Join Australia's most dynamic and respected property investment community

How much value do plans & permits add?

Discussion in 'Development' started by dan_89, 28th Jul, 2015.

  1. dan_89

    dan_89 Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    115
    Location:
    Melbourne
    The below 725sqm block of land in Scoresby fetched $605k at auction last week. The only difference was the latest sale had plans + permits for 2 townhouses. Over the last 12 months the area seems to be performing very well.

    https://m.realestate.com.au/property-residential land-vic-scoresby-201227621

    What caught my eye was the previous sold price; $340,000 in Mar 2014!

    That's 78% growth in the space of 16 months.

    Roughly what sort of value do plans and permits represent? (bank vals and also market value). or are there to many variables to consider?

    Can anyone confirm if the data on this particular sale is correct? Onthehouse also notes the same figures. If it is correct, im extremely envious to say the least! :(
     
  2. sash

    sash Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    3,214
    Location:
    Sydney
    That is about 265k proft...minus 18k in stamps/legals plus 17k DA costs plus 15k selling costs plus 25k holding costs. So that leaves about 180k profit still not bad!!

     
  3. dan_89

    dan_89 Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    115
    Location:
    Melbourne
    I'm looking at it more on percentage increase over that short period. Otherwise yes I wouldn't be complain with an approx $180k clear return!
     
  4. Be Developer

    Be Developer Property Developer Business Member

    Joined:
    19th Jun, 2015
    Posts:
    1,078
    Location:
    Australia
    @dan_89

    It really depends on area and quality of plans approved.

    I am seeing lot of plan approved sites are going for premium ATM. I normally expect them to be 25% above market.

    This is my theory, lot of builders/developers are looking for ready to build sites, to get benefit of low interest rates(saves huge holding cost) and anything new in the area is selling (fhb and investors).

    We recently bought DA(NSW lingo) approved site for client at premium. Our client game is moving stock and volume at certain %.
     
    Colin Rice, Tufan Chakir and MTR like this.
  5. Big Will

    Big Will Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,546
    Location:
    Melbourne, Australia
    As other have posted it really depends lets say someone buys a place for 500k and gets plans approved however in that time the market went back 10% (50k).

    They might be lucky to get the same amount of money they paid for the place but it would be at a loss if including holding, selling, legals etc.
     
  6. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,298
    Location:
    Perth, Melbourne, USA
    Plans and permits can add value, but as mentioned depends on the designs and whether there is any money in it for the builder/developer.

    You will need to do you sums on expected profit a builder will make to see whether it is a viable proposition, there are also other factors to consider, whether there is a market for this in the particular area you are playing in.

    The idea is to utilise the land to maximise the number of units etc you can build on the land. If you have plans and permits for 4 units, dependent on the area etc. there will be a $ value per each lot, which increases the value of the land.

    MTR:)
     
  7. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,713
    Location:
    Sydney
    I know 1 person who just gets DAs and on sells them for a tidy sum. But as MTR said, the more dwellings you can fit generally the better the premium you can get for the DA, as long as the margin for the builder is still acceptable.
     
    Colin Rice and MTR like this.
  8. Starbright

    Starbright Active Member

    Joined:
    18th Jun, 2015
    Posts:
    39
    Location:
    Sydney
    How about if the land is zoned for medium density and the local council has plans on their website showing what is allowable for each zoning, so developers can work out how many units they can build based on FSR etc. Do you think there is much premium on a DA approved site (already zoned), vs non DA approved?
     
  9. RetireRich101

    RetireRich101 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,292
    Location:
    Sydney
    Question re market value Vs bank value
    say you got a DA plan approved, and from your DD/Agent feedback, you're confident the market value would be 25% higher.
    are there any luck in getting bank valuation for this 25% increase?

    Had multiple dispute in the past with Bank valuer, as they dont get into development potentials, approval etc.
     
  10. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,298
    Location:
    Perth, Melbourne, USA
    DA approval more valuable because a builder is looking for turnover and this saves time/money and it's approved.

