Newbie Development Advice - What's a reasonable first start?

Hi All, have been reviewing this section of the forum and am inspired by the knowledge and experience on display.

I'm looking to take my first step into a build project and want to know what the "safer" sequence of development projects are. I've a couple of rental properties and have owned and renovated off an on, now looking at that next step. The problem is, it's quite daunting from here and I don't really know where to start!

Based out of Sydney, this will be a project in a regional area within 3 hours of the city (TBC) and necessarily at the affordable end of the market. Although I can move now, am keen to work through the process correctly so am setting aside a year to do the research and make the decision. Funds available up to $600k. All build work will use a builder but I will probably do the landscaping etc. Very aware of council issues and differences that need to be researched, and will do that separately once locations begin to firm up (central coast, blue mountains, central west currently considered but not committing as yet).

These are the ideas I have to mind:
- New build on normal block and sell upon completion. This would possibly be an eco home on an infill site as I'm not a fan of new estates.
- Battle ax on older block, sell 1 part and build on other, or equivalent 2 for 1 subdivision. Sell on completion.
- Duplex build on an infill site. Sell on completion.

Sorry if the above is vague, just trying to sense a good start point to begin focusing research. If anyone has ideas of the expected margin differences between these approaches, that would be great. Any alternative approaches to starting out will be greatly appreciated too

Many thanks for your insights and assistance.

 

I should add, I was looking for another regional IP but talking with my partner, it's time to commit to something a bit bigger.

 

Hi MK101

I would suggest starting with a clear aim in mind.
Are you wanting to sell and make good profit?
or
Are you wanting to acquire property to keep?
or
Both

The safest options are options that offer higher returns. What I mean is that if you add massive value to your investment through development then most other problems go away. I am happiest when my focus is on a chipped tile in the bathroom rather than "gee am I going to make a quid here"?

In this market if you are smart you should find an opportunity that allows you to escalate the value of your purchase hopefully rendering market forces less relevant.

I hope this helps
PAUL

 

Thank you Paul. I'm looking to develop and sell, thinking small scale and simple is the best starting point, but hear what you are saying about adding more value so the little problems don't matter as much. In light of that, I am thinking a duplex by an experienced builder is a better start than a home as the value equation should be notably higher. Either that or split a block and build

 

Yes a duplex is in most cases a better option than just a knock down re-build of a single dwelling as the profits should magnified.

The art is in finding the right site at the right price and equally as importantly with the right terms.
Long terms should mitigate the only negative about this approach and that is the time a permit takes.

The art is in the development site purchase!

Good luck
PAUL

 

Is there really any money in building single homes on a standard block at the moment?

 

Its will be a struggle to make a profit on a single dwelling or a duplex

There are a range of costs such as GST, income tax and various fees etc that all need to be costed. Council contributions, DA fees, town planner costs and so on as well as services connections, civils and a range of issues down to fencing etc ...and holding costs. Then costs for strata etc assuming each on its own title

Our developer toolkit helps explain the key tax issues to assist that element of project planning.

 

The art is in the development site purchase!

Thank you! Sage advice for sure

 

Ehh I don't really know! Any advice appreciated

 

No real money on Duplexes either? What are you recommending to clients now?

 

Whats your buffer like if something goes wrong?

Determining profitability should be step 1, no?

 

I don't know any areas that are going to move 3 hours from Sydney. If I am going to develop, I look for areas that are on the upswing.

 

Hi Cate, I'm watching a few spots and reviewing infrastructure plans before committing, hence a year to decide locations. Let the dust settle first.

 

Buffer is OK/comfortable if I keep it in the affordable end. Yes Profit x risk exposure is key, which is to be assessed per option. Right now I'm just trying to narrow the options to give the better possible profit x risk profile. Honestly, there's so many ways to do small scale development, what's still working now? From there I can refine the search criteria and look to specialise my knowledge.

 

With $600k I would be looking at Brisbane, plenty of opportunities. I don't factor in where I live when doing development.

 

Good point, I don't live there now but know it fairly well. What would be your hit list for types of development?

 

I would be targeting Mitchelton, Upper Kedron, Albany Creek, Chermside West, The Gap, Stafford, Arana Hills, Ferny Hills, Everton Park. Northside is doing well. Of course, you will have to do your DD to ensure that you find the right site at a good price. Have a look at some of the prices being achieved in Mitchelton, but you would have to get the block at a good price, sometimes it is just better to do a really good reno. I am doing a reno near the water at Thorneside. I suppose you just need a clearer idea of what you want to achieve- but I am definitely seeing improving sentiment in Brisbane Mitchelton, QLD 4053 Sold Property Prices & Auction Results - realestate.com.au

 

Thanks very much Cate, I'll research the area now

 

Which area is that ?

 

Nothing nailed down, I'm waiting to see the infrastructure forecasts and which way regional property goes. I'm also trying to assess the best development process before selecting the location.

I'm still trying to work out what my first development should be, build, duplex, block split. That then assists the property to look for.

Fyi, I'm casually reviewing most regional areas within 3 hours of sydney.