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If selling a property with DA how much DD to give buyer

Discussion in 'Development' started by eggnog, 26th Jan, 2016.

  1. eggnog

    eggnog Active Member

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    Title pretty much says it all. Should you give prospective buyers all the DD on the property you are selling? Pros and cons?
     
  2. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I would give none. You never know what will turn a Buyer off something. You might include what is a fantastic construction price, or a siteworks cost or soil test and they will think it's terrible.
    The only thing I might give is a sales and rental appraisal from a local REA if you feel that it's a positive.
     
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  3. MTR

    MTR Well-Known Member Premium Member

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    DA, submitted to council with plans and permits? Right

    Generally you would need to provide buyers with details of the plans, the designs, including council approval.

    I sold a property with DA with plans and permits and buyers need to view this to determine whether they can make money from the project and that is why they pay a premium if it stacks up.

    MTR:)
     
  4. eggnog

    eggnog Active Member

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    I understand the need to supply approvals to entice buyers but what about numbers like infrastructure contributions, civil engineer quotes, services costings, etc. Would any of you experienced developers divulge this to prospective buyers?
     
  5. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Why would i want to open their eyes even wider as to the costs and fees involved?? If I was going to bring anything to their attention it would only be positive news, like " all infrastructure fees have been paid, the site is ready to go . Hassle free", and that kind of stuff.
     
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  6. wylie

    wylie Moderator Staff Member

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    This raises a question I have.

    We have a DA in. Assuming it is approved it will mean repositioning two houses to allow the townhouse site to be clear. We plan on doing these first. At some stage we will reconfigure the two blocks into three and will either build the townhouses or sell the block with the DA.

    At what stage does BCC ask to be paid the $28k per townhouse headworks fee? If we do the build we pay it... but at what stage?

    If we sell, does the purchaser pay this before they build or is it a cost to us before we sell?

    Either way, it is going to cost us or a future purchaser $112k and that has a huge bearing on profitability for whoever pays it.
     
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  7. Scott No Mates

    Scott No Mates Well-Known Member

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    @wylie - Most likely scenario is BCC will require payment before you move either of the houses.
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    Exactly, and there is no need to do this ie costings, fees etc. that is up to the buyer to do their own DD.

    Approvals, plans need to be provided because you are selling with a DA. The real estate agent would request these as part of the marketing/ selling process.

    MTR
     
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  9. MTR

    MTR Well-Known Member Premium Member

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    Wylie
    When I on sold my DA with plans and permits, all I did was pay for the architect and council fees, that is all.

    The other items you mentioned are part of the building process and the buyer would be paying for these when he/she progresses with the build.
     
  10. Leo2413

    Leo2413 Well-Known Member Premium Member

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    That was also my understanding of it.
     
  11. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Yup I assumed you meant to include the plans so I didn't mention that.
    I wouldn't include those extras like infrastructure, civil quotes etc
    An experienced developer will know these requirements and an inexperienced developer will be turned off by these.
    Just the DA, maybe some nice 3D renders of the elevations, some glowing sales and rental appraisals and that's enough.
    Just curious - Is there any reason why you aren't building it yourself? Or was the intention to always sell as a DA permit
     
  12. MTR

    MTR Well-Known Member Premium Member

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    I love this strategy for much, but you have to get it right and also means purchasing the land at the right price.

    pros
    You can sell for a premium if you get the designs correct and there is a demand.
    Shorter time frame
    Less risk
    No need to source finance for build

    Cons
    Need to ensure there is a demand for DA in this area
    Need to ensure there is enough fat in the deal for the buyer ie 20%
    Need to ensure the designs will fly
    Need to look at what developers are building the area

    MTR:)
     
  13. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Another big con for me is "need to accept less profit". Yes you can save time, then use that time to do more deals and perhaps make more profit that way. But for me, I would want to develop something myself, especially if it has a great profitability margin and i have the capacity to develop it. But thats just my take on it.
     
  14. MTR

    MTR Well-Known Member Premium Member

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    But building is not necessarily/always going to be more profitable that is the point, and as developers we are at the mercy of markets changing.

    You can make serious profit on the DA. Especially if you buy at the early stages of a boom cycle and there are no sites around, land is scarce.

    In Sydney recently an investor I believe made something like $5M profit, larger number of apartments he could not build, however he was able to sell the DA and a company snapped it up. I think this was 12 month project to put DA together, imagine trying to build 19 apartments?? risk vs time vs market changing vs getting burnt.

    I posted my numbers on my small DA I did this in Melb 5 years ago now.

    Purchase price $597,000
    DA 8 reverse living apartments - fees/architect $20K

    On sold to a builder 12 months later - $907K
    Very high return on my money in short time frame.

    The other option is do both which makes sense, this way you generate cash flow. Building takes a long time and you could be waiting for the money before you move on to the next project.

    I also did this with land, rather than build, cut up 2 blocks and on sell, I am glad I did because the market started turning.


    MTR:)
     
  15. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Yes i really like this option best, to do a mixture for cashflow and creating wealth.By the way you did really well with your DAs profit margin and time wise! Great stuff!
     
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  16. MTR

    MTR Well-Known Member Premium Member

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    Love your new avatar... who is this guy again, on the tip on my tongue.... is it Lee.
     
  17. Leo2413

    Leo2413 Well-Known Member Premium Member

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    heheh....your funny (not in a bad way)... Yes its Bruce Lee ;)
     
  18. Marg4000

    Marg4000 Well-Known Member

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    Doubt it matters much in the long run, so long as you have the ability to pay it if required.

    If the buyer has to pay it, then obviously that will be reflected in the property value when sold.
    Marg
     
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  19. wylie

    wylie Moderator Staff Member

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    Absolutely Marg. We will pay it or purchaser will if we sell - either way it will be reflected in any offer we receive.

    It is interesting that I have had two answers that are completely opposite. I will ask the town planner. I did ask him a while back for a rough idea of timelines and he said he will give us this information once we get it through. But I need to know if we need $122k at short notice :eek:.
     
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