Developing in Perths flat market...

The best learning experience is jumping in there and giving it a go.

I wouldn't be going into Balga in the current market. I've been actively looking for the next projects. I'm finding the only ones that partially stack up for me are the larger projects (4 or 5 units +). For smallish projects, maybe @Aaron Sice can suggest some ideas...

 

Someone is going to have to break it to my broker who spent alot of time getting me finance ahaha

 

This will be the first of many difficult conversations you're gonna have as a developer.

 

where to from here is to keep looking for deals. when i did my first project i had 70 or 80k from memory and that's total and i spent a pretty damn long time finding something to work within that. getting that right meant i could go on to something better and bigger and on and on.

if you jump into a bad project now it will hold you back years vs getting a project right. it sounds like this is an area you're quite interested in, with that in mind you should start off correctly and try to maintain a high standard from the start.

developing property is for making money. it isnt there for a lesson or for feeling good when we say we're doing heaps of projects or any other reason. the entire purpose is for it to be a profit or income producing venture. never forget that and never forget that they are not without risk either, the whole reason it is important to do a proper feasibility and have enough fat in the deal is because if things go south you will live to fight another day.

if you are slack with your feaso and go into a deal with 5% net margins and then the market tanks or your builder goes bust or you have unforseen issues or whatever and at the same time say you lose your job or get ill, all of a sudden the exciting first project that you were willing to do at razor thin margins to learn from ends up being the depressing one that may send you to bankruptcy. it isnt all peaches and cream which is why you have to be disciplined with the numbers. this is especially the case early on when someone is unlikely to have a big asset base or buffer to help bail them out in the event the project doesnt go well.

good luck! it's a wild ride sometimes but can be very rewarding and not just financially.

 

You missed GST as well....? That's your 100k?

No bank will lend on a 10% profit with no contingency.

Balga is a 'build for yield and depreciation' play. Single bed townhouses in certain areas might do okay here, especially if you can turn a triplex into a 5x or similar by applying your 1/3 concession.

Otherwise ..... uh, yeah. There are better ways to spend your money in Perth.

Fremantle puts up some gems lately.

 

Nor beer and skittles - https://propertychat.com.au/community/threads/life-its-not-all-beer-skittles-old-ss-thread.8497/

Good on you for getting in and giving it a shot. However, I agree with others. There just isnt the room in this to make it a 'goer'.

If you can get out of the contract I would. Get back to the drawing board and keep looking.

Westminster is a wealth of knowledge. A small fee goes a long way.

Blacky

 

Thanks Sanj, I guess 100k profit seemed like enough to get the first one off the line, with intentions of getting a little more on the next project and the next,
I also have little experience and really could'nt see how that 100k would all be eaten up, with that in mind I did make a Plan B, hold, which would work out to be a negative geared investment (only by a few %) all in all, It can be hard for eager young investors like myself to really know what is and isnt a good first deal, as the there is so much to learn just by doing.
Again the idea behind this project, while I hope to learn alot, really was to make that 100k

 

I think another deal. Something a bit more unique to battle the market and with less risk.

I think his selling fees were about right as I assumed he was going to sell 2 and keep one??
I assumed the $15k for water was all up which is about right - $7500 each for 2 extra sewer connections. I think his headworks allowances are find. I came to $550k from Matt's sums and I thought it would be at least $600k - more like $620k + demolition

 

Thats the thing, I have an out right now, which Im considering... meaning back to the old drawing board. I guess what i need now, is fatter contingency and higher profit.
Will look into better structures for the next one to possibly, or just go IP for now...

Thanks for the help tho! will keep everyone up to date with who things move in the future

 

i completely understand where youre at atm, ive been there myself and as someone who got slack on modelling/feasibility of projects/events in another industry when i was much younger and went from making good money to completely broke at 23, trust me you dont want to make the same mistake.


in this case, i can genuinely say, hand on heart, that i would be shocked if you make the 100k and there is a much greater chance of a loss than a 100k profit. you have indicated an ability to terminate contract without penalty, ultimately its your decision but if i were you i would do it.

