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How to "crunch the numbers"

Discussion in 'Development' started by Cuffman, 20th Jul, 2016.

  1. Cuffman

    Cuffman New Member

    Joined:
    18th Jul, 2016
    Posts:
    2
    Location:
    Western Australia
    can someone explain to me how they determine wether a site is a good development opportunity or a bargain. I see people talking about 'napkin numbers' and 'running the numbers' but what is it you have to take into account.
    Say you find an old 3x1 on an R40 block in craigie for mid 400k for example... Like this one
    8 Barunga Way Craigie WA 6025 - House for Sale #123155354 - realestate.com.au
    So if I wanted to buy this and develop it what are the numbers I need to consider so I don't crash and burn. I am very interested in developing a block but am a little hesitant because I see all the things people talk about on this site and don't understand some of it.
    Any help would be great. Let's use the craigie site as a case study... What do you think??
     
  2. HD_ACE

    HD_ACE Game-Changer Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    449
    Location:
    Perth
    In 'essence' It is sales price (or values) - total costs to give you profit in $$ and which can be turned into a percentage. You then take this profit against the time frame and the risk involved to determine if your willing to put your balls on the line for this 'potential profit'

    (Values- Costs)
    Time Frame X RISK = $ in your (wife's) pocket.

    That's the easy part. Determining total costs takes research. Determining the values is knowing your target market.

    So you have demo, subdivision, legal, build, block clearing, council contributions, selling, taxes etc.

    Then you have to know the councils TPS. What has to be achieved to be allowed to develop to this higher density coding? what set backs are required? what are the set backs from power lines? is more than 1 cross over allowed? whats the open space requirements? are turning bays required? after all this what will be building envelope be and then what can we fit on? Will this end product be in demand in this area? and at what cost?
    Also do the services run on my side of the road? Flight path? Road widening easement?etc etc

    So Much to think about. Best to focus on a few areas that you know in and out so you can jump when the time comes.

    But it is a fun process :) especially when the final product comes to completion.
     
  3. Cruskits

    Cruskits Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    50
    Location:
    Perth

    I was going to start going through all the costs etc.

    There are other threads wit heaps of this information just do a search and spend a couple of days reading.

    For this one in particular I opened it up and closed it within about 20 secs. I love the area and your ideas but its just got nothing in it in my opinion. I am new to all this but that is my 2 cents.

    Happy reading