Development Feasibility Calcs, what am I missing?

Hi Guys,

I am trying to ascertain the feasibility of developing a large block I currently own.


Stats for the Block:

2200m2 Level block with no easements

500m from soon to be open railway on the Moreton Bay Rail Line

Plan for university to be constructed across the road

Shops less than 1km away in 2 separate directions

High level development in the area, specifically with townhouses.


Current status:

Currently has a 5 bed lowset house on the block which is positioned directly smack bang in the centre of the block.


What I require:

I require some method of a feasibility in order to value the prospects of a development. I can certainly do the calcs based on numbers, however what I need to determine is a rough possible optimum configuration for this block?


i.e –

How many townhouses can I fit in this block?

What is the best configuration?

Can I simply get a development feasibility completed and then look to sell the block with this as evidence of value?


Last but not least, if anyone can recommend a good resource to discuss this, please let me know.

Feasibility Calc attached.

 

I'd factor in sale cost (ie real estate agent fees) per townhouse. Probably 10-12k each.

Also, I don't think it would be sensible to sell 14 townhouses at the same time, so may hold onto some of those, and tax implications.

There would also be some council fees, servicing costs/fees and all the common areas.

I'd also make assumptions that you would get more $$ for a high quality finish.

I think any potential purchaser would do their own feaso, so I think your money would be best spent getting approval to do it, or just include a 'non-official' lot layout.

 

Save yourself a headache, get some Feasibility Software and do it properly. I've included 3 of their sample reports which will give you an "A - Z".

http://www.devfeas.com.au/

 

Thanks for the response guys.

Feastudy certainly looks the goods! will give it a crack and see if I can outline the 20% profit margin benchmark.

I dont have the cash backing to develop, so does anyone have any suggestions on the best way to market the sale of this block? Would sending a rough feasibility to buyers agents be an idea worth throwing around?

 

Council fees don't appear to be included (unless that's the 20k fee), also engineering needs to be factored in.

I'd have a chat to @RPI on here as he is much more familiar with the QLD system than me.

 

The good thing about this software is, you can play around with the inputs to achieve your IRR, which in your case is the magic 20%. Have you thought about engaging with a developer rather than a buyers agent.

 

My partner is a paralegal who deals with developers, I definitely plan to but just wanted to run the numbers so I dont waste anybodies time.

Was just looking for a bit of guidance as I have never delved into the development side of things. I have always renovated run down properties but this house is just too big and too old to do anything profitable with, the 2200m2 in prime location seems to be my best bet out.

 

As there sample reports, Andrew, it's possible that input wasn't included in these reports. On our software, there is a drop down window, which lets you choose the state you intend to develop the land. Good point though.

 

Your def on the right track, speak with your partner and discuss all options.

 

Sorry - didn't see your post as I had a phone call before finishing off the message. Referring back to the original feaso costings.

I'll have a look at the software. We do a lot of feasos based on yield and cost per sqm at a high level.

Another factor to keep in mind (in NSW at least) are developer contributions. 2mill in townhouse development in one Council area can have S.94 contributions of 20k, next Council area they might request 13k for a single granny flat. Huge variables at play as a result.

 

Thanks Andrew.

What your responses outline is there is a lot more to the story.

 

Agree 100%..

 

Keep in mind, Whishy, we use our software purely for commercial and not residential, so yes, the inputs will be different as will be the options to input raw data. As Andrew has touched on, there may / might be more involved from a residential development point of view.

 

If you are looking to maximise the sale price of the property and selling with "development potential" without going through the process of getting DA, a common solution is to engage a town planner (familiar with the area) to prepare a preliminary feasibility assessment for the site which will look at the opportunities/constraints and provide advice on the anticipated yield. You may also choose to get some basic sketch plans of the proposed townhouses to provide to potential purchasers.

 

^^^do this. Variations are to call Town Planner, Surveyor or building designers local and well regarded to get their opinions, pay them for an hour if you need to its worth it.

 

@Whishy

one the the big ticket item missing in your feso is council contribution cost.(unless Morton bay is waving a contribution fee again, it will be around $23K per townhouse + utility connection/upgrade cost)

other things :

• Low holding cost calculated
• Commercial Finance Application and valuation cost
• QS report cost
• Project marketing fee
• Pre sale
• Professional fees are on low side
• i am sure there will be few other cost involved that i haven't mentioned above.

As others said, consult developers, town planner, etc.(@RPI


Feel free to use our simple feasibility calculator on our website!

 

Thank you Be Developer.

I have done some more homework and I am still getting a very conservative profit margin, including risk.

Just wondering what the best advice would be for obtaining development finance? And what prerequisites apply?

For the Record, I own the land in which I purchased for $530k and owing is $470k

Would anyone be able to PM me contacts on potential partners in something like this? i.e. One part land holder, other part development, split profits at end? Is this common?

Cheers

 

On such a large number of units it would be commercial finance only which requires a much larger deposit/skin in the game.
Commercial lending is not as cut and dried as residential lending. The LVRs are fluid depending on the perceived risk of the bank - builder experience, developer experience, site location, project feasibility etc etc. Depending on that is what interest rate and LVR will be offered.
As a rule of thumb though you might want to use 6% and an LVR of 65%

For the record - the bank owns your land lol . You own $60k worth of driveway or a patch out the back.

With a small amount of equity like that you will struggle to get this off the ground unless you have equity in other projects/oodles of cash.

 

@Whishy

To add to what @Westminster said,

you will need a pre-sale

above all, lender will look at your overall position and experience.

Other option is to get DA sorted and flip it. Use the profit to start small deve (under 4 units , resi loan)