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Penrith Development

Discussion in 'Development' started by Shahin_Afarin, 1st Sep, 2015.

  1. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Penrith Development

    Here is a diary journal of my Penrith development that I am working on concurrently with the BH project.

    Purchase:

    Purchased a DA approved site for 5 x 2 bedroom townhouses at auction in June 2015.

    Although I had done the numbers prior to the auction – I hadn’t seen the site until the day of the auction. It’s a good flat block with brand new colourbond fencing on all 3 sides of the block that is going to save a few dollars down the track.

    I plan to commence construction February 2016.

    I am using the same builder as my Baulkham Hills project and I am getting him to do everything including most of the CC (CC drawings, hydraulics, landscaping, easement, construction, etc)


    Numbers:


    Purchase Price: $805,000

    Stamps and Legals: $35,000

    S94 and s73: $20,000

    Misc Costs: $5,000

    Holding Costs: $75,000 (approx.)

    Construction: $910,000 (including GST)

    Total: $1,850,000

    Resales/Revalue @ $440,000: $2,200,000

    Gross Profit $440,000: $350,000

    Resales/Revalue @ $460,000: $2,300,000

    Gross Profit $460,000: $450,000

    This is very much a get in and get out project so im planning to build and sell as quickly as possible. At this stage im planning to sell 4 and keep 1.

    End debt against the remaining townhouse will be at most $90,000. Plan is to then leverage against this project and BH project and re-invest the funds in the next project.

    Finance is residential - 80% of in one line value.
     

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  2. TML

    TML Well-Known Member

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    well done. Will a 2 bedroom easy to sell in the Penrith market? did you had a chat with some of the penrith real estate agents before coming up with that design?
     
  3. Zak

    Zak Well-Known Member

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    good one.

    Is it zoned R3?

    and how big is the land?
     
  4. Gaby

    Gaby Member

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    Good on you! Also interested in knowing the land size?
     
  5. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    R3 Site - 923sqm is the land size
     
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  6. RetireRich101

    RetireRich101 Well-Known Member

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    I always knew there were some good potential in those R3 that got rezoned last year. I have one in Kingswood R3 but not good enough for MUD as its under 800m2.

    I think you're correct in saying getting in and out in your development timeline in Sydney. Awesome build cost.
     
  7. TML

    TML Well-Known Member

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    does anyone know the min. frontage to build four (4x) townhouses?
     
  8. RetireRich101

    RetireRich101 Well-Known Member

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    In Penrith Council adapted 2014 planning it is 15m frontage for MUD

    upload_2015-9-2_11-51-58.png
     
  9. TML

    TML Well-Known Member

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    awesome thanks =)
     
  10. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    Shouldn't be too hard. Plenty of young childless fhob that wont be able to afford a house and the prospects of having a new property even if its a unit/townhouse will help :p
     
    bob shovel and Be Developer like this.
  11. ej89

    ej89 Well-Known Member

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    How much money did you have to inject into something like this? Also, did the builder give you a discount because you've built with him before?
     
  12. Daniel007

    Daniel007 Well-Known Member

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    +1 Would like to know this
     
  13. Be Developer

    Be Developer Property Developer Business Member

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    Million $$$$ question?? and @Shahin_Afarin will cover similar calculation at Sydney Meet up next week... (he did last time too)
     
  14. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Correction finance is 70% not 80% - I just realised I made a mistake on the original post.

    I am waiting for the valuation to come back - once that comes back (hopefully this week) I will be able to confirm the cash injection required for this project.
     
  15. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Shahin - Obviously the sale of BH releases a degree of cashflow to assist to fund the build too. Or a plan to keep say 2 of the 4 BH and get a revaluation can also release equity without hitting LVR too hard.

    There can be strategies to :
    - Defer income tax on the sale at BH (perhaps a year ??) so that the ATO's own taxes help pay for build costs on Penrith rather than using a loan or cash.
    - Reduce GST using margin scheme as the site is eligible.
    - Time claiming of GST on the build
    - Use structure smartly for land tax, rate of tax and deferral of tax

    So while one dev looks separate to the other the reality will be that they aren't. One of the things I see more often with smaller developers is that they choose to end to end projects as one feeds the other and so on.. You don't want to stop and sit it out too long.

    The other observation I have from numerous clients in this area is that many smaller devs get too greedy and miss opportunities for fear of under analysis. They think too small and then dont see the numbers that make it viable and start to chase risk. BeDeveloper last session showed example of some devs that think slightly bigger to make the numbers work. Different areas etc... I'm sure BeDeveloper and Shahin will be able to further explain this next session,
     
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  16. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    I would be more focussed on a great builder at a fair price than a lower cost. Cost isn't just the price you pay. I believe Shahin had some foundation issues at BH that his builder addressed which saved his bacon as the budget didn't initially factor in such significant site works.
     
  17. TML

    TML Well-Known Member

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    Paul , what would be best structure when doing multi-dwelling development ?

    Should it be under:

    1. company name

    2. individually name

    3. trust

    4. other?
     
  18. Be Developer

    Be Developer Property Developer Business Member

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    Tom,

    Best to consult your own tax/structure advisor before you start your journey in to property development.

    It will depend on your circumstances, family situation, current income, future/projected income, keep/sell of proposed units,etc.
     
  19. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Valuation came back last week. The cash injection (by way of equity releases against existing securities) is $400k from start to finish.

    Its not about getting a discount as such as thats not how it works really - its about the fact we have a strong relationship whereby the negotiation process was much smoother this time around. It was very much a systematic approach. We both need to make money and work together. The project must be profitable and feasible for both parties.
     
  20. John Wood

    John Wood Member

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    First time poster, long time lurker. Shanin, I think this approach will see dividends in later projects for you.

    I suspect many people will try and screw down on price when negotiating a price on a build, but I really don't believe this is the best approach in the long run.

    If you try and screw a builder down, they'll make it up elsewhere. (cheaper materials, time, quality of finish, etc)

    Sitting down and working with them for a win/win situation would allow for ongoing harmony for future projects.

    I've been involved in a few negotiations where both parties (developer/builder) come away with a profitable position, and built a relationship to a point where we could ask them to quote for jobs that they knew we weren't going to give them, but to help us out in reducing costs from other operators.
     
    GOU likes this.