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development diary - duplex

Discussion in 'Development' started by GoOnAndTell, 30th Jul, 2015.

  1. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
    18th Jun, 2015
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    86
    Location:
    Melbourne
    We have some minor experience in developing, currently we are working through a retain + 2 build, and previously we have pushed through and sold with plans & permits. We are now tackling a build knock down & build duplex.

    We initially purchased the place with the intention of;
    Retain existing 3 bed + 1 bath house
    Build 2 bed, 1.5 bath, 1 garage
    Build 2 bed, 1.5 bath, 1 garage reverse living (living upstairs bedrooms downstairs).
    However the tide has turned in this council and its zone would make it difficult to push for 3 on the block despite others around it being that way, and we don't want to push for VCAT or have significant delays & redesign cost.

    So now we are aiming to remove existing* and build more upmarket 3 bed, 2.5 bath, 1 garage houses in a mirror image.

    The block is in reservoir and we purchased for high fours, we hope mid to high 500s as a finished product per house, which is backed by estimates from agents we have used in the area. One said 580 to 620, the other said 550 to 600, a comp sale (high) 22B Arundel Avenue Reservoir Vic 3073 for 630k.

    We have a builder we like in the area who is currently doing our other development, turn key completion (drives, curtains, landscaping) will be sub $250k

    Due to APRA lending requirements we are likely to need to pre-sale at least 1 as we will no longer be able to get the loan on serviceability.

    *We have a spare block of land in a rural city in western victoria, we are looking to cut existing house and relocate it to the block, rough figures has it landed with basic renovation (flat pack kitch, floors, paint, bathroom tile) $90k, projected sale value of $150k. We have tried unsuccessfully to sell the land bare, if we can't move for 150k then rent would be $200+ per week so we could reborrow and pull maybe $80k out and be CF+.

    We are using buffered numbers and safe sales so hopefully final profit comes out a bit more, aim is now 2 years from settlement to completion. We have 20% capital + stamps in so far and will fund planning & approval 100%.

    I figured i will keep this thread updated with our no doubt slow progress to help anyone looking to do similar, warn others off, and ask questions i have them.
     
  2. willy1111

    willy1111 Member

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    16th Jul, 2015
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    Location:
    Melbourne
    Thanks for sharing.

    It sucks big time when council doesn't let you get your way :(

    Just wanted to confirm if the $250k build cost is for one or both units? I assume per unit.

    So land + stamps : approx $500k
    build cost : approx $500k
    dev costs : approx $30k
    hold costs : approx $40k
    Probably no open space to council if only split in 2 which is nice.
    End Value : approx $1.2M
    About $130k equity created if retain.

    If selling, less GST approx $16k, less selling costs approx $24k
    leaves about $90k to be taxed at company/personal rates.

    Does that sound about right?
     
  3. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
    18th Jun, 2015
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    Location:
    Melbourne
    Yes per unit build cost. Sale cost should be less.Holding should be less (we will rent out for the first year while in planning and sales).

    This was our fall back position so profit isn't were we would like. And APRA has more or less ruled out holding which has further eaten into profit by forcing a sale.

    It is inside a family trust so income will be distributed to mother (mostly retired) and our share to my wife (will have intermittent income with children for the next few years). So actual tax should be relatively low.
     
  4. Reno Crazy

    Reno Crazy Well-Known Member

    Joined:
    3rd Jul, 2015
    Posts:
    55
    Location:
    Vic
    I will be watching with interest as I want to make a leap from buy, reno hold to development.
    Reservoir has seen some good gains in recent years. Good luck with it.
    Can I ask is the trust set up mainly to allocate the the profit? or does it serve a greater purpose?

    I am in the process of working out what is best for us to purchse in either our own names or trust. ( I do realise that there is many different types of trusts)
    As it stands it would just be my partner and I and we both earn the same wage give +/- 5K so if it is just to allocate the profit it probably isn't the worth the effort for us.
     