    Builder also needs ongoing projects so his workers are continually employed. First DA I put together was purchased by a builder, but I don't care who buys it as long as I make money:)

    MTR
     
    Last edited: 30th Jul, 2015
    Starbright likes this.
  11. OC1

    OC1 Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
    212
    Location:
    Melbourne
    @dan_89 Aim to get the numbers to work for a developer, not a builder.

    Most builders BUILD for others, be it for PPOR's or for developers. Not every builder is a developer :rolleyes:
     
  12. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,298
    Location:
    Perth, Melbourne, USA
    Also, I don't believe this is going to work in every State.
    Not seen too many buyers in Perth that will buy smaller deve projects with DA.

    MTR:)
     
  13. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,713
    Location:
    Sydney
    @MTR yep this guy i think mostly looked at Syd and Brissy.
     
  14. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,298
    Location:
    Perth, Melbourne, USA
    Melb for me and architect managed to get 5 on current site, whereas a draftee that viewed the site could only manage 3. Another lesson for me, make sure you get the right person this could make a massive difference to your profit.

    MTR:)
     
    Last edited: 30th Jul, 2015
    Colin Rice and Leo2413 like this.
  15. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,713
    Location:
    Sydney
    @ MTR Also with Engineering. Tell you a funny story. This developer i know went to get some structural engineering work done and come time for the builder to quote it up it was like hundreds of thousands over budget. Turns out it was waaay over engineerered. He had to take it to another engineer who had to unengineer its over engineering haha.. lost some money in the process of having to use 2 engineers but ended up being a good deal.
     
    Colin Rice likes this.
  16. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,412
    Location:
    33°41'24.7"S 150°55'34.3"E
    Has anyone seen examples of actual sales prices for small apartment sites that have been sold with plans and permits?

    i.e. sites with plans for 10+ units
     
  17. Barny

    Barny Well-Known Member

    Joined:
    16th Oct, 2015
    Posts:
    1,178
    Location:
    Melbourne

    Currently going through this process and learning what is worth more. Sometimes it can be worse getting plans and permits approved if the plans aren't done correctly, some designs can cost more if not utilised to their best ability, and selling as is with a longer settlement can achieve the same or better result.
     
  18. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,412
    Location:
    33°41'24.7"S 150°55'34.3"E
    Early days for me. I've done some basic costings for one of my sites and it seems profitable for a low-rise with some good margin in it for a builder. Will spend more time on the numbers this weekend. Also need to look at other options such as townhouses.

    Town planner and an architect have been quite helpful with costs.

    Timing will be key for this one. A wait and see of 6-12 months is needed.
     
  19. Iamnumber5

    Iamnumber5 Well-Known Member

    Joined:
    31st Dec, 2015
    Posts:
    149
    Location:
    australia
    Do you get it drawn up to work out the numbers?
    I would really like to hear how you do the basic costing if you don't mind sharing.
     
  20. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,412
    Location:
    33°41'24.7"S 150°55'34.3"E
    No, I have not had it drawn up.

    The architect gave me a good indication of the floor areas possible for each level of a low-rise based on setbacks ( although I could have worked that out myself from the residential design guidelines ). This allows me to work out a gross floor area I have to work with. From other plans I have seen I think 7% of the floor area should be left aside for common areas ( lobby, stairwell, etc ).

    Site can accomodate a building up to approx 1300sqm gross floor area. From that I can work out number of units that can be fit in ( using these figures as a guide Minimum apartment sizes in NSW – let's not worry yet or by looking at unit size figures published on some DA plans ).

    As for other costsings I was quoted ( indicative ) $1200 per unit for DA plans, but waiting for additional figures for construction drawings ( although these are not needed for development approval ).

    The town planner gave me a good rundown of all the costs involved for town planning, lodgement, engineering reports, infrastructure levies, titling and legals. Allocations are need for contingency. Construction costs from Construction Cost Calculator & App | BMT Tax Depreciation. This allow me to work out overall costs for a builder. Holding costs ( interest, stamp duty ) for the land also need to be considered.

    A budget of $40k to $50k should be sufficient for getting plans for a low-rise unit block planned, drawn up and lodged through council.

    Sales figures will be a guess since it will take a while for zoning changes to drive redevelopment.

    Might post figures once they have been tweaked and tidied.
     
    Iamnumber5 likes this.