JV for 8 town homes project

Ok so I haven't posted this in the Development section because I won't be able to diarise the project in detail from beginning to end as it's not just my project but a JV with someone and I need to respect their wishes fully, so just a more general thread (but if the mods feel it should be there then move it by all means). I will outline the deal and then in the future pull up this thread to make general updates and the final outcome as well as how the partnership worked out.

Where: Brisbane inner ring
What: LMR zoning, 8 higher spec, tri-level town homes. 3-3-2's somewhat conservatively valued at 850k-940k each
Due to start: July 2017.
Total Development costs approx.. $5,550,000
Profit: At least 22.5% or $1,250,000 gross return on TDC
The partner: An established builder and someone who I have worked with in the past with good success though not quite in this capacity. We've had a very good business relationship history and know each others strengths and weaknesses. We'll work closely together on this project as equal partners and if all goes well, we'll most likely do more JVs together in the future, perhaps even before this one comes to a full end. This allows my partner (romantic partner) and I to do our own projects plus additional projects at the same time whilst spreading the risk. I'm also looking forward to furthering my knowledge on specific building practices etc and this is a good opportunity to learn even more. The site is secured and rented at this point in time so holding costs are mostly covered. I will update general progress over the next 18 months or so. I'm both nervous and excited but we'll see how it goes.

 

I'm quite interested in following this thread. I'd like to develop one of my outer Brisvane sites eventually but profits aren't stacking up yet.

Margin seems slim. How does this compare with other projects you have executed?

Is there anything difficult about the site?

 

Suburb?

 

HI wombat,

The Margin is more like 25% plus but just wanted to be a little conservative. The good thing is that site works shouldn't be horrendous. Flat land, main services in optimal locations and initial soil testing haven't revealed anything scary (yet). The margin is probably a little less than other projects but that's OK for us because the risk is spread and also it allows us to potentially do many more projects at the same time. We actually have a mid term view to build retirement homes together so this is just testing how we work together in this capacity really.

 

Inner ring mate.

 

That's awesome. Is this the first JV you have undertaken ?

 

No mate. In the past I have done JVs but I was in a very passive capacity back then. I didn't even know the difference between a class P and class M site/soil classification then.

 

What's class P and M site/soil classification?

Obviously never done a devi...

 

Name names.... or at least 3 proximate suburbs.

 

Great.

So what's the end plan, hold, sell, mixture of both?

Is this market strong at the moment?

I am surprised that the rent covers the hold costs, that is a massive bonus.

All the best, will look forward to updates.

 

Sell all except 2, keep one each. The market seems at least stable for this type of stock and the land was bought at a good price. The reason holding costs are low is because the site was bought with a much lower lvr and also currently renting by the room. Thanks Marisa.

 

Newfarm(ish) mate.

 

Below is a list of these ratings showing what each of them represents:

Site classifications and movement based on soil reactivity
Class A (0-10mm) Stable, non-reactive. Most sand and rock sites. Little or no ground movement likely as a result of moisture changes.
Class S (10-20mm) Slightly reactive clay sites. May experience slight ground movement as a result of moisture changes.
Class M / M-D
(20-40mm)

Moderately reactive clay or silt sites. May experience moderate ground movement as a result of soil conditions and moisture changes.
Class H1 / H1-D (40-60mm) Highly reactive clay sites. May experience a high amount of ground movement as a result of soil conditions and moisture changes.
Class H2 / H2-D (60-75mm) Highly reactive clay sites. May experience very high ground movement as a result of soil conditions and moisture changes.
Class E / E-D (75mm+) Extremely reactive sites. May experience extreme amounts of ground movement as a result of soil conditions and moisture changes.
Class P (this is approximately 70% of building sites in Australia) Problem sites. The ability of the soil to evenly bear a load is very poor. Sites may be classified as 'Class P' as a result of mine subsidence, landslip, collapse activity or coastal erosion (e.g. dunes), soft soils with a lack of suitable bearing, cut and/or filled sites, or creep areas.
Ground movement as a result of moisture changes may be very severe, and these sites are typically subject to abnormal moisture conditions resulting from things like trees, dams and poor site drainage. If you are building on a Class P site you will need to consult a structural engineer.

The 'D' inclusion (i.e M-D, H1-D, H2-D or E-D) The 'D' in these classifications refers to 'deep' movements in soil due to deep variances in moisture. These classifications are mostly found in dry areas (e.g. north of the Great Dividing range, in places like Stawell, Horsham, Mildura, Bendigo, Shepparton and Wangaratta).

 

Congrats @Leo2413 .

All the best. looking forward for updates.

Regards

 

Great work. Are these deve projects your main gig or do you have another 'day job' be it either a business or a PAYG employee?

 

Thanks mate.

Yes our main gig but also have some other commercial businesses in Taiwan, but mostly for cashflow not so much for growth. The wife also does private accounting consulting for high net worth clients . She's an accounting freak . ..personally I can't stand accounting

 

@Leo1234 you are on fire

how big is the site?
Is it ground floor parking, 4 dwelling first floor and another 4 on the second floor type of development?

 

@Leo2413 thanks for sharing , and keen to watch. Out of interest what do think your build cost/sqm on this type of project would be if your builder wasn't JV partner ?

 

you said JV as in 50/50?

 

It's probably going to be a similar design to this or some variation that's tri level.