Newbie Development Questions

Hi All,
I have a strong desire to develop as part of my investing journey. I have been investing in Resi housing for the last 9 yrs and have acquired 10 properties in that time, mostly in metro Sydney and Brisbane. I have been reading books and doing various courses, so i am slowly learning but want more knowledge before taking the leap. My questions:

• When looking for sites, are we to scour council zoning maps for the medium density locations or can we apply to council to have the site's zoning changed?
• I realise that often, due diligence clauses are put on contracts. How often are contracts exchanged without full D/D being completed?
• For those who have done small development, What is the most important thing for a beginner to learn?

These are just some things i could think of right now but i will no doubt be posing more questions to follow up.

Experiences and opinions welcome.

Thanks,
Michael

 

HI Mike81,

I'm no expert on this topic mate but this is how I have been approaching it.

• When looking for sites, are we to scour council zoning maps for the medium density locations or can we apply to council to have the site's zoning changed?

When I look for sites, first i choose the area I wish to develop in and then investigate what development opportunities are there in the area. Zoning maps can be useful and usually the council websites have a heap of information on this. I also try to have a good idea of my finance situation so I know roughly what size developments I can actually take through to the end if that's my goal.

• I realise that often, due diligence clauses are put on contracts. How often are contracts exchanged without full D/D being completed?

I have bought sites in quiet markets and then in markets that are rising and I found generally there is less opposition in quiet markets to DD clauses although if the DD clause is 'reasonable' then my feeling with agents was that they would entertain it. I have had some friends try to get a 'subject to successful DA' clause in and were knocked back mostly. When I was looking for sites in Brisbane, the agents/vendors mostly had little objection to say a 2 week DD clause where consultants had full access to the property at reasonable hours. Personally I think it very risky to not have time or be allowed some time to do DD before buying a site. I know some people wing it and hope for the best but I would never do that, not even on a small site.

• For those who have done small development, What is the most important thing for a beginner to learn?

I think to be able to accurately asses your costs with the feasibility and then as Bob Anderson puts it, learn to 'manage people and processors'. I also think buying well is essential and being realistic with your determined end value. There is so much to learn and I have a lot to learn too. This is just some of my experiences.

Good luck mate!

 

Thanks Leo. I appreciate the time you invested in the reply. Coincidentally i purchased Bob Anderson's course because I saw it mentioned in a post of urs a while back.

Also good you for posting you Parramatta thread too. Good stuff mate, I love reading it

Cheers

 

np mate. How did you find Bob's course?

 

I haven't attended anything, i bought the course from someone who attended. So i have the manual, the cd's, the dvd's, and a stack of feaso calcs and so on. I love it man. I have the audio playing in my car non stop. its very encouraging and bob seems like a good enough bloke.

 

I agree he's a great guy. Very nice and down to earth too.

What kind of sites are you looking for? Syd or bris?

 

I'm in a similar boat as you, Michael.
I'd like to get hold of his materials too. Where is a good place to get it from??

Also, is it possible to do a small house build on a vacant land with 80k capital and 400-500k borrowing capacity???

 

Don't forget to make sure you have enough for the soft costs as well which include: architectural/design fees, surveyor, permit fees for DA,CC, council contribution fees, bonds, engineering, financing (interest), accounting and legal fees, and other pre- and post-construction expenses. This generally is not covered in the construction finance.

 

I'm in the same boat as the OP but can answer a few questions. For me the process is as follows.
a. Where to invest (State, suburb and area)
b. Land discovery
c. Quick & preliminary Feasibility assessment
d. Financing & land acquisition
e. Detailed Feasibility Analysis and Design Concepts
f. Architectural Design and DA Process
g. Subdivision approval
h. Construct
i. Property management and tenancy
These guys below have a easy to follow developer guide stating the basics. They also have a feasibility calculator - browsing that you will notice many of the detailed costs to be aware off.
Resource - Be Developer, Australia

As I'm past point a & b and on c, the question is how to do a quick feasibility when all the costs are not known yet but need a reliable cost estimate?

 

I posted some of what I learned in a previous post.

Life - its not all beer and skittles - Somersoft Property Investment Forums

Blacky

 

One gotcha is hidden charges that you don't know about that can blow out your feasibility. Things like Council Public Open Space Levy which can vary from not applicable to $30k or more!!
There are awesome duty Town Planners at most councils who you can ring and ask questions to - from the zoning of the land to a query on open space levy to how close can walls be to each other. They are there to help and there is generally always someone rostered on to answer general enquiries over the phone or in person at the Council.
In terms of construction costs the BMT Calculator is pretty good for when you are at the rough stage @ottg. Construction Cost Calculator & App | BMT Tax Depreciation

It doesn't include siteworks/retaining/power/sewerage/council but it's a start for filling in the fields of spreadsheets.

 

i always get confusing answer to what site work is?

as i understand from speaking to various builders there are two main items:

1. construction of the house - this includes concrete slab, frames + roof trusses, electrical wiring, plumbing pipes for drinking water, sewage pipes, windows, brick, kitchen, bathroom, laundry and everything internal to the house within the concrete slab.

2. site costs - this includes everything outside the concrete slab. That is connecting to the house - electrical connection from outside line, sewage main connection, drinking water connection, landscape, scald folding, driveway.?

could someone please clarify and is there a standard explanation that itemize which category it sits in?

 

@TML you are not wrong - it's a minefield of stupidly inaccurate clumpings. Its always best to seek clarification from EVERYONE who quotes

Sitecosts/siteworks: generally is most outside the house stuff as you say - retaining, bringing services to the house (gas, power, sewer, water), stormwater connections to soakwells/drainage system. Specialty safety items such as tiger tails for overhead power lines are generally put into here

Construction costs: the actual building of the dwelling(s) and may include turnkey items (carpet, painting, paving, landscaping, lighting etc) when quoted as a turnkey price. Items like scaffolding are generally put into here

The grey area: landscaping, paving, dwelling walls which may also be retaining levels (so the price might be factored into the construction cost),

 

Don't forget "Earthworks", commonly confused with the word "Siteworks". Even if you have a "flat, level & sandy" block it needs to be prepared and compacted by an earth worker prior to construction.

 

Oh... I usually just go with Dilberts method for feasos.

 

@Blacky many good lessons from your post on SS. Thanks for sharing. As for Dilberts method...hey perhaps....not really... as it will increase your risk.
@Westminster the BMT cost calculator will be a handy benchmark, Thx. Would like to check the difference between say 5 developers that are active in the same area and their average say 3x2x2 offerings, and then compare that to the BMT calculator. Will need extra work because often quotes from developers are deliberately hidden among broad headings to make comparison difficult. But surely there are ways to overcome this.

 

It was a tounge in cheek response to a good (and serious) question.

When Westminster and I started the BlackMinster development we met at the local bar one day, and ran through, literally, a napkin feaso.
We agreed it was worth persuing further. So did a more thourough and detailed annalysis/feaso.
Interestingly - and I would need to check back through my records - but I am pretty sure our original 'made up' number wasnt out by much (though we did underestimate the engineering).
From memory we are within 10%.

Blacky

 

we should have taken a photo of that napkin

 

You mean quotes from builders not developers right. ..?

 

Yes correct; but may be both as its in the semantics:
Definition of developer: Person or a firm that improves raw land with labor and capital, and arranges for utilities and essential services, in order to sell subdivided land
Definition of builder: One that builds, especially a person who contracts for and supervises the construction of a building