Development Diary - Western Suburbs, Melbourne

Hi,
Very long time ready of Somersoft, but rarely post so I have decided to share my adventure of our first development in the Hobson Bay area. Bought property as a PPOR about 5 years ago (at the exact peak of the boom in Melbourne). As we were considering selling and upgrading elsewhere last year, the costs associated with stamp duty and REA fees would severely reduce our equity. So we decided that the best course of action was to exit our current house through development.

I completed a feasibility analysis last year and it come up only 15% profit margin on the full costs associated with 3 dwelling townhouse. This was below the recommended '20%' but as we already bought our property, and was in an area where the buy-in was much cheaper, I thought that this was reasonable.

Last year in November, applied through our town planner after 2 months of negotiation a 3 dwelling townhouse development. Last week, we received council approval so we are continuing with our journey. When i started the development, I could get finance, but with the recent restrictions I may have difficulty so have required to consult a mortgage broker. This is our next hurdle, however, our property has gone up 30-40k with the DA so not all is lost if we have to exit.

Exit strategy is to recycle the equity and use it in a future development. So, we will sell 2 units and keep one and maximise its LVR for tax offsets. I've attached current estimated build costs and plans for development.

Thanks for reading and will continue to provide updates on my experience so that others may learn.

 

Planning something similar in Hobson Bay council too. Plan is to place 4 townhouses.

What builder are you going with?