First time IP - Building detatched dual occ in Newcastle

Hey guys, come on my journey as a foray into the world of property!

My wife and I recently acquired a big block (780sqm) 200m from Stockton beach.
Lovely land, terrible house. -> https://www.realestate.com.au/property//14-flint-st-stockton-nsw-2295
About 17.8 wide, and 44m long.

We are planning on doing a knock down rebuild in 2-3 years time with a high spec detached dual occupancy with the following mentality:
1. We want to build to what the suburb should be in 10 years
2. Build something we would love to live in ourselves
3. Has to make sense financially

(something similar to this 594 | Futureflip )

Goal is to spend $1.2m on the build (on a $1.25 acquisition) to create two houses worth $1.4m each.
Call it $2.5m costs with some blowout with $2.8m in equity so a $300k profit.

Soft costs are expected to be ~$80k (including design and subdivision), so allow $1.12 for the build. We've been quoted to expect roughly $3k/sqm for the build which would let us build each house to 186sqm.

I'd love to hear your thoughts on whether these numbers look feasible to you?

Also, if you have any tips or recommendations on builders, cost saving, building design for the area please let me know!

 

That's a 12% return on total development costs ( I say 'total' very loosely).

Doesn't take gst into account either.

Based on your numbers, it doesn't come close to stacking up for me.

Usually you'd want to do a feasibility before buying a site...

 

Re GST we arent planning on selling post development so GST shouldnt be an issue.

Re feasibility, we have done already and know we can make a buck on a lower cost development but trying to make the numbers stack up for something higher end.

 

Well based on your cost and sales estimates....the profit margin is too small, assuming the numbers are accurate enough.

Don't worry about building high end or low end. Build what the market wants now and use that spec level as your guide. Going a bit better spec is fine but don't over spec if the numbers don't support it.

Also don't worry about building what you love, it's honestly irrelevant. Build what the market wants and has good sale values.

 

What kind of total return will you be looking at?

 

I look at 2 things before determining acceptable return for me.

1. Overall risk
2. Timeframe of project.

Generally I'd want to see a 30+% gross return on the back of envelope feaso before I would even consider taking it further. If the project can be completed in 6 months then I am happy to look at 23-25% gross return.