1 into 2 split. Is there any way around this?
     
  16. Brady

    Brady Well-Known Member

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    If it was me I would be likely holding at this stage. Just because the plan has just changed doesn't mean it's time to develop. Make sure you do the numbers.
     
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  17. Spets

    Spets Member

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    I'm looking to free up some cash for another project, so it's either 1 into 2 or sell the whole thing as one.
    Would a "Statement of Support" from a Town Planner have any weight in moving a 1 into 2?
     
    Last edited: 1st Nov, 2016
  18. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    As an alternative option, is it possible to release the cash via equity, so you can still hold the property and get into the other project?

    Going through the plans process and selling with DA is an option, but at this level I'm doubtful you'll gain much if any premium for this if the numbers don't stack up.
     
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  19. Perthguy

    Perthguy Well-Known Member

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    I don't really understand how 1 into 2 works but 1 into 3 doesn't work. Have you verified the numbers in the feasibility?
     
  20. Spets

    Spets Member

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    1 into 2 leaves a 9 meter frontage for each block, where 1 into 3 only 6 meters. A similar 1 into 3 split has been on the market for months now with minimal enquiries according to the selling agent.