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Anyone joined forces with a neighbour and developed?

Discussion in 'Development' started by Otie, 4th Sep, 2016.

  1. Otie

    Otie Well-Known Member

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    Just wondering if anyone had ever joined forces with a neighbour and developed?
    We have a 600m block, as does our next door neighbour. The neighbour threw it up in conversation today that we should put our land together and develop down the track (our suburb has townhouses shooting up everywhere at the moment)
    Has anyone done this?
    Personally I'd rather buy a neighbours house if it came on the market but just wondering if it's any more feasible to combine rather than just keeping your own? Id hate to have to have neighbours agreeance on specifics.
    Not ready anytime in the near future to do anything just interested in hearing from others who may have done this.
     
  2. Barny

    Barny Well-Known Member

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    Depends how many extra dwellings you can place on the 2 titles together. It can certainly bring in extra cash on sale of 2 compared to one. Seems it's becoming more popular these days. Otie mind if I ask what location? Seeing this in the north alot lately.
     
  3. Otie

    Otie Well-Known Member

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    Jacana.
    Though I'm confused with why people are paying 450-470k for a 4 unit site, and developing straight away.
    I'm assuming av build costs would be 160-180k per dwelling.
    The end sale prices are 310-350k
    I get that you may get 200k profit if lucky, though wouldn't it make sense to hold for a few years to when townhouses are bringing the 450-500k they bring in other suburbs?
    Seems like a waste of a cheap buy to me to develop straight away
     
    Barny likes this.
  4. PacMan

    PacMan Active Member

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    You would be pretty brave to join with your neighbor and develop, I see way too much risk in it. The margins would have to be significantly higher for me to consider it. Plus if it's your first project I would start small, 600sqm is a decent block size, have you consulted any town planners or architects ? Have you put a feasibility study together?
     
  5. sanj

    sanj Well-Known Member

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    I don't know the area and if your figures are right but to answer your question, firstly no one ever went broke making money and taking it off the table. 2ndly, it might be years before prices rise to the level you're saying, is the extra money worthwhile ifor a development takes maybe 4 years instead of 1?

    The person developing this side could cycle the initial capital+the profit made from this and future projects 3 or 4 times before this 30% rise in end values happens, if it happens at all.

    Personally I'd rather cycle that money throughas a couple of times and there's every chance that once the 3rd development come around, provided you've been making good money, that you would be able to do the 3rd one and keep them instead of being forced to sell.

    I have to be honest, I don't think I've ever heard a developer be disappointed that they bought a site cheap and made a quick profit on a project, firSt time for anything i believe
     
    PacMan likes this.
  6. Otie

    Otie Well-Known Member

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    I feel it would be too much risk and stress too. Im not at a place where I feel ready to develop at all yet anyway, this is our first IP, and we bought it with the intention to buy/hold for 10+ years, with option to develop one day. I was just interested to hear if it is a thing, and if others do it thats all.
     
    PacMan likes this.
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    Had a neighbor who did this. Single site would get 3 but double site was 7. Each site would have cost $1.2m at the time.

    When he finally sold (lived in it for 7 years) he achieved close to $2m for his t/h.

    As each party didn't have to pay stamp duty on purchase prior to developing there was a big saving and incentive to work with the neighbor.

    Costs and profit shared equally. He wasn't worried about working aftet that build.
     
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  8. Aaron Sice

    Aaron Sice Well-Known Member

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    The "joint and severably liable" clause tends to end most parties pretty quick.
     
    Terry_w likes this.