  5. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
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    Location:
    Melbourne
    we have been 'playing' in reservoir for about 4 years now.

    the trust is for a number of reasons.
    - The banks treat us differently, each bank has different rules around trust our broker has navigated around it well (happy to discuss more in PM if required) but speak to your broker about how each bank looks at trusts in loans.
    - we had properties in the unit trust, and one in each of our names, selling the one in each name is ok as we have been able to time it (i took 6 months off work so had a nice gap in income to sell in), (my wife is soon to take time off for children so again nice income gap to sell in). The properties in the unit trust are quite trapped so if we sell we must distribute (in our case 50:50) that year, where as the family trust can push money as required.
    - if either one of us gets sued the assets in the family trust are somewhat shielded as technically we don't own the assets themselves.
    - we have another family member with cash into this deal this is a way of being able to distribute with out having their name in the mix, also we can bring other family members in as required (including adult children in the very distant future)

    Honestly having the trust for one property is overkill but we plan to do more and hope to be in it for the long term. Also the trust can be the 'owner' of any other shares/units/etc...

    Hopefully I have explained enough about our choices but you will need to speak to accounts/lawyers/brokers/etc...
     
    neil-asher likes this.
  6. UrbanDingo

    UrbanDingo Member

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    29th Jul, 2015
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    Melbourne
    great info.........
     
  7. GoOnAndTell

    GoOnAndTell Well-Known Member

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    Melbourne
    has anyone done a 'STEPS' themselves? It is about $1k to have it done and also i think it might help us learn doing it ourselves.
     
  8. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
    18th Jun, 2015
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    Melbourne
    an interesting month or so for us.

    The house moving looks viable i think we will be around $100k but have budget for extra if required.

    We have spoken to council and despite the more restrictive GRZ1 zoning we can most likely fit 3 x 3 bed on the place, nice wide block helps a bit with layout (and maybe second drive), as does ok setbacks from properties either side roughly in line with the zones (extra) minimum.

    More outlay than we really wanted but the returns look better and playing with excel we have a bit more support on some of the 'what if' lines.

    Paid the deposit to our designers today and signed the form.
     
    Jessproperty and trivial like this.
  9. littletee

    littletee Active Member

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    Location:
    Melbourne
    Sub $250k? How many squares are they each if you don't mind me asking? I'm in this game as well and to finish the build for that price they would have to be under 20 squares and not a high quality finish in my experience.
     
    Jessproperty likes this.
  10. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
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    Location:
    Melbourne
    So shopped around with a couple of REAs we are friendly with in the area and our designer has drawn up a first round.

    It looks like this will become a triplex build; About ~140 m^2 a pop.
    3 bed, 2.5bath, 1 garage, double story
    2 bed, 2.5 bath, 1 garage, double story
    3 bed, 2 bath, 1 garage, single story.

    $250k for it at duplex which would be ~170 m^2 is probably a touch low, but our rough spec;
    * stainless steel entry level bosch appliances
    * Gloss laminate doors (not 2 pac)
    * 20mm ceaser stone
    * tiled living areas
    * carpeted bed rooms
    * floor to ceiling in shower cube area with mosaic highlight, splash back only around bath
    * mirror sliding doors in bedroom with shelves, drawers & rails
    * auto panel lift door
    * reverse A/C to every room
    * solar HWS with gas booster
    * led downlights through out

    Certainly not top end but in line for the area.

    No the big question (so big i started its own thread)
    https://propertychat.com.au/community/threads/shower-only-or-shower-over-bath.4834/
     
  11. Planning Permit

    Planning Permit Active Member

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    17th Oct, 2015
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    Location:
    Melbourne
    Great read. If its GRZ1 then 3 is allowed. I assume this is Darebin Council. They like the upper floor recessed to reduce visual bulk and some respect for neighbourhood character makes life easier at Council.Ensure neighbours amenties are not adversely affected especially in light of the new Planning and Environment Amendment (Recognising Objectors) Act 2015 which has no transition period and came into effect 15 October 2015 and the Red Dot VCAT decision by Member Naylor on Lomaro v HumeCC
     
  12. GoOnAndTell

    GoOnAndTell Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    86
    Location:
    Melbourne
    Hi very detailed post thanks for the advice.

    Yep GRZ1, so far the plan complies with the zone however councils are councils and sometimes they want to knock something back for fun. They have certainly tightened up in the last year or so, previously we had discussed a block like this having 4 with maybe 1 or 2 being living upstairs but now it presents to big of a risk in time.

    The design we have is particularly good from the front with a side court yard which will reduce the bulk from the street substantially (not building fence to fence), and of course the magical setback you referenced. The drive runs on the south east side which should reduce shading impact to POS on that fence line.

    I will need to do research on the last half of your post :)