Developing - Where do the numbers stack up

I've edited just to be sure

 

Wow. Even in today’s market a x10 on that site struggles to work.

Blacky

 

I would not be trusting Momentum with any feaso when it comes to developing property. I know at least 2 investors who got royally screwed by this group.

 

Anyone looked at subdividing and developing in Melbourne inner east? (mainly suburbs within Boroondara)

With the new minimum garden requirements, not sure if it is still worthwhile given an average size block is about 700 sqm which means you'd only get 2 decent sized townhouses on the block and have to give up 25% of the lot for garden.

 

@jyeung80 - numbers is hard to stack up in the inner east. unless you are doing apartments.
my mate is doing one now in hawthorn for apartments and also finding it harder to find buyers.

 

That's exactly right, why no buyers, too many apartments = high risk.

They don't make sense if you can not sell them.

Also, its not only they don't make sense, its difficult in current climate to source finance for this product.

When the market turned in Perth the only thing that made sense was apartments, but did it make sense... of course not, developing property makes no sense if you cant sell the end product.
May as well buy the development direct from a developer who ends up having to fire sell.



MTR

 

Yes, I've been keeping an eye on apartments and agree the areas around Hawthorn and Camberwell are getting a bit saturated. I'm also seeing lots of apartment blocks popping up around Balwyn, Balwyn North and Surrey Hills. I was thinking more townhouses or villa units though. I see a few of them being built as I drive around but there aren't that many listed for sale online from what I can see. Not sure if that means they're selling well though or, even if they are, whether or not the numbers would stack up?

 

I know these areas well. though this are my views IMHO from a logical standpoint - april 2017, the state vic gov removed the minimum dwelling sizes or constraints to the blocks across the board NRZ GRZ unless there is single covenant. Balwyn, Balwyn North majority are NRZ which previously had 450sqm min for dwelling. so some areas and streets were all single dwelling as unless you have a massive block, you could subdivide. So in the past, the old 70s-80s villas some were selling for 1 mil for a 2 bedroom in Balwyn, power st etc however now that the restriction has been removed although with the garden rule stil apply, ppl can subdivide - so macroeconomics more supply and more sub division. you can still make money but this is not the numbers as in how many you can put on - is how luxurious or grand the unit or villa can be.

forget the east the north and the west yields the highest gains (the numbers will most of the time stack up in the RGZ zone)

 

In late December I got my DA for a 4 unit site in Warwick, WA

I have a 823sqm corner R20/40 block and I'm going to mix it up a little with this development. I'm aiming for 2 ends of the spectrum with it.

Lot 1 and 2 are 10m frontage 295 and 280 sqm of land and will have a 250sqm 4 x 2 x 2 + study two storey built on it. There is around 50sqm of garden and a 21sqm alfresco at the rear. These are very much family homes.

Lot 3 and 4 are 9 and 12m frontage and only 119-129sqm of land. These will have 105sqm 1 x 1 x 1 + study two storey built on it. There is around 50sqm of courtyard and alfresco in these. These are aimed at FHOB or downsizers.

Feaso on this is sitting around 22% gross in today's market. I'll start construction around mid year after demolition in April. It would be nice if Perth could have some growth by the time it's finished at the end of the year.

 

If you can achieve 22% gross in Perth market today I think you will be doing OK.
This would definitely be not the norm in terms of product for this suburb, do you think there will be a demand for this??

 

Talking to some local REAs they say that there is little upgrade opportunity in the area and that there is demand for new product with 4 x 2 family appeal. Many of the locals are still in unrenovated 3 x 1s and to renovate or rebuild is not cheap. Those who want to upgrade are leaving the suburb as there is no product.

There is a small pocket that was redeveloped about 10 or so years ago. Pricing in that pocket is strong and popular. What is now quite dated but a lot more modern than the 70s on 278sqm blocks and 3 x 2 x 2 sells for mid 500s 30B The Circle, Warwick, WA 6024 - Property Details

As to the smaller product it's a bit of a leap of faith but the older 2 x 1 duplexes do sell well in the area for people that want to get in to the suburb. I've done my sums on $375k end value on this which is pretty low.

 

That's what I have noticed in Newcastle as well, which has been a hot market last couple of years. Happens when people (greedy mums and dads) buying on the potential rather than fundamentals. The old saying is that you make money when you buy the property.

....if that is no longer true you have to be very selective.

 

So, the improved value is not much to the improved value?

I've noticed something similar in renovating houses over the years - renovated houses not reaching expected values but unrenovated ones selling for ridiculous prices. I never buy solely on potential and sometimes miss out because of it.

I think it also gets back to not understanding the trends. As well as the arbitrage potential, a good indicator is how long houses are staying on the market for before they sell, and anecdotally, what agents say about how many people show up for open houses. A good network of agents can be an excellent source of intel.

 

I have seen the same with unrenovated houses selling for over the top prices. I will buy for potential if there is value in the buy. But too often properties "with potential" are overpriced.

 

@Westminster how long do you anticipate the project to take all up?

 

Inner - middle Brisbane Splitter blocks that I have seen lately are asking the same price as if the land was split. Eg They want offers over $1.3m for an 810m2 block but you could only sell the 405m2's for $650k.

 

Makes no sense you would lose money after all costs

 

Crazy. Splitters are very hard to make work in todays prices. We bought all of ours years ago. Last one snuck in last year for under 830k with city views.

But I know @WilliamB develops in the mid price areas and does well.

 

So what product is making sense in Brisbane?

In Perth very little from what I can see, way too much risk.....who knows if you can sell the product as its a buyers market. Comes down to price you source the land but IMO still too much risk, skinny profits

Melb, land has soared, once again not making sense, developers now trying to offload DA, these will now become a dime a dozen.

Syd, I think wrong time of the cycle to be developing, high risk.

Adelaide? Am told that this market also not making any sense to develop. Anyone who develops will be holding stock

MTR

 

Outer land subdivisions and inner new build houses.