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My "Armchair Developer" Experience (cont. from Somersoft)

Discussion in 'Development' started by Crido, 25th Jun, 2015.

  1. Crido

    Crido Well-Known Member

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    Hi all,

    I thought I'd create a link in my Somersoft thread to here, so I could enable everyone to read the history of my investment experience with EOS and Bird Property Groups in the archived Somersoft forums, and then come here for the 'post-June 2015' updates.

    Here is a link to the first post in the original ten page Somersoft thread:

    http://somersoft.com/forums/showthread.php?t=84911

    Happy reading.

    A brief update ...

    The building of EOS Property Group and Bird Property Group's development and our investment at 33 Windsor St, Perth, 6000 continues. We are gearing-up for vesting (settlement/ownership) in the second half of the year.

    A brief history ...

    It's been a long slog to get to this point - delays have meant the original 16 month timeline has blown-out to currently around 30 months and still counting! Coupled with this we have been told we will need to provide an extra 5% to cover the added interest due to the delays (approx. $18,000 for investors in a one-bedder, and more for investors in the two-bedders). We hope for no further delays, and therefore no further cost blow-outs, however considering the history of the project, we are bracing ourselves! And lastly, the Perth market, as most would know, is also not the shining-star it was when this project started, so values and returns may fall short of original expectations.

    As our first investment property, my wife and I are just hoping the great location is our saving grace at this point! We have a buy and hold / long-term strategy for this investment, so we remain confident that the market at some point will repay us favourably.

    Cheers,
    Crido
     
  2. sanj

    sanj Well-Known Member

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    Hi Crido,

    I've just finished construction of some multis around 100m away from you. This pocket of town was always a bit of a forgotten one but is coming into its own atm. At the moment there are 2 larger ones being completed to go with the Ecco by finbar that was completed last year.

    There's also a large development proposed around 300m from your site. Personally I think these changes will be good for this part of perth and good for you.

    What was your estimated value on completion again? Hope there's still a decent profit.
     
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  3. Biz

    Biz Well-Known Member

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    I never knew you were so...."smouldering" Sanj.
     
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  4. Crido

    Crido Well-Known Member

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    Hi sanj,

    Although some have said the extra development in the area may mean an oversupply of apartments, others have commented that this will not be the case - here's hoping the latter is true!

    Our original figures are below, with any changed figures in brackets.

    Initial deposit: $114,000

    Construction costs: $236,000 (now $254,000)

    Total outlay to investor: $350,000 (now $368,000)

    Expected final market value: $430,000 (now ... ?)

    Expected capital gain: $80,000 (now ... ?)

    Expected Rent return unfurnished: $475/week (now ... ?)

    I've asked a couple of agents in the area for estimates on value and rents and both have said they need to see the finished product, so I'm not sure how the market has affected these numbers.

    Anyone like to comment with their estimates?

    Cheers,
    Crido
     
  5. sanj

    sanj Well-Known Member

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    Don't get me wrong there will be a bit of an oversupply but I believe there will be more demand for small block developments like this. 2 storey, walk up, no lifts etc, less than 10 units in good areas.

    The key is though that it's a quality development that feels good and presents well. You won't know that til completion.

    Margins certainly look tight and I can't believe they claimed a 1 bedder would get 475 /wk, was never the case imo
     
  6. Crido

    Crido Well-Known Member

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    Any thought on what a one-bedder such our mine might go for in today's market?

    $400/wk?
     
  7. sanj

    sanj Well-Known Member

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    Depends on the end result. Anywhere from 370 to 420 imo, with 420 being a push and unlikely.

    From memory it's only 40sqm or so but has a huge courtyard, is that correct? Good Floorplan, spec and ceiling heights?
     
  8. sanj

    sanj Well-Known Member

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    I'm an understated and fly under the radar kinda guy :D
     
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  9. MTR

    MTR Well-Known Member Premium Member

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    Just curious the expected $80K profit is this done and dusted, I mean the final figure including all holding costs till completion?
    Rent seems high at $475, however have you looked at option of leasing fully furnished, may be a good target in this area???

