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Feasibility of Beckenham development

Discussion in 'Development' started by Perthguy, 12th Nov, 2015.

  1. Perthguy

    Perthguy Well-Known Member

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    Interesting opportunity in Beckenham. For sale an almost completed house on a large block. There is a demo house at the front and a new, almost complete build at the back. Asking price is $599,000.
    reiwa.com - 51 Dulwich Street, Beckenham

    I am running the numbers on the following scenario: subdivide into two green title blocks, demolish the front house, build a 4x2 and sell, complete the rear house and sell.

    Based on a sale earlier this year, I have priced the street front 4x2 at $540,000. I have budgeted $75k to subdivide, service, fence and clear the front block. I am estimating a build cost of $200k to build something similar to this:
    Sold Price for 28 A Lacey Street Beckenham WA 6107

    I am guessing the rear might sell for $600,000, but it needs work. For a carport, landscaping, painting, floor coverings, compete the kitchen, shower, taps, I have allowed $50k.
    Assuming we bought this for full price, here are my guesses so far:

    Purchase price: $600,000
    Stamp duty: $24,815
    Registration of title transfer: $274
    Registration of mortgage: $164
    Estimated legal costs: $600
    Total Purchase: $625,853

    Front house:
    Clearing, servicing, fencing, subdivision: $75,000
    Build: $200,000
    Total Cost: $275,000

    Back house:
    Complete the build, carport, landscaping: $50,000

    Total costs $950,853
    Sale of front house: $540,000
    Sale of back house: $600,000
    Total sale: $1,140,000

    GST on selling: $114,000
    Agent commission: $28,500
    Settlement fee: $2,353
    Selling costs: $144,853

    Total costs: $1,095,706

    Gross profit $44,294
    Where have I gone wrong?

    If the place could be bought in the margin scheme and the places sold in the margin scheme, that would reduce the GST component payable but I'm not sure how much by. Apart from that, it seem unprofitable unless I have missed something.
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    The main hurdle will getting finance. Banks *hate* unfinished houses though it is dangerously close to being finished.

    I'm going to assume the rear house was an owner build so that would need have have risk factored in.

    The ceiling height of the attic looks quite low to me so I'm curious it is more than 2400mm. I don't think the bedrooms have sloped ceilings like that will be as popular or as comparable to a standard 4 x 2

    There is definitely a story behind this sale.
     
  3. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Run fast, run very fast :)
     
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  4. Perthguy

    Perthguy Well-Known Member

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    I assumed the same thing. I didn't factor in an engineers report to make sure it has been built properly. Owner builders provide the warranty but that is useless if the owner has gone broke.

    I doubt it is a good story. ;)

    I figured as much or I woudn't be posting here ;)

    I really wanted to see if I seem to have messed up any of the numbers big time because if I am even close, it is a bad deal all round. Oh, I didn't even factor in holding costs because the margin got so small I gave up calculating. Holding costs just make it worse.
     
  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Holding costs just turned you into a charity giving money away :p
     
  6. Perthguy

    Perthguy Well-Known Member

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    Hypothetically, if all the other problems could be overcome, at what purchase price does this start to look attractive? I could chat to the agent on the weekend and give him the bad news... ;)
     
  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Maybe at land value and if it was R40 and you could demolish both and build a triplex?
     
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  8. wogitalia

    wogitalia Well-Known Member

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    That price seems absolutely astronomical for Beckenham, I don't reckon you could pay me enough to live in that slum. If there's a more unsafe feeling and ugly suburb in Perth than Beckenham I haven't been there and I've been just about everywhere in Perth! It's the only place that makes areas like Balga, Armadale and Gosnells feel nice!

    I'm fully aware it's probably roughly the market price for that property... it just seems absurd :)
     
  9. Perthguy

    Perthguy Well-Known Member

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    I have no idea if it is market price or not. I suspect it may be over. I think the numbers would only work if the front was able to be renovated and sold. I have been told the front is a demolition job, so the numbers don't work at all for me. I might drop by on the weekend just to see how weird that back house is. Weird doesn't sell well, so add that to the list of negatives.
     
  10. wogitalia

    wogitalia Well-Known Member

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    Weird is especially unlikely to sell well in what is still fundamentally a Homewest type area.

    I have no idea on the market price in Beckenham, just not an area I'd personally look, too much wrong with that neighbourhood to feel remotely safe about an investment in it and I'm sure as hell not living there! To be fair I haven't been in there in probably 5 years now so it could have changed dramatically but somehow I doubt it.
     
  11. Big Daddy

    Big Daddy Well-Known Member

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    Does Beckenham have connection to deep sewerage?
     
  12. Perthguy

    Perthguy Well-Known Member

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    Luckily the property market doesn't work like that. ;)

    This is what they are building and selling there now: Sold Price for 183B William Street Beckenham WA 6107

    Most parts do, some parts don't. Anything that is R25 or above most likely will. Have to do your due diligence to find out.
     
  13. Aaron Sice

    Aaron Sice Well-Known Member

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    Gosnells is applying Public Open Space contributions to any subdivision they can, including build strata. Might pay to check before dipping your toes in the water much further....
     
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  14. Perthguy

    Perthguy Well-Known Member

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    Thanks Aaron. It's not something I am interested in but that is useful to know. Can they apply Public Open Space contributions to a 2 lot subdivision. I thought there was something in the P&D Act preventing that?
     
  15. Aaron Sice

    Aaron Sice Well-Known Member

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    They've got a new policy surrounding it all. I don't do much in Gosnells but they've been applying it retrospectively as well....just double check anything you do in the area.
     
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  16. wogitalia

    wogitalia Well-Known Member

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    Well the market kind of works like that, there is a reason that Cottesloe, Scarborough, Mt Lawley and co are so expensive in comparison ;)

    Is it just me or is that one incredibly ugly house?
     
  17. Perthguy

    Perthguy Well-Known Member

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    No wonder you are whinging that housing is so expensive if that is where you are looking. ;)

    Back in the real world, there are deals to be made and money to be made in lots of places you wouldn't ever live. :p

    This is not an example of a good deal. I just posted it in case I was missing something obvious. Apparently not. :D
     
  18. MrRB

    MrRB Member

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    Looks to me like someone got them selves a shed house, spent a few dollars at Bunnings, and ran out of cash maybe?
    The unfinished floor that wasn't professional laid is why I'm guessing owner builder and a few Bunnings gift cards.
     
  19. Perthguy

    Perthguy Well-Known Member

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    No idea. I haven't had a chance to have a look yet. Though I suspect you may be spot on.