Can you build 4 townhouses for $1m in NSW?

Discussion in 'Development' started by spludgey, 19th Feb, 2020.

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  1. spludgey

    spludgey Well-Known Member

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    I’m trying to get my head around whether an environmentally sustainable 4 townhouse development would stack up financially.

    So can I build a 3bed 2bath 110sqm townhouse for $250k including everything?


    Please also critique or comment on anything in my spreadsheet (well I changed the spreadsheet, I didn’t create it) that looks a bit iffy!

    Ocean Beach Road townhouse development.xlsx

    upload_2020-2-19_12-21-29.png
     

    Attached Files:

  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    The issue that I see is how can a 3 x 2 fit in 110sqm??? When I'm estimating I need to cater for all under cover areas so a 3 x 2 including a single garage (or double) is generally 140-160sqm for a small one.
     
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  3. spludgey

    spludgey Well-Known Member

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    Sorry, I should have said 110sqm of habitable space.
     
  4. Archaon

    Archaon Well-Known Member

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    @Westminster is it cheaper or more expensive to build 4 together?

    Efficiency sake would suggest that it would be cheaper as all 4 buildings are on the one site, but there would be fireproof walls etc that would add to costs.
     
  5. Scott No Mates

    Scott No Mates Well-Known Member

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    BMTQS puts a 3/2 townhouse basic finishes @ $230-255k+GST, so it may be very tight as it doesn't allow for a garage/parking.

    You don't have no allowance for stormwater connection (probably require new kerb inlet pit/sump, new Kerb/gutter/footpaths),
     
  6. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    There are some economies of scale but it's merely to do with deliveries, scheduling trades etc and less on bulk discounts for items as they are generally at the buying power of the builder standard price.

    The 4 may be separate or terrace style. So savings will be based around design.

    Whilst I think it is possible for a 3 x 2 townhouse (I assume this means 2 storey in NSW as it does here?) for that price I do think it will be on the lower end of specifications.

    @spludgey I can't see a line item for infrastructure contributions ?
     
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  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    PS I would assume environmentally friendly may also increase costs if we are talking higher star rating, pv arrays, double glazed windows etc etc

    There may well be an increase in end values to make up for that but it will make it harder to fit into the $250k budget
     
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  8. Hamish Blair

    Hamish Blair Well-Known Member

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    Is there an open space contribution to Council too?
     
  9. Morgs

    Morgs Well-Known Member Business Member

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    $1m cost would be on the low side in my opinion.. it'd need to be real low spec/basic build.

    Environmentally sustainable... don't know what the qualifier is but sounds expensive and at odds with a cheap build!

    Without knowing anything about the project or market conditions where it is the margin feels a bit thin for me. On the plus side, I think selling costs are grossly overstated :)
     
  10. Sackie

    Sackie Well-Known Member Premium Member

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    If there's a house, I don't see demolition costs.
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    Not a big saving even if it was 2% + gst and marketing costs.
     
  12. Morgs

    Morgs Well-Known Member Business Member

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    Better to do a feasibility based on the most accurate picture...
     
  13. spludgey

    spludgey Well-Known Member

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    So based on these numbers, would you recommend not to proceed? The sales figures are quite conservative.
     
  14. Sackie

    Sackie Well-Known Member Premium Member

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    It's good to be conservative but if you're overly conservative that can often make a good deal look terrible.
     
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  15. spludgey

    spludgey Well-Known Member

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    Yes, thanks.
    Since posting the comment above, I've spoken to a REA that's listed four similar townhouses around the corner.
    Their location is a bit better:
    • it's not on a main road
    • doesn't have a petrol station across the road
    • Their block is 20sqm bigger
    But given that it's two literal stone throws away (70m from my back fence to theirs), I think it’s by far the best price guide that I’ll get.

    They’re listed at “Offers between $650k and $690k”, but according to the REA, they’re trying to get $740k for two of them and $760k for the other two. Of course those are asking prices, not selling prices, but it shows my assessment may have been too conservative.
     
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  16. Morgs

    Morgs Well-Known Member Business Member

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    Agree with Sackie - you can end up talking yourself out of a good deal... (or even worse into a bad one if it is the other way round!)

    What I like to do when we're weighing up projects with feasibility is 3 scenarios;
    1) Realistic: What I think is actually going to happen with the most accurate information we have at the time.
    2) Conservative: Build some buffers in; be that higher construction cost, shaded sale price, additional holding costs, DA/council costs, etc.
    3) Optimistic: Within the boundaries of what is possible (grounded in fact), what would a best case scenario look like?

    That helps me get a feel for things a bit more than a static model, and helps in comparing different projects as each have a different spread. We usually end up somewhere between scenarios 1 & 3 in what we actually deliver.
     
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  17. Sackie

    Sackie Well-Known Member Premium Member

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    I agree, I like to have sensitivity analysis for varying end sale price points as well as costings.
     
  18. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Based on the figures then it is a 20% gross which would green light it but I think the figures need more refining
    1. how was the GST calculated?
    2. how confident are you in the construction figures (I think perhaps they are too low)
    3. should you add additional time in at the beginning for the DA process?
    4. What about infrastructure charges (water, power, sewer, council etc?)
     
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  19. spludgey

    spludgey Well-Known Member

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    Thank you!
    1. Total sales revenue minus current valuation (is that correct?)
    2. No idea, I might add 6 months then to be a bit safer
    3. No, it's currently an IP and if I don't proceed with the project, it will remain one. So there won't be much financial difference in the two scenarios until the tenants leave.
    4. Noted, thanks.
     
  20. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    1. so using the margin scheme? I would get some advice on this on calculating that figure as you need to account for the GST on construction being claimable which may reduce the figure
    2. I was referring to the construction costs. i think this needs further input to ensure that you don't eat all the contingency or more or construction costs.
    3. If it's currently an IP that is good as you'll be able to do DA whilst it's being rented out but there will be an amount of time between tenant leaving, preparation for demolition, actual demoliton and getting to site. This may be 3mths
     
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