    I have no real idea on end value, advantages smaller complex, appealing, location.
    However the down side is the size of these 2 bedders, I think 55-58sqm ?? Of course it will come down to finish etc as mentioned. I guess you are holding and values are important on completion, just make sure you have some cash if you need to throw in any money if there is a short fall.

    I have to say from your posts you seem to be very calm and managing what has happened very well. I don't have the right temperament, if things go wrong I don't sleep at night. I wish you all the best.

    MTR:)
     
  10. sanj

    sanj Well-Known Member

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    I wouldn't recommend fully furnished. There's a large oversupply of east perth fully furnished apartments and the rents have come right down for them. I rented a place in the city last year fully furnished for 480/wk less than the previous tenant paid because the demand for them is dramatically less
     
  11. Crido

    Crido Well-Known Member

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    Apartment: 40.1 sqm
    Courtyard: 51.4 sqm

    Westminster commented over on the original Somersoft forums:

    "I love the courtyard - really helps them stand out from the crowd. Looking at the plans you have 2.9m high ceilings which is higher than normal - umm I think it might be 34 course. Yours is a very practical design. Not an inch of wasted space."

    And again, Westminster previously mentioned ...

    "Crido also has wonderful outside areas. When you look out of one of his windows the courtyard wall is 2.5m away. This will help make the rooms appear larger than if the wall was 1m away from the window."

    Plan below:

     
  12. Crido

    Crido Well-Known Member

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    No, it's simply the difference between "Total outlay to investor: $350,000 (now $368,000)" and "Expected final market value: $430,000 (now ... ?)".

    These were the figures used for marketing - we've done our own PIA using more conservative figures and obviously factoring-in holding costs, etc.
     
  13. hobo

    hobo Well-Known Member

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  14. mrdobalina

    mrdobalina Well-Known Member

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    Wow... that internal space is tiny, even for a 1 bedder.
     
  15. Crido

    Crido Well-Known Member

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    Thanks hobo ... think I've corrected the permissions for that album now. All members of the forum should be able to see it. :)
     
  16. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Crido when the body corp/strata management is set up, see if you can vote for pets to be allowed in the complex. With decent sized courtyards the ability for tenants to have a cat, ferret, snake, small dog may help pull in some DINK tenants who like fur kids.
     
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  17. Crido

    Crido Well-Known Member

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    Hey Westminster,

    I'm a dog person, but I fear allowing dogs/pets into my IP may mean extra maintenance expenses (remember, this is my first IP, so I'm naive to these things). Is the risk of extra maintenance founded, and/or would the potential returns from DINK tenants with fur kids outweigh the risks?

    Thanks for the suggestion - I wouldn't have thought of this come time for Body Corp negotiations.

    Cheers,
    Crido
     
  18. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    You'll see a few trains of thoughts on this - on here and Somersoft.

    I allow pets because:
    - only a small percentage of Lessors do and therefore there is greater number of pet owning tenants vying for those that do, they may be more willing to pay a little bit more than the avg apartment in the area
    - pet owners can't just pick and choose to up and leave, they have to find another pet friendly Lessor therefore there is less vacancies
    - pets generally do less damage than children (though don't ask me why I have no reticulation left in my house - it seems it's a critical part of my dog's diet)

    Lots of good info in this article http://news.domain.com.au/domain/real-estate-news/can-i-bring-my-dog-too-20141012-114eyf.html

    The BC may say that dogs may annoy other tenants and whilst this may happen, this also can occur in general suburbia too - pet noise complaints are handled by the local Council and they can suggest training methods etc. Place some common sense By Laws such as 'Pets that cause disturbances to other occupants and are reported will be notified to Council. Repeated complaints may result in the pet being asked to be removed by the BC'.
     
  19. MTR

    MTR Well-Known Member Premium Member

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    Wow, that's not good, makes sense now, mining executives etc long gone, rental market in Perth in general taking a big hit

    Mtr:)
     
  20. Mumbai

    Mumbai Well-Known Member

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    Nice suit sanj ;)