Feasibility of Beckenham development

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.

 

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.

 

Run fast, run very fast

 

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.

 

Holding costs just turned you into a charity giving money away

 

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...

 

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

 

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

 

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.

 

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.

 

Does Beckenham have connection to deep sewerage?

 

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.

 

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....

 

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?

 

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.

 

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?

 

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.

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

 

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.

 

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