First development - 3 townhouses SE Melbourne

I thought I would start a thread on first development in SE Melbourne now that we have settled on the block.

Not sure if a good idea based on reading other threads and feedback received but I believe it may be helpful for a current experience for new or first time developers and any feedback received could hopefully be constructive.

Current status - Corner Block settled (90 day settlement) and draft plans have had initial council feedback and being amended (very minor) for submission next week with clause 55 documentation to proceed to public advertising.

Budget Numbers:
Purchase price $525k (purchased just before 1st home owner grant took effect with longer settlement) 680sqm
Stamps, legals, conveyancing $30k
Demolition of existing house $20k
Town planner $8k
Drafting, architectural plans, engineering, council fees, subdivision $52k
Build costs $560k (1 x 4 bed - 3 bath - 2 car, 1 x 4 bed - 2 bath - 2 car, 1 x 3 bed - 2 bath -1 car) townhouses
Contingency $30k
Interest costs $45k

Total investment / costs $1270k

Sales targets, $700k, $700k, $625k (conservative - I believe these can be exceeded based on recent comp of $740k for inferior quality but also brand new 4-2-2)
Staging, conveyancing costs $10k
Other settlement charges $4k
Selling commission $40k

Total Proceeds $1971k

Return $701k
Approx GST based on margin scheme $70k

Profit after GST $631k.

Return (after GST) on sales 31%, ROI (total costs) 50%.

Structure - Being done as a joint venture between the investors in a company. Each person with an equal cash (loan) investment to the company and an equal share of the profits. Company to borrow a small amount towards the build costs (approx. 25%)

The area has certainly jumped after the recent first home owner grants and I believe there could be another $25k to max $50k for each sale price but for budget purposes we are keeping the existing sales figures.
Will post up the updated floorplans shortly when they become available.

Looks like no common area required so no body corp.

Initial thoughts - great idea to share the load, there is a lot to cover and a lot of things to consider. Each person brings slightly different skills to the table which has proved valuable.
Communication between all is important to maintain progress and updates / queries as they come to light.

Keep plenty of cash reserves, something will always come to light or delay the project - don't run too close to the edge for SANF.

The townplanner is critical - some initially said couldn't get 3 on the block (figures still worked with 2 4 bedders but not as profitable) but council is supporting our proposal with only some minor amendments which will actually help the saleability. A planner who is familiar with the council planners helps and with many contacts is a huge benefit for first time developers.

Will keep updated as progress continues.

 

Are you a builder, How can you manage to build three for only 560k construction costs....

 

No - based on cost approx 10k per sq but one of our team members does project manage full renos for a business.
Depending on quote prices from builders we may use builder to lock-up and finish internals ourselves or otherwise builders for the full build.

 

That does sound very cheap. Have you had any quotes on it yet?

 

Currently in process of getting loan for approx 300k to complete build. Rest via cash contributions.

Quotes to come but will see how close we are.

 

Craig i'm interested to understand how you managed to squeeze 2 x 4BR townhouses + 1x3BR on a block of that size, is it a corner block? Do your 4 bedders have a double garage?

 

Yes it's a corner block, both 4 bedders have double garages & 3 bed has a single garage.
All with street frontage.
Will post up floor plan etc when get back final draft from council.
Cheers

 

Man assuming these are double storey - can tell you it is next to impossible.

Even the cheapest possible volume builders were quoting 195-220K for 3 bed 2 bath 2 carpark houses and that was 4-5 years ago. I'll take a pic of brochure when back.

And no way a spec builder can match up its pricing with a volume builder without cutting corners.

 

My costs (in Adelaide) for
- 3 Bed + Study 2 Bath + WC 2 Garage
- 3 Bed + Study 2 Bath + WC 1 Garage x 2 (duplex)
Was ~$830k that was pretty much everything, fencing, landscaping, a/c, driveway, paths - turnkey.

Always interested in seeing other developments and plans - throw them up when you can.

 

Ok thanks - will prepare for higher quotes - we are also happy to finish ourselves from lockup as one of the team's skillset so will see how we go.

 

not sure how you are going to do from lockup unless you are a professional builder with a registration. The kitchen and plumbing fitoffs need signing off by the building surveyor and so does the electrical and plumbing, so you would not get occupancy. Then there is the issue of insurance covering the site - as once the first builder leaves - the onus is on you. The original builder is also not going to want to give a cert just on half done job and if any issues - you would have 2 plumber or 2 electricians pushing the blame to the other.

 

Always allow for blowouts so best to add/deduct 20% from the figures quoted so at least you break even or make some profit worst case scenario.

 

We do have surveyor, qualified plumber, electrician, builder contacts etc on board. Do realise we would have to look at the insurance issue however if we finish off. Will see how much price difference to see if it is worth pursuing.
The 4 bedders are slightly smaller than the one quoted above even though you mention it is a few years old and we do have economy of scale of 3 on 1 site.
Still plenty of fat in the deal even if build cost does blow out more than the contingency above but will keep an eye on it.
Thanks for input all

 

Yes but a volume builder is the cheaper than a spec builder and to do one now is 250-270k. Those prices are 4 years ago For straight up. As for builders it what I meant was many builders would be reluctant to put ur name on the line and let someone else come in for fit off as a lot of issue could occur when warranty comes to question as to who is liable so how does the plumbing certs get signed off etc u would need two unless u are owner builder

Even the cheapest of the cheapest spec builder at today's prices would come in 800kish bare minimum for 3 and I know the cheap builders from Turks to Serbs

All the best good luck

 

Man I would be crying buckets if I lost money or broke even on a development for all the extra risk and heartache taken on...

 

Not much danger of that - even with worst case scenario still a good profit. Sales no's also should be conservative so some likely upside there. Will see how those builder quotes come in.

 

Keen to see the tenders, hopefully you find something equitable that will see you receive a profit for your hard work and risk.

 

Here is a quote few years back I obatined for a 3 townhouse dev in a Doncaster from a spec builder when townhouses were not 800kihs but only 600kish. Hope this helps.
there is fat in every deal. just a matter of how much or how less or how much effort one wishes to devote or undertake. My friend did one in kew for 3 townhouses made 800K but could have made 1.4 mil not doing anything with just permits. rather than spend time and efforts.

 

It happens and when it does you just have to hold and pray, if you can