JV venture #2

Hi Leo...looks like you are on fire.

A couple of questions....590-620k seems to be quite a bit for units...even at 100sqm.

I just had a debate with a developer in Brissie on the topic of how well newer, larger, high sepc units sell in Brissie. He does a bit around Annerley area....it is an areas that is definitely seeing the move to hipsterville. His comments is that whilst he has not lost a lot of money he has not made a lot.

He indicated to me....he new niche was to do buy 800-1000 sqm lots and put 2 Queenslander replicas on them...he reckons he an buy in for 700k....put two on for 500k...and sell at 850 per piece.

Don't know about his numbers...but his comments around this were he was tired of the BS from banks around pre-sales the splitter type of developments are usually done as resi.....

A very interesting...idea I though....when I looked at his profit...it made more sense given the risk...1.3m in the deal and he pull out 1.7m...not bad return and relatively low risk.....

...some interesting ideas out there....he also reckons that once you get past 450-500k for units it is harder to sell ..what does your research suggest?

 

Thanks @sash. Have a look at this one mate. 2/2/1, 107sqm, 10 Oct 2016 sold $639k, 5/285 Bowen Terrace, New Farm, Qld 4005 - Property Details
so I think the market is there just depends on the area.

500k for 2 free standing homes? I think its impossible...its around 900-1+mil for 2 higher end homes on splitter blocks. So even at 800k for lower specs.. no where close to 500k.

I've never heard of pre-sales for a splitter.... both our splitters are resi and no mention of pre-sales ever

I think it needs to be in the right area and close enough to the CBD with some views. Also needs to be marketed to a specific demographic and needs to be really modern, chic and sexy. I think as long as you are not doing like say 50 etc... if it's a small, manageable number of boutique stuff then there will always be a rich enough, in demand enough demographic who will be willing to pay for it.

 

I get that there are comparable sales but a very stiff competition from the below in terms of bang for buck...:

116 Charles Street New Farm Qld 4005 - Townhouse for Sale #123860142 - realestate.com.au

21/45 Moray Street New Farm Qld 4005 - Apartment for Sale #123385326 - realestate.com.au

17/75 Welsby Street New Farm Qld 4005 - Unit for Sale #123650378 - realestate.com.au

As for 2 freestanding homes..well that was what he quoted me...he is builder so it would cost him a lot less then it would you and I.

He is not saying he is pre-selling the opposite...he does not have to have presales as he funds via a simple loan rather than a commercial loan.

How are you financing...I am presuming you need minimum pre-sales? Or are you bank rolling the entire development.

I did the feasibility of a lot of sites...and yes the money is there...but it is inherently risky..I am not comfortable with that level of risk.

 

Hi Sash. For the splitters bank is financing without any pre-sales just normal resi and for the JVs commercial loan with some level of pre-sales. Resi approx 65-70% funding and jvs around 50% of GRV as we want to borrow less.
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Yes definitely more risk involved with development that goes without saying but i think we've looked at risk on a few levels and we feel comfortable with these projects for our situation as well as having multiple mitigation measures avaliable.

 

OK....splitters if done right are quite good....haven't done any...mostly just simple H&L with 80-100k in them..most are build for 260-325k...so nothing fancy.

Each to their own...

 

man, you are on fire

 

Yeah mate whatever works for us. I think we all at some point just find stuff that works for us and run with it for as long as we can until we need to change strategies.

 

Thanks @Eric Wu. Need to realise the profits first otherwise I could literally be on fire

 

You're selling Parramatta properties? All the best with that!

 

Yes mate. We did a SWOT analysis on it as well as different scenarios for the use of the equity and possible returns and then looked at overall risk. Basically because we are utilising a very proactive approach with our capital to manufacture equity, we feel it's best used in other places for higher returns, lower risk. We didn't come to this decision lightly.

 

Fantastic stuff mate. Good luck.

 

Great stuff

 

Thanks fellas. Happy Near Years.