Help me do a feasibility on large development

Commercial finance isn't something to be scared of. You generally get great terms that resi lending doesn't allow. You can borrow more for example.

 

Hi @Westminster ,

Was wondering at 200k in Perth, what level of finishing would that give? would that price include everything to do with construction (assuming carport)?

 

$200k is really a rough and ready amount, truly not an exact amount down to a level of finish as each site is so unique.
However I would say it would construct a basic 2 x 1 (maybe 2 x 2) with carport but not include headworks or siteworks.
For example if I was looking at a site with 5 apartments on a flat block I'd expect an total budget construction and site/headworks turnkey to be around $1.1-1.2. For that I'd be getting 31c ceilings, split system air con, alarms, stone benchtops to kitchen + overhead cupboards + dishwasher, large format tiles, window treatments

 

MrM
Looks like a great project.

I think that is clever idea to build in stages and sell first 10 to help fund project.

All the best

MTR

 

Thanks MTR. There's certainly a lot of risk involved with this project. Wanna mitigate the risks as much as possible before fully committing.

 

I am amazed with the numbers, expected profit
Perhaps you timed it correctly in terms of building costs.

Also I like the lower end values I think it's going to be far easier to sell, and Hammy hill is excellent too.

Are the apartments still selling well, I know they have been quite popular.

From memory they were flying out the door when I was building nearby, they were high spec. You could stage one of these on completion.

Did you source the property yourself?

MTR

 

Yep - sourced the property myself.

The market is pretty stagnant, so you need to do something different. The numbers really only work with the two stage strategy, reducing capital investment and increasing the % return. There's risks associated with that - namely the longer timeframe, and the need to sell stage 1 in order to move to stage 2.

I think end products need to be the right spec and prices right in order to sell. Anything can happy in 2 years.

 

I agree, I think if you get the spec right you will be fine. also as there is plenty of fat if you go from $399k anything with a 3 has to be attractive.

see if you can find sales on same product, I recall seeing pictures they were Awsome, very impressive in Hammy, find the selling agent and work out what they did. Just suggestions

I would also look at getting a slick interior designer to put it together it's peanuts if you get the right person, just ideas thinking out loud and perhaps get an edge in this market

MTR

 

Thanks for the suggestions. I'll give a few agents a call this week. I ran some sale reports from RP Data, and 2x1 have sold for $399k whilst 2x2 have sold for $420k. Definitely need to build in some fat in a stagnant market though.

Great idea on the interior designer. Have you used one that you would recommend? I've been thinking of getting some help, even for my current projects.

 

Yes, my g/friend and is a developer but she does this for her own projects, I will chat to her and find out more. Not sure whether she will do this

I think Myf has an interior designer as well perhaps another contact and just work through it. I will gat back to you.

MTR

 

That would be great thanks. Much appreciated MTR.

 

Oops noticed I missed out she is a interior designer, she is pretty amazing, but I am sure there are plenty around I am biased because I have used her. I will get back to you.

When do you think you will start build approx time

 

Cool.
This project will be about 12 months away. I've got 3 other projects underway at the moment at different stages, and could certainly use some good advice.

 

Interior Designer and a good 3D renderer if you want to sell off the plan is a good idea from @MTR. The interior designer can come up with 2-3 colour schemes for the development, create sample boards for the REA to keep and show clients and the 3D guru can do up slick photo realistic pictures.

I've been talking to Shane at Motivo Design about their 3D services - details below. There is also a really good 3D Renderer who I met on SS who's going to do some work for me in barter for some help from me but I don't know if he normally takes on private clients.

Shane Fragomeni
Design DirectorB.A. Interior Architecture (Honour’s) & Dip. Building Design & Drafting

Interior Design + Building Design + High Definition CGI 3D Render Images + 3D Modeling Services for Residential & Commercial Projects
office 08 9204 5090 mobile 0403 227 990
First Floor, U1 / #22 King Edward Rd, Osborne Park. Perth W.A. 6006 PO Box 2005, Yokine South PO W.A. 6904

Web: www.motivodesignstudio.com.au
eMail: [email protected] ​

 

Thanks Tigress!

 

Few things that pop into mind that i didn't see you mention/allow for:

-Engineering (can be a substantial amount and needs to be budgeted)
-Planning Drawings & Working Drawings (i'd imagine this will be in the $10's of thousands so best to include it in your budget).
-Retaining/site works/demolition budget seems a little low to me. We just did a development on a block half that size and the slope was not even noticeable but by the time the engineers were done with their engineering/footing design the site had to be built up and as a result $50K worth of retaining was required and that wasn't even alot of retaining so if your block has a slope that is noticeable you could easily spend the $100K alone on retaining. I'd allow more like $200K (just a guess because i don't know whats existing on that site and how much clearning/siteworks or demo is required).
-Don't forget to allow a contingency. Banks usually require it and even though you're not using a bank for the most-part its still good practice i think to allow for it.
-Power upgrades (we just completed a 15 site development and it resulted in a $200K power upgrade). Thankfully this was investigated prior to purchasing so we allowed a budget for it.
-Civils (is there going to be roads built?), streetlights etc?

On a separate note about cost-plus. We did it once a couple of years ago after a builder friend convinced us it was the way to go for developers....well from our experience (having only ever used fixed priced for every other job) cost-plus worked out worse for us! Builder has absolutely no risk as whatever it costed was what he passed onto us plus his margin. There was no incentive for him to shop around for the best price which made it worse for us. Saved him a heap of time and money and ended up costing us more than if we had gone fixed price. I suggest you send it out for tender to a handful of builders and then really consider whether cost-plus is worth it. If your tenders come back within your budget (or even under) then i'd save the hassle and go that way, you're much more protected.

Look forward to hearing the how this project progresses

 

Thanks for the input @3LittlePigs . I'll firm up some quotes and pricing for those things you mentioned.

How did you determine the cost for power? I'll have a chat with the power utility to see if they can give me an indicative price.

I'm building cost plus at the moment. So far so good.

 

Power may refers to substation?

The one that I am working on (55 units in Sydney) requires an electrical engineer to submit a connection design to Ausgrid in order to get the electrical power from an existing substation. Otherwise I will need to build my own substation which will cost $300K or more.

 

Agree - Cost Plus will only ever work out in builders favour.
Have a look at GMP with shared savings for the best of both worlds.
Guaranteed Maximum Price - As advertised
Shared Savings - Incentive to minimize the cost of the work, if it is shared the more they save the more you both benefit

 

We enquired with SA Power Networks during the due diligence phase (which still allowed us to back out of the contract should this cost turn out to be substantial) but essentially it involved getting an electrician to work out the power demand suppply for each dwelling. They have a special calculation whereby they then are able to determine whether the currently supply to the site/area will be sufficient to cater for an extra X number of dwellings. If not, this will involve a power upgrade and in our case its costed an extra $200K. In our case as well the work was non-contestable meaning we had no choice but to allow SA Power to do the work...it wasn't something we could shop around and get the best price for.

If there's substantial fat in the deal it should still stack up but its just best to know what these extra costs are because it is significant.