How to get started with a development?

Discussion in 'Development' started by spludgey, 11th Jan, 2020.

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  1. spludgey

    spludgey Well-Known Member

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    While I'm asking the question, I think I do have a very basic understanding of what to do.
    I need to find comparable units to price the future value and rental potential. I know that there are websites that estimate building costs, but I don't know how accurate these are.

    Basically, I've got a 700sqm block in Woy Woy and a 800sqm block in Umina, both medium density that I want to develop.

    I want to build accommodation (most likely townhouses) that's reasonably green, so fly ash concrete, decent insulation and solar panels on each townhouse.
    I'm a bit agnostic to what development to do, be it a standard townhouse, over 55s, low income, NDIS, etc. Not sure how to assess what's best value for me there.

    With the Woy Woy block, there's the added complication that I want to buy the block next door (also 700sqm and currently not for sale) to hopefully build a better development than having a narrow block with three(?) townhouses.

    What are the best first steps to take? I don't mind spending a few hundred dollars to come up with a plan. Should I engage a town planner? Is that who I want to speak to first? I don't really know where to start.

    Now the idea is to build and hold. Are there any GST implications for this? As I understand it (and I might be incorrect), there aren't, other than paying GST on all costs associated with the build. If I was to sell a couple, would I have to pay any GST on the townhouse?

    I feel like I don't really know where to start on this. Are there any good books/guides to read on this subject?

    I've got lots of random questions, like are there ways of keeping costs down such as project townhouses? If not, can I go through designs that I like and then see if I can buy that existing design instead of paying an architect to come up with something entirely new? What costs how much? Ultimately I want to work out how much equity I might be able to build.
    If I should be using a town planner now, are there any recommendations?

    NB: With the Woy Woy one, I've asked the neighbour previously if he was interested in selling. He said he was not, but it's quite old had has had health issues. So I'm considering approaching him again with a plan of me paying for and organising his move, an alternative accommodation for this move back and then construct one of the townhouses for him, he gets that plus an agreed upon amount of money. Any opinions on this?

    I feel quite a bit like I did a decade ago when I started my investment journey, keen, but not really knowing anything.
     

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  2. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    Tbh The answers to your questions would take a book to fill up.

    From my perspective very briefly, before you decide to build anything you need to make sure the area supports it and there is a decent profit margin.

    With all those ideas you had, you'd need to do a comparative feasibility analysis to see which option would be the best, if any.


    There are some good books posted for a broad outline. Myf recently posted a revised version of Ron Forlees book plus another one he put out. The learning curve is steep but it gets easier over time and with the right people helping you.


    Most important is to do a BOE feasibility on any idea development idea you have to see if it's even viable or not. If the preliminary numbers look good then you do a more in-depth one. I'd go over all the development threads, there's alot of info.


    Australian Residential Property Development for Investors : Ron Forlee : 9780730315094

    Fast Track to Passive Income : Ron Forlee : 9781925952308
     
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  3. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    For me, the first place to start is financial capacity. That will most definitely determine everything else. You need to determine how much you can borrow for land and build cost plus extras. Ultimately, whatever finance or capital you have available will limit what you can develop. If your max amount for a total development cost available to you is say 2mil, then it's no point looking at projects that will go beyond that scope.
     
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  4. spludgey

    spludgey Well-Known Member

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    Thanks very much @Sackie!
    I've ordered both books now and should get them later this week. I'll be sure to do lots of reading on here as well.
    As for access to money, that could be a little bit of a pinch point. I'll be able to access between $1M and $1.5M of private borrowings or JV money partner (yet to be determined). So that would be enough to either do my Umina block, or potentially the Woy Woy block, if the owner next door accepted a property and some cash as payment, however it would not be enough to do both, nor enough to buy the block next door outright and do a development.

    I feel like I know virtually nothing, but hopefully, I'll be able to change that reasonably soon.

    In case you're interested, I've drafted a letter to the neighbour. Any comments?



    Dear Mr Neighbour,

    I am writing to you in regards to your property at 1 Fake Road in Woy Woy.

    As you may remember, I’m the owner of the property next door at 3 Fake Road. I spoke to you a while ago, to tell you that I would be interested in purchasing your house. However, at the time, you stated that you were not interested in selling.

    So, I have come up with a suggestion that could be beneficial for both of us.

    What I’m proposing is that I would construct townhouses on the two blocks and upon their completion, you would move back into one of these brand new 3 bedroom, 2 bathroom townhouses of which you will become the owner
    On top of this, there would be a cash payment to you, the amount of which we’d have to work out.

    All this in return for your property.

    I would pay for and organise your move into temporary accommodation. I would pay the costs of this accommodation as well.

    I should also note that I’m interested in building low energy townhouses with solar, so your energy bills would also be a lot lower than they currently are.

    Your townhouse would be landscaped and you would also have a private courtyard, ducted air conditioning and a garage that would be attached to your townhouse.
    If there is anything else that you would want (such as a stairlift for example) then we could certainly discuss this as well.

    In summary, in return for your property, you would get the following:

    · A brand new 3 bedroom 2 bathroom townhouse with ducted air conditioning, solar panels, private courtyard

    · An attached garage

    · Moves to and from temporary accommodation organised and paid for

    · Temporary accommodation paid for

    · A cash sum, to be determined

    To give you some sort of an idea, I’m thinking of something that’s a little bit similar to 2-4 Nearby Street, less than 100m away from our properties.

    I’m also hoping to retain the existing trees. If this is not possible, I would purchase biodiversity offsets and have new trees planted.

    Please feel free to discuss this idea with family, friends or any other people whose opinions you value. I’m hoping this would be a win-win solution for both of us.

    Thank you for your time and consideration, I look forward to hearing back from you. If you have any questions, please let me know. I’m also happy to meet with you to discuss this proposal.


    Regards,

    spludgey​
     
  5. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    Hi mate, kinda hard to say as I don't know the dynamic you have with the neighbour. If possible and you think your neighbour may be receptive to it, try dropping by for a casual chat and bring your letter. If you think it's best to post it first then that may be the better approach. At the end of the day even if your offer is a fantastic one, many folks just don't want to move/the hassle/the risks etc. Need to find out what they really want. And sometimes it's just to keep the status quo. But no harm trying.
     
  6. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    Re developing, if you PM me your address I'm happy to send you ( and only you) a development bootcamp video on a USB.
     
  7. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    It is a long peice of string question but everyone starts here.

    Ideally you need some assistance working out what is possible with the blocks, so someone like a town planner perhaps which can say Woy Woy block potential scenarios are 1. side by side duplex 2. three single level villas 3. three of threedouble storey townhouses 4. four 2 bedroom townhouses 5. four 2 bedroom single level villas

    Then work out the costs and the end values and see if there is any profit in them.

    Then work out which ones will work with your finance abilities. Duplexes are easier to finance than triplex (3) and four would be commercial finance. That will whittle down the list some more

    If there is no overlap between profitable and financable then you have to wait until things change or see if you can stage the development and build some then the others after.

    In regards to your neighbour if he is elderly not even a chair lift would be attractive, he would probably much prefer a small single level unit. I think first broach if he's interested in discussing selling then work out if there is a deal that he might like BUT deals like that are fraught with tax and legal issues.
     
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