Just wondering if there are any land developers here. I.e, purchasing a large block of land recently zoned to residential and subdividing into different lots, building roads, utilities, water etc? How do you go about it? What's does it cost to do this from a purely academic viewpoint? Also, what would be a ballpark for subdivision costs? This is purely academic. Just wondering how it all works
Every area is different as the DCPs and GAIC costs vary as do civil costs, and the yield you achieve, awkward grids like one sided road create inefficiency too. That said in Melb growth areas it costs between $75k and $110k a lot to develop the land.
Hi @MagicInSydney, there's many ways to develop raw land, many will yield less profit than others. With the cost of raw land in Sydney quite high, you might have to sit on the sidelines to observe and learn before risking a few $million.
Great estimate to work off. True, there are a lot of variables to consider and a very costly exercise
Hi @Scott No Mates, I'm definitely sitting, observing and learning When I have a few mill $$ to risk, I may consider it, but it's purely academic at this point
Good way to explain it @Cactus as it varies so much but breaking it down to per lot does help for academic questions like above where it could be any amount of lots. Council infrastructure costs and holding costs are the biggest variance - generally a road is a road cost. In the outer lying areas that are being turned into land estates the councils have few amenities and no rates yet to create those amenities so they can have quite high infrastructure contributions per lot - they need those parks, pathways, road upgrades, libraries etc etc to be paid for. This page helps describe one particular councils approach to it North Forrestdale Development Contribution Plan No. 3 | City of Armadale Generally it will take 2-4years to go through the whole rezoning to selling process.
Yes in Melbourne first you have to get the MPA to agree to conducting a PSP, which requires enough funding partners (other developers) to agree to pay for the costs of a PSP can be $300k. Then it can't take 3-4 years to complete the PSP and any Panel Hearings. Buying UGZ is a long slog unless already approved PSP.
A very old and rough rule of thumb I've heard before is: Final sale price = 3 parts 1/3 acquisition cost, 1/3 development cost, 1/3 profit
Yes this worked a very long time ago. Good luck getting this. Now it's more like 2/5 acquisition, 1/5 development cost, 1/5 government charges & taxes, 1/5 profit. Even then you'd be lucky.
Heavily involved with larger (50+) lot subdivisions for a long time and @Cactus advice is right up there. In WA, a development in Munster or Beeliar will be significantly less than Cell 6 East Wanneroo or Cockburn - council contributions can seriously affect your end profit.
The download on this page has some interesting cost breakdowns for different development types. Construction Finance | HoldenCAPITAL | Commercial Property
Its more like a larger ($250k+) deposit and settlement after design / approvals with civils ready to go at settlement +1 day.
Terms are good if you can get them. But you can't always get them, and most of the time your only getting them because your paying the money the vendor wants which is over the odds for settlement 30:60:90 but stacks up after 3 years holding costs. Also just because you settle a site post permit and engineering approvals (perfect world) and even assuming enough presales for development finance doesn't mean you will have sewer and drainage discharge so that you can start construction immediately. Sewer authorities won't always allow eduction. Neighbours especially non developer neighbours are notoriously difficult to deal with getting outfall through their sites, or half share roads or even just building the intersection/road on their land as per the PSP at your cost. But yes it is possible to get terms subject to permit etc on a deal.
Its good pickings in WA for deals like this; has been for about 4 years now. Just my experience. No doubt a red hot market it just wouldnt work.
