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Basic feaso figures for splitter blocks Perth

Discussion in 'General Property Chat' started by Walter, 1st Jun, 2016.

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  1. Walter

    Walter Member

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    I am new to development and am exploring the possibility of purchasing property that I can buy and split, selling both the existing house and vacant block. Can anyone please offer average feaso figures for such a development? I’m searching for properties within 15km of the Perth CBD with minimum 20m frontage and 800sqm area.

    Your input is appreciated.
     
  2. thatbum

    thatbum Well-Known Member

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    How much do you know so far about this sort of development? Could you clarify what you mean by "average feaso figures?" There are lots of variables, even within the parameters you've mentioned.
     
  3. Walter

    Walter Member

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    I have little knowledge on the subject but am looking to learn how to perform a quick feaso that can be performed when a property is first identified. A more thorough feaso would be required if it appears that the development has further potential. I see a few battle axed properties listed around Perth. I’m sure there are many variables but the basic costs for a level block where the rear can be sold off is what i’m after. Is it possible to have such figures to work from or is the five minute feaso a falicy? Thanks for the reply.

    288A Robinson Avenue Cloverdale WA 6105 - Residential Land for Sale #201506082 - realestate.com.au

    An example above.
     
    Last edited: 1st Jun, 2016
  4. Walter

    Walter Member

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    If possible, the headings with basic average figures would be appreciated.
     
  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    To split off a survey strata rear block costs around $20k.

    There are a number of threads where the breakdown is listed if you do a search on perth survey strata
     
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  6. HD_ACE

    HD_ACE Game-Changer Premium Member

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    Budget 30-40k, that should give you subdivision costs, surveyor, head works, block clearing, any fencing and sales costs.
    Then add on your taxes etc and that should give you a back of the envelope feas assuming you know the end values.

    Cheers
     
  7. Walter

    Walter Member

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    Thanks for the information.
     
  8. Perthguy

    Perthguy Well-Known Member

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    The feaso will only be as good as the numbers you plug in. I would be careful of end values, especially in this area. The asking price on 288A looks way too high IMO. As a comparison, 70A Arlunya Avenue in Belmont sold in September last year for $349,000, rear battleaxe with a lot size of 912m2.

    Sold Price for 70A Arlunya Avenue Belmont WA 6104

    I would roughly value 288A at $300k - $350k, which is going to have a huge impact on your feaso vs $419,500.

    Roughly, for purchase you are looking at:

    Conveyancing
    Stamp duty
    Mortgage registration fee
    Transfer fee
    Bank settlement fee
    Water rates
    Council rates

    Holding costs:
    Interest
    Insurance
    Water rates
    Council rates

    For Subidivsion (as per @HD_ACE's post above):
    Surveyor
    Subdivision costs
    Head works (water, sewer, power)
    Block clearing
    Fencing (if required)
    Retaining walls (if required)
    Modifications to existing dwelling (if required)

    Selling costs:
    Advertising
    Commission
    Mortgage discharge
    Conveyancing
    Bank settlement fee

    Don't forget tax.

    I haven't see one of these in this area where the numbers add up to a profit. All the ones that I have run were loss making.

    It all depends on your assumptions though. For example, 145 Arlunya Avenue, Cloverdale was on the market for a long time at $649,000 145 Arlunya Avenue, Cloverdale WA 6105 Property Profile - PropertyPriceHistory.Com

    There is potential there to retain the front house and create a battleaxe rear block or retain the front house and create 2 rear survey strata blocks.

    Taking option 1: a buy price of $649,000, subdivide, sell the front for $450,000 and the back for $350,000. Nominally, there is a difference between the buy price and the sell price of $151k. But if you change your assumptions and you assume your purchase price is $599k, front for $400k and back for $300k (which IMO is more realistic), there is a difference between your buy price and sell price of $101,000.

    Factor in purchase costs, holding costs, subdivision costs and selling costs, there is not much fat in that deal. End of the day, possibly a loss. I certainly would not take it on. But more posting this example to be very, very careful with your assumptions of sale prices. I would look more at sold properties than for sale properties. There are many properties on the market that are overpriced and the sale prices are misleading.
     
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  9. Walter

    Walter Member

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    Thanks for the good information Perthguy you have been very helpful.
     
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  10. sanj

    sanj Well-Known Member

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    if you're talking a basic retain and subdivide you'll want to see at very least 30%, prob 40% and up discrepancy in gross values. if you see that then it's worth doing a more detailed feaso. anything less is a waste of time.


    eg, in the past morley retainable sites were as low as 400k, end values say conservativelu 350k and 200k.

    immediately that's a gross discrepancy of nearly 40% over purchase cost. that means it's worth looking at because once you add in stamp duty, subdivision costs, any make good costs to existing homes (eg potentially soakwells, fencing, outdoor storage, crossover, new parking area, cosmetic works, fencing etc) then allow for holding costs, contingency, selling fees etc you'll find that 40% gets whittled down very quickly.

    to use @Perthguy s example, if I saw those numbers I wouldn't even bother spending 30 seconds doing a feaso on the site because site price of 649k and end values of 800k mean there's bugger all margin to work with, not even 25% as a headline gap in values and that's before any costs are considered.

    going back probably 2.5-3 years or so I've been saying prices are crap for divvy sites in perth, simply because margins haven't been there. that's changing atm but always be guided by the numbers and nothing else.

    a few strongly disagreed with me on SS about this, ultimately they're the ones who probably wished they cared more about margins and less about needing to appear to be a busy developer.

    always be guided by margins and $$, forget the rest.
     
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  11. LifesGood

    LifesGood Home Building & Development Consultant Business Member

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    Sound advice from a seasoned developer! (And avid gold jewellery collector)
     
  12. Walter

    Walter Member

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    Thanks Sanj for the reply, it was very helpful.
     
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  13. Perthguy

    Perthguy Well-Known Member

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    That's what everyone else thought about that property too @sanj. The owners took it off the market, removed the pool and put it back up for rent.

    145 Arlunya Avenue Cloverdale WA 6105 - House for Rent #419161762 - realestate.com.au
     
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