Properties with DA approval

Hello all, I’ve been seeing a lot of properties for sale with DA approval, and some really making a profit from it (Not sure if this is an extreme case but this property was sold for $1.7m in Nov 2020, a DA approval was obtained, no works done and was sold for $2.7m in Apr 2021! https://www.realestate.com.au/property/6-julie-st-marsfield-nsw-2122 )

I’ve been looking for an IP with the aim to turn into PPOR in maybe 2 years time and haven’t been looking at properties with DA approval as I thought it will limit my opportunities to do my own designs/development plus I feel I just don’t know enough about this. But given the current low stock, I’m thinking I shouldn’t limit myself so wanted to know more - what are the benefits/risks involved?

What are some of the things I should be mindful of / explore when going for a property with DA approval? E.g seeing if I like the design of the plans that’s been approved? Date of the approval granted?

Also how do I go about estimating the cost of building the approved plans? I understand I can’t rely on the cost submitted as part of the approval. Do I need to engage a builder to give me a quote?

Many thanks!

 

You need to ascertain a copy of the DA and plans.

The DA will give you a lot of information such as s94 fees, any specific information re construction, etc.

The plans (including hydraulics) will give you an idea of construction costs although they will most likely not include structural plans which are required for accurate cost estimations.

As a rough guide I would be working off around $2,500 per sqm for basic/medium finishes turnkey. This may be more or less depending on the site costs.

 

May be tricky buying these if your seeking value - often they trade at significant premiums. If its small scale development, there'll likely be builders in the market or small scale developers. Generally it'd be very hard to compete value wise with these buyers - who trade on the 'certainty' and 'time' aspect of DA approved sites. In south west, these type of sites are trading at around 5% margins now - not very much (historically developers would seek 20!). Builders are really the only people who can buy this level of risk, as they'd make the rest up in the build cost component.