Dual Occupancy/Duplex Build Melbourne 2019

Discussion in 'Investment Strategy' started by croseks, 4th Oct, 2019.

Join Australia's most dynamic and respected property investment community
  1. croseks

    croseks Well-Known Member

    Joined:
    9th Oct, 2018
    Posts:
    184
    Location:
    Melbourne
    Hey everyone,

    Long time listener, first time caller so to speak :)

    I currently own a 600m2 block in Melbournes south east and I have a plan to sub divide and build dual occ townhouses (side by side). 4 Bedroom, 2/3 Bathroom, 1 Car - x 2.

    Now I have asked quite a number of builders and real estate agents in the area for price guides of just the build cost, with the lowest prices being in the $800k region (not including demolition of existing, sub division costs, site costs, landscaping etc...), so approx $1M total development costs.

    Recently, there has been some newly built dual occs sold in the area for around $800-950k with the land purchase prices being from $790k+ (4 Bed, 2/3 Bath, 1 Car)

    When you do the math, this just doesn't stack up with the build prices that I have received.

    For example, the below numbers are from an actual development in the area:
    Land Cost (may 2017) = $821k + Stamp duty, holding costs, etc..
    Sub division costs = ????
    Demo costs = ????
    Building Costs = ????
    Selling Costs (Agents commission, CGT, etc..) = ????
    Selling Prices (Jul-Oct 2019) = $895k + $895K

    That means that out of $969k, the developer needs to pay for all the question marked prices above and still make a profit. The numbers just don't stack up. There are also at least 2 more developments in the area with a similar range of numbers.

    Am I being duped into thinking $1M all in build cost is normal for dual occupancy builds (have been told by 4 builders and 2 estate agents this is normal)? It would appreciated if anyone with any experience could chime in.

    P.S. The whole development is worthwhile even at $1M, It would obviously be a lot more worthwhile if that can be much lower lol
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    3rd Jun, 2015
    Posts:
    11,331
    Location:
    Perth
    Well firstly I wouldn't be asking REAs for construction costs but sometimes they are privvy to how much their vendors paid to construct - still use it as unverified information.

    However I wouldn't be surprised if it does cost $1m if it's around 575sqm of turnkey construction. The information you have given doesn't really indicate size very well and so if you are asking a builder how much does x cost then whatever they tell you isn't probably going to be accurate. I know you could do a 4 x 3 x 1 in as little as 215sqm (x2 = 430sqm) so yes there are potential savings if you were doing something like that as it might only cost $750kish to build. I'm estimating using $1750psqm here - no idea of your suburb, what level of finish, specification level, retaining etc is required I'm just spitballing a decent square meter figure.

    I would go to council and see who the builders where who did the ones which are for sale and find out how much they cost to build. That would help you determine if these people have made no money (sad but possible) or if the build costs are lower than you think.
     
  3. croseks

    croseks Well-Known Member

    Joined:
    9th Oct, 2018
    Posts:
    184
    Location:
    Melbourne
    That is a great idea regarding getting the builders info from council! Thank you!

    Yeah sorry I was vague about details, got a bit too excited haha.

    Basically, I took plans from a volume builder for a duplex 2 x 28sq townhouses, then used those plans to try get an estimate at build cost. I did see a town planner to make sure what kind of build would work on my block and the plans from the volume builder were pretty spot on.
    The comparison build that I am referring to in my example is actually the same size and specification as the plans I had.

    The advice you mentioned above pretty much answers what I need to do next so thank you very much for that!
     
  4. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    What area is that if I may ask? I don't see a reason to hide it.
     
  5. shorty

    shorty Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    1,207
    Location:
    straya
    Subdivision will set you back $10-15k. Demo about the same unless something unusual.

    $1m total is probably a good number to work from when you consider holding costs, contingency, etc.

    Also be aware that gst will probably apply (new residential dwelling) not cgt.
     
    croseks likes this.
  6. croseks

    croseks Well-Known Member

    Joined:
    9th Oct, 2018
    Posts:
    184
    Location:
    Melbourne
    Carrum/Patterson Lakes
     
  7. shorty

    shorty Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    1,207
    Location:
    straya
    I know a good builder in that area that we used. PM if you're interested.
     
  8. Westminster

    Westminster Tigress at Tiger Developments Business Member

    Joined:
    3rd Jun, 2015
    Posts:
    11,331
    Location:
    Perth
    I think you can definitely get the price down for that area then. I should have been more clued in by the end values but I'm from Perth and I forget how much more expensive Melbourne is. If it was Mordialloc then $900k-$1m build and a large house but Patterson, whilst not Frankston, is not as nice and probably doesn't need all the bells and whistles that nicer bayside requires. End values will be dictated by how close you are to the water etc

    Also run numbers on going smaller, for example this is a much smaller build with a 3 x 2 but is close to water and got $825k 21B Valetta Street, Carrum, Vic 3197
     
    croseks likes this.
  9. jyeung80

    jyeung80 Well-Known Member

    Joined:
    25th May, 2017
    Posts:
    215
    Location:
    Melbourne
    Just make sure u do a thorough feaso. I did some calculations a while ago for a potential dual occ in SE Melbourne and found it wasn't really worthwhile once u take into account everything other than land and building costs, i.e. interest, GST, design & engineering, landscaping, driveway, agents fees, etc.

    Also how much would the volume builder charge? I'm assuming they're among the cheaper quotes u got.
     
  10. mehrar_84

    mehrar_84 Well-Known Member

    Joined:
    29th Jan, 2019
    Posts:
    118
    Location:
    Melbourne
    or look at existing properties for sale in your area. email agent asking who is builder (act as if you are buyer) 99% they will know or find out.
     
    croseks likes this.
  11. croseks

    croseks Well-Known Member

    Joined:
    9th Oct, 2018
    Posts:
    184
    Location:
    Melbourne
    I will be getting more information over these next 2-3 weeks from some of these other builders, I spoke to the selling agent from one of those townhouses and he gave me the details of the builder used so should be able to gauge another perspective on this.

    I should mention that for my goals this build would definitely be feasible as we plan to live in one and rent the other, the block we have currently has an old house on it which requires significant renovation so for me personally it makes sense as we will be getting a new PPOR and IP for the value of just 1 property.
    The RE agents I have spoken with all confirm that final value should be around $1.1M+ each (the block is near the water) so for me even the $1M price tag to develop make sense.
    Obviously I don't want to over capitalise so trying to get as much info as possible before we make any decisions.

    I appreciate all the good suggestions above :)