Is Property Development really worth the Effort

Here is another commercial development.
Will take a couple weeks to complete.
Brought 0.4ha in 2020 for $1m
Spending $170k on leveling the section .
Signed up tenant @$40m2
Rates $6.3k
Net yield 13%
Funding 3.2%
So 75 % of the net rental is profit
https://www.colliers.co.nz/en-nz/pr...ve-trentham-upper-hutt-wellington/nzl67013826

 

Will you build the warehouse?

 

What do you mean by alpha and beta?

 

Sorry finance speak! Alpha is like buying well/manufactured equity. Beta is the market movement.
Eg if your a fundie trading equities, asx up 40%, if you return 50% then your beating the market return (beta) through your active trading strategy (this part is alpha).

 

All CDCs, one is a DA but it’s a much much larger project (25-40+ dwellings) and will take years.

We have built the infrastructure/network/process after learning on the initial sites. Approval times have crunched from 6 months or so to 90-120 days, so we generally have approvals shortly after setts (most buys are 90 day setts).

Everything runs faster when you know what’s next/have experts on board, and going down the certifier route. It’s just a process really.

Have flipped 3-4 noted above. Owning timeframe isn’t short with longer settlements, and fairly quick sales.

Reinvested into 6 other projects at the moment currently at various stages in the development cycle (one slab poured, two approved with demos shortly, two to be approved next 60-90 days purchased fairly recently). May flip out of one or two, depending on market conditions. % Returns will be similar to already completed ones.

We’ve moved more into primo areas (relatively) as we scale up, there’s a bit more comp in western markets at the moment making deals harder to source. Also working more off market and direct landowners too nowadays for deals as general market comp is too strong.

Hence; if you know what your doing, Sydney is a developer playground. Planning changes have made it one the biggest development opportunities in decades. Market is onto it now and hence quality development sites trade high.

 

There is no warehouse .
Just hardfill.
Leased to a local authority.
It's not mine.
I have never done a development.
My 2021 investment is only yielding 10% now ((hopefully 11 .5% later this year) but my property I purchased in 1997 is now yielding 48% on cost and the one in 1998 45%.
Great results are achieved over long periods. not from skill or hardwork just patience.
Great results over a short time is from skill and hardwork.

 

Talking about permits, i got a permit for one of our sites today, we havent settled yet. Im in vic.
100 lots, land sub, 5-6 months for permit, including RFI from council and an objector who didnt take it to vcat (28 days lost waiting for that). Pretty stoked with the timeframe, did the planning application myself, which helped with the timelines a lot, that prob saved 3-6 months alone.

We are now tossing up selling this site, to focus on the others, started preparing the IM today.

 

Some would argue that having long term patience IS a skill. One that many don't seem to possess.

 

OK. ...looks like decent returns.

Doing something similar except divesting old and simple H&L in growth markets....getting rid of 3-4 year....profits are then reinvested. Currently in Perth....deals are not as lucrative 380-400k...hoping to make 200-300k in 18 months.

 

you've got gst expense only on the build cost, it says you're allowed to claim on purchases relating to the sale, would that not include interest costs and stamp duty costs? / all costs involved?

 

There's no GST on interest so you can't claim any GST credits on it. Not sure about stamp duty but I don't think there would be any GST on that either

 

You say 'we' a bit in your posts, are you a partner in a syndicate? Or is it with a business partner?

 

No .
It is hardly worth it .
Great yield why bother with a building that needs maintenance , will take ages to build, probably have delays, probably cost and overruns.
After all that the additional rental will not even cover the cost of funding

 

One that I looked at recently and is a real scenario with both duplex's recently selling off plan prior to spade in the ground

Balgowlah, NSW
$3.5m land purchase
$200k stamps, legals, tax, due diligence costs
$900k build cost per duplex
$150k planning and design
$100k statutory & holding costs
Marketing costs - $20k

Total costs - rounded to $5.8m

Sold - $4.125m & $4.25m
Less agency fees of 1.5%
Total Revenue - $8.45m

$2.45m profit before interest, gst, tax etc

 

Good profit...one of the better ones definitely. But not many making this type of coin.

 

I think duplexes in Seaforth is the way to go and still plenty of profit to be had in a falling market

Can get 700-800 sqm for $3m

$3.75m - $4m per duplex with a build similar to this ie $900k each

156A Woodland Street, Balgowlah, NSW 2093 - Property Details (realestate.com.au)

 

so if i become a private money lender i don't need to pay gst?

 

I'm not sure what this question means but it's definitely above my pay grade.

 

...and this is why I ❤ PropertyChat.. so much insight.. And thankful to the OP to ask the original question - this is the only way anybody learns!

 

So what are you looking to earn over a 18 month period if that is how long it will take from purchase of site to sale of development?

Given an index fund should net you 10% p.a I presume you would want a minimum 25%to 30% return for the additional risk taken over 18 months?