Large lots in Logan Area - Long term hold?

Hi guys,

Just trying to get my head around prices for large lots in the Logan area. I know that prices in Western Sydney (say Penrith area) would be circa $150k per townhouse site - ie a site you can put 10 townhouses on may be worth circa $1.5M. If DA approved, maybe more, if raw then perhaps less.

I'm guessing the calcs per townhouse would be something like the below for Penrith:
Site = $150k
Build Costs = $230k?
Total Costs = $380k
Sell Price = $500k (profit of say $100k per townhouse after selling and holding costs etc)

By comparison, this site in Eagleby is asking $625k. I believe the zoning stipulates 40 dwellings per hectare, so being 2,529sqm it would allow for 10 townhouses (not sure where the agent got 10-12 from?)

This equates to $62.5k per site. Now I'm guessing the numbers are something like the below:
Site = $62.5k
Build Costs = $230k?
Total Costs = $292.5k
Sell Price = circa $300k for a new build in Eagleby?

Therefore you'd be more or less breaking even and it's not a worthwhile development, which explains why it hasn't sold.

Anyway, just wondering what peoples' thoughts are on these types of sites for a buy + hold? Say in 10 years a townhouse in Eagleby is worth $600k. If you work back then the numbers would look something like this:
Build Costs = $300k? (add 30% from today's cost?)
Sell Price = $600k
If you were to leave $120k per townhouse for profit + selling/holding costs, then the site value per would be $180k. This means a 10 townhouse site is then worth $1.8M. If you were to do the construction yourself, then you retain the $120k profit as well (let's say $100k profit, leaving $20k for holding/selling costs) = $1M. Therefore, your $625k is now $1.8M if you sell the site, or $2.8M (net) if you do the development yourself.

Obviously this would be negatively geared so you'd have to have some cash cows in your portfolio to balance it out.

Obviously even a small variation in resale price and build costs makes a huge difference to the final numbers...

The above are purely off-the-cuff estimates. Would love to hear your thoughts on my numbers... ie what are developers paying per site in the Logan area at the moment for townhouses? Where would build costs actually sit and how much do you think they will vary in 10 years? Obviously some materials will get more expensive, while technologies such as pre-fab homes may help reduce costs?

Cheers

 

Why not just buy something that is profitable today?

 

If you are interested in townhouse development costs, I believe @Shahin_Afarin has a very detailed development thread. It's in Penrith. This will show you detailed costings.

 

I'm time-poor, and just looking to passively acquire properties for the time being. Depending on the numbers this could be good to have in my portfolio for the future though. Imagine buying a half-acre block in the Blacktown area a couple decades ago...

Thanks York, I do remember seeing it once. Will dig it up.

EDIT; Here's Shahin's thread: Penrith Development

He paid $160k per site (I was close!), construction costs were $180k per (I guessed $230k) and sale price was $440k (I had $500k). I was thinking 3bdr townhouses, Shahin's were all 2bdr. Anyway, this is great as a rough guide.

Cheers

 

Imagine doing profitable deal after profitable deal starting a couple of decades ago.

 

I know some eaglby developers. It's generally pretty cheep stuff built and they manage a slight profit on each development. But it's not easy.

I'd be more inclined to look at more expensive land closer to southport that has high rise development potential if you are looking and long term capital gains.

 

You can buy LMR blocks within 2km of the CBD for close to 300k, with a house on it. I have no idea why you would go out to an area not already zoned. There is limitless land out towards Ripley and beyond, and it is hard to envisage townhouses being popular over the H&L out there (which, incidentally, is 100K overpriced compared to older stock in a better position IMO). It's hard to envisage this ever becoming particularly profitable. As much as I don't like the greater Bris - gold coast corridor for the same supply reason, I think you would have a better bet there.

It's not the place with the Church on it is it?

 

Hi Bran,

Thanks for the feedback.

What suburbs would you be referring to where you can buy a house close to 300k within 2km to the CBD?

Cheers

 

CBD!

If you re.com.au sub 300K, there are over 200 listings.

Here's one on the first page of re.com.au:

Sold Price for 2 Thorn Lane Ipswich Qld 4305 - mixed use, its in or very near the medical precinct

Quite a few in 2014 MEDIUM residential for sub 300: Sold Price for 16 Short Street Ipswich Qld 4305. Prices haven't moved nearly at all

The specific ones and/or streets I'm looking at I won't share yet and aren't on re.com.au

Buyer beware in Ipswich unless you know it.

Good luck

 

are we comparing apples to apples in this case? The eagleby site is 2500m2+ site whereas the ipswich sites are under 1000m2... if you do by price per m2, the eagleby works out to be cheaper.
Ipswich is closer to ipswich CBD, where as eagleby is closer to Brisbane CBD, each to there liking I guess..

 

I just bought a site in Loganholme recently (just under 1900m2), pretty close to the Logan Hyperdome, and about 5 doors away from one of the proposed Costco sites... Main reason I bought it was because it has a large renovated house (that I split in 2 for renting) and also a large existing separate granny flat, overall the ROI is very good, which is rare for a dev site from my exp.

My agent tells me the developers will pay 100k per townhouse site with DA in place, not sure I trust anything the agent says though. Eagleby has an oversupply of townhouses, often re-selling well below the original price. Personally I cant see a townhouse there selling for 600k in 10 years time, just look at the negative growth on units in Beenleigh (arguably a better location), there is so much land available, Eagleby is not the best area. I'd target sites closer to major shopping centres and/or good public transport - Loganlea, Logan Hyperdome etc. My tenants love the fact that they can walk to the shops and the local bus interchange and fast food outlets etc. As an investor I look at the benefits for the tenants, I cant see much benefit in Eagleby, unless the rent is very cheap.

To answer your question, I think these types of sites can be a good buy and hold provided the ROI to hold is sufficient and fits in with your long term goals. But be careful where you buy in Brisbane, prices for these sites have jumped up a lot in the last 12 months, when zoning changes the agents get into an area an work it very hard and push the prices up. I would rather pay a bit extra for a well located site as I think it will pay off better in the future.

Free Suburb Profile report for Beenleigh QLD (4207)

-22.45% growth in median value for property investors (units) in Beenleigh,4207 puts this suburb at number 181th in terms of best performing suburbs in QLD

 

I'm lost. You said you can buy LMR blocks within 2km of the CBD for close to 300k with a house on it but you're sending links of properties in Ipswich? Which suburbs near the CBD were you referring to?

Cheers

 

Mmm. I'm lost too. I have no idea what sent me on an Ipswich tangent. For some reason, my mind must have read Eagleby as something else.
Please disregard, sorry!