VIC JV on 4 townhouses

Discussion in 'Property Analysis' started by lightbringer, 5th Feb, 2020.

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  1. lightbringer

    lightbringer Active Member

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    Hi,

    So a BA of mine just told me about a development site in a Melbourne suburb, which is selling privately for $750,000. This one has approved permit for developing 4 townhouses (2x3b and 2x2b). He also told me that the cost to develop 4 townhouses range between $800,000 to $1,000,000

    However I cannot swallow this by myself. So I have a few questions.
    1. How much do I expect in solicitor/lawyer cost to process paperworks for a 4-person JV.
    2. Is there any other measurable purchase cost besides stamp duty, solicitor.
    3. How do we structure the JV for acquisition and construction (I have a family trust, but others don't)
    4. For the initial loan to buy, will it be separate loans, or all 4 will sponsor a single loan.
    5. Same as Q4, but for construction loan (we are thinking to sign a single contract to construct 4 townhouses)
    6. After completion, what is the process to break JV and all will go on their merry way. Also is there any extra cost on that.
    7. We think the construction time is within 1 year, and prepare the holding cost for that period. Is it a realistic timeframe?
    8. Is there anything else that we need to be aware of?

    Thank you all in advance.

    Tom
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    1. $20k up, depending on what you need
    2. tax advice, loan fees
    3. that will depend on the circumstances, probably a special purpose company or unit trust
    4. This will depend on the security, probably one loan if secured by that property only, but also will need related party loans
    5. as above
    6. Sale usually then wind up the company or trust that owned it
    7. at least
    8. heaps
     
  3. lightbringer

    lightbringer Active Member

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    will this trigger stamp duty for each person when selling? We are thinking to hold the properties for a long time, but basically the JV finishes at the completion point.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    It depends how it is structured and who sells it.

    If a company owns in and sells it then no.

    If the parties wish to hold long term it is possible to structure things so that each party can take one unit at the end without triggering duty (or perhaps a small amount) or tax.
     
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  5. gach2

    gach2 Well-Known Member

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    Have you looked at the numbers Gross even?

    No idea exact but I wouldn't be surprised if its purchase 750+build 1 mil (you may pay more if your not experienced and not sure how to save costs) and each unit is worth 500k (this example is actually not really that off with most suburbs where you can get blocks for 750k)

    Since your realising only 1/4 of the profit its only 62.5k - This doesn't include holding costs, taxation costs, structuring and advise

    If its first time completing a development like this plus working full time I would say 3 yrs would be close to reality in completion time
     
  6. lightbringer

    lightbringer Active Member

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    thank you for the thoughts.
    just wondering why does it take 3 years? Are there other things apart from the construction time? Why is it different whether we're working full time or not.

    Yes I do realize the profit is quite low, so there's not a lot of wiggling room, but would be great to know the numbers so I know a good deal when I see one later.
     
  7. gach2

    gach2 Well-Known Member

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    Sorry misread your post, the property has the permit so that would save a bit of a time

    12 months would be everything goes ok to plan and the property sells easily and you know exactly what and when to do everything

    Not sure how the permits are in VIC but are you able to build immediately? do you have a builder? are the any conditions outstanding in the permit, do you have finance ready? + more

    All these things take time, especially if you don't know what your doing
     
  8. gach2

    gach2 Well-Known Member

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    Working full time is possible but can delay things - something goes wrong on site, everything stops and whether its your fault or not you need to sort it out, handover etc, finishings

    In saying that my first interstate build was the complete opposite, never met the builder till handover and after that spent a week completing the final works (mind you I had a team lined up and weather was perfect). Note that was a 116k build not 1 mil
     
  9. lightbringer

    lightbringer Active Member

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    thank you for the information.
    I feel like it's better to JV with someone who already knows the process, that would increase my knowledge since I can observe what they do and they can't really hide stuff since they have some skin in the game too.
     
  10. spludgey

    spludgey Well-Known Member

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    Given your other thread and the fact that you're speaking to several BAs, it sounds a little like you're trying to run before learning to walk. I might be wrong in that assessment though. Do you bring property experience to the table? If not, I would suggest a boring buy and hold (maybe throw a reno in there) to start with.
     
  11. lightbringer

    lightbringer Active Member

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    I have a few properties under my belt. All buy and hold. Now I'd like to learn more about development to prepare myself to it.
     
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