Duplex development Essendon, Melbourne

This one popped up on my alerts over the weekend and I thought I recognised the address from when I looked in Melbourne years ago. I didn't recognise the house though so I dug a bit deeper.

Turns out the original property sold for $365,000 in May 2006. It was some kind of renovated weatherboard cottage but I didn't like it because it backs onto the railway line. If you scroll through the photos in this link there are pictures of the old cottage. I don't remember it being so ugly!

14 Grice Cres, Essendon, Vic 3040 - View Sold History & Research Property Values - realestate.com.au

Looks like at some stage the old house got knocked down and rebuilt as 2 townhouses.

One side was listed for sale for $580,000 - $620,000 in July 2015 and sold for $816,000 in July 2015.

12 Grice Crescent, Essendon, Vic 3040 - Property Details

The other side (the one that popped up in my alert list) was listed for $820,000 to $890,000 and sold for $1,000,000 on the weekend (8 April 2017).

14 Grice Crescent, Essendon, Vic 3040 - Property Details

Purchase price: $365,000.
Sale price (total): $1,816,000.

Who said developing isn't profitable?

What is missing is the build cost, which I have no idea about Melbourne. What do you reckon @MTR? They don't look like particularly cheap builds?

Tagging @Barny also because you have an IP in Essendon?

 

Would at least be $1500 per sq, but with the boom building costs have been rising could be more now? No idea now

 

Looks to me like it could have built around 2014.

I think $1,500 per sqm could be in the ballpark. I will run some numbers on that and see how much fat. Of course it helps the original house was purchased in 2006. A lot of the "profit" is land appreciation.

 

ksou is reporting number 12 as 146 sqm and 14 as 145 sqm.

Purchase price: $365,000
Demo and subdivision: $50,000?
Build: $436,500
Holding costs, architect fees, planning fees etc: ???
Total cost: $851,500 +++
Total sales: $1,816,000
Minus: advertising, commissions, tax ???

Looking up the rent history, there is nothing for the original property. PPoR maybe? That would make the tax side a lot more attractive.

Either way, seems like a good project.

 

depends if its a builder it will be significantly less ?

 

Yep developing can be profitable if you bought years ago, or if you're the builder. I had 3 townhouses roughly drawn up for that block. Very cheap 12k per square similar speck to outer suburbs quality, middle to higher 15k, and top notch 18k square. Figures didn't stack up for me and best to sell either with plans or as is. Essendon market has gone bonkers and hasn't stopped, lack of stock for development blocks pushing up prices, but people who just want a house are also competing with builders/developers currently.

 

@Barny sounds like it could be a good move to sell?

 

Nah, gonna use it as leverage. Essendon is the best investment I have, that will stay for awhile.
Even if prices drop it's in a great location which will always demand a premium.

 

You shouldn't really look at developing like that as it needs to be feasible in the Present value.

I.e. Do a hypothetical feasibility of buying the block in Dec 2013 and finishing the build in June 2015, ready to be sold in July with settlement in August. Then staging the sell and holding the other till April 2017.

That being said with escalation of 184k in just under 18 months it would most likely be pretty profitable.

 

Some ruff figured I used over a year ago.

Open contribution fee if more than 2 dwellings 5%. Architect fees and and other fees to have ready to build, total came to 73-82k for 3 dwellings.

Demolish bout 15k

Was quoted then 12k per square but quality was close to med build.
Total 3 town houses 48sqare plus gst 633k

My total project came back a total 855k worst case scenario which included my holding costs for 3 dwellings totalling 48squares.

Commission bout 3-5% depending if you spruik them off. You get a higher return compared to 1.5-3% standard rates.
Dwelling standard rate over the million mark is 1-1.5%.

Should also add from memory total sales were 2,150,000. But then you have to add in taxes etc etc. Sale price at the time was about 1-1.05. Worked out best to either sell as is or with plans. Since then, current comparable homes around the house have sold for 1.6-1.73. So My current estimates are 1.3-1.4 as is unrenovated.

 

I agree. Personally I think it would be risky to buy a similar site now and try to replicate this. The risks are: suitable sites are now close to a million dollars. That eats right into the profit. Also, the Melbourne market may not keep rising.

The other consideration is developing vs holding and selling. After tax, it seems like the profits are not too different. Realistically, with the amount of capital required and the level of risk, it probably wasn't worth developing at all.

The $1.8 million total sale price seems impressive at first. But add up all the costs and take out tax and the profits disappear very fast. I still think it would have been a good project but maybe not the smartest move financially?

 

True.