 

Do we agree that build costs are a fraction to low? and selling costs to low?

This is part of the learning and I really really appreciate it everyone

 

very persuasive, and Im inclined to agree, which is fine, I will have another look tomorrow, but looks like on to the next deal/ idea or whatever. this has been so helpful, I cant ignore the words of people wiser than me (im youngish) so I do appreciate it. Its all learning and if I can get a deal that looks right in a few months, I will have you guys to thank.

 

Unfortunately I can't take anymore clients at the moment until some finish so @Matt Ad will have to bounce the ideas around the Perth development brains trust on here and we'll all help for free.

Don't worry @Matt Ad, we aren't here to burst your bubble but to save your butt.

I know you mentioned Mindarie and that seriously is not outside the realms of possibility now. In the coming months they will release the land at Catalina Beach in Mindarie and depending on how they end up doing the structure plan (still dilly dallying at the moment) there might be some duplex blocks in there like there is in Catalina Central where I've been building. It's an easy duplex for under $800k

Otherwise there are a few cheapie blocks in Mindarie which can take duplexes - technically this is one 29 Shoreham Turn Mindarie WA 6030 - Residential Land for Sale #201506474 - realestate.com.au

 

Thanks!
Yh I guess Im a little to keen
I do love Mindarie, I actually live there right now, lots of potential, will have a think and take it a bit slower... I started looking at buying property when I landed by first 6 figure job 12 months ago, so Its taking a while to get there!

 

you're 21? damn nice work to not only have the motivation to do something like this but get the deposit together, do a feaso (even if its not 100% accurate), have the foresight to include a due diligence clause and then to come here to get feedback too.

when i was your age i was doing really well in a couple of ventures but was much more pig headed and would often not place enough importance on opposing advice or consider the risks. sounds like you're smart enough to do that upfront and avoid being punched in the head by reality as i was.

 

While the news hasnt been great... you guys have all been really helpful and Im still so excited to try find the next deal, lets hope that when I make a decision next I will bebale to have some more confidents in the numbers

 

ahahaha getting punched in the head does not sound like fun! avoiding at all costs!
but yh never been the one to just go day today, and I certainly want a positive outcome with a project and Im willing to do whatever it takes, I just cant believe how support everyone on here is, the info has been so helpful and everyone has been so nice about it.

 

Slow is an option in this market. There is no rush - but don't go over to the other extreme where you wait for the perfect deal either and wait 20yrs.
Keep saving, keep learning and keep running feasibilities. The more you do, the more you will learn.
I'm in Mindarie and Clarkson every week so if you ever want to meet for a coffee and a chat let me know.

 

I would be giving this one a miss. The words over supply and vendor discounting come to mind for Balga. Especially in a declining market. Take gst, income tax and a mere %2 drop in sales price and your quickly looking at loosing money and confidence for the next deal.

Take a step back and be patient. The deals will come and you will keep on learning more.

Start smaller if you like. My last Perth development was a retain and build and after all costs and bank valuations (As planned to keep) I ended up with a
27% ROI after the market turned. Take tax, gst and selling costs and would end up around the 20% mark, even less now the market has dropped further over the last 12 months. Also less outlay and holding costs.

I have another site on hold atm as end prices have come away, so when the market turns I will look to give this the green light. Right now looking for the next development oportunity which is proving quite hard.

So words of wisdom, don't just jump in for the sake of it, plan to win, as a 10% profit margin on a triplex site with that out lay probably won't last long. Maybe presales and fixed price build contracts could mitigate that but far to risky for my likeing.

Come along to the next few meets and talk property development with us all

Hope this helps

Cheers.

 

That's an offer too good to refuse.

There's a great bar there that has very handy napkins.

Wow - 21 a 6figure salary and approval to fund a $1mil project.
Be patient - the world is your oyster.

Blacky