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Scarborough Development

Discussion in 'Development' started by Cruskits, 8th Mar, 2016.

  1. Cruskits

    Cruskits Well-Known Member

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    Hi guys,

    Well I just thought I would post and say g'day and looking for a bit of moral support :) Somersoft and now Propertychat has been invaluable to me and I really do owe a lot to everyone on here and a few in particular. You know who you are.

    My girlfriend and I are currently building a 3 unit development in Scarborough and are thoroughly enjoying the experience. The builder has been fantastic and everything is were it should be for around this time of the build. The roof is getting completed this Friday and tiles go on next Monday. The slow work from the top storey down to the bottom for lock up will then begin. It looks like keys will be handed over approx. October / November

    I have been investing small scale for around 11 years now and have really enjoyed the ride. Just lately though I have started to think about "things" a little more than usual. We will owe the bank $1,710,000 at the end of the build. Each unit will be worth between $760,000 - $790,000 on completion.

    The builds are a mirror image to these:

    Sold Price for 1/93 Northstead Street Scarborough WA 6019

    and these

    Sold Price for A/111 Westview Street Scarborough WA 6019

    I reckon they will rent for around $660 a week and we hope to live in one of them. We have $90,000 cash in the bank with a nice tax return (approx $20,000) coming in September..... also have $45,000 in equity set up if needed.

    I earn $100,000 a year and my girlfriend is coming off maternity leave in August. I'm hoping to lock in a nice fixed loan for 3/5 or so years as I would like this to be a nice set and forget for a while.

    My girlfriend and I have taught in regional W.A. for 10 years away from family and friends and it has all kinda been working towards this moment. As we get closer to the end we are getting some jitters and I am sure it is all normal but yeah has anyone else been through the same process and got nervous towards the end :) (7 months to go, but around 2 years in the making from initial decision to build)

    We are just taking each day one at a time and I suppose we would just love to get the keys, rent them out and move in like tomorrow already. Interest rates do worry me a little but as I would love to lock in todays rate. I understand that there is nothing we can do about it but yeah it does play on my mind.

    Thanks again to all the knowledge and experience from all of you on here. I read this website everyday religiously. Sometimes a little too much :)
     
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  2. Blacky

    Blacky Well-Known Member

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    Hey mate
    You are in very similar position as I was when I finished mine a while back. I had a bit more cash on hand, some other debts to service and a bit more income. But overall, very similar.
    Also - I rented all 3 out.

    The interest payments made me nervous also. Its ok now but every .25% is an extra $350/month. Its fine, but do it 4or5 times and it may suck. I locked in 1/3 for 3years and 1/3 for 5. Given the current low rates, which just gives me peice of mind mostly.

    When/if your Mrs goes back to work, have all of her income piled into the PPOR offset and work on getting rid of this asap. In the meantime it builds more buffer. At the end of the day you have about 12months of interest in the bank if sh** hits the fan.

    Enjoy the tax benifits and then just sit back and wait for CG to kick in. A 5% CG is = to (more than) your current salary. Easy money!

    Be patient.
    Blacky
     
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  3. Big Daddy

    Big Daddy Well-Known Member

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    Nice work. Glad to see the end is near with a healthy profit margin. Do you know the size of the frontage for those lots and do you know if the market accepted them or was it a tough sell?
     
  4. mrdobalina

    mrdobalina Well-Known Member

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  5. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    As the drawdowns progress and the balance owing grows it is perfectly normal to feel that way. Towards the end it will get even more terrifying and exciting as the debt reaches peak and the end is sooo close!

    Blacky's advice is good. If you have been living this year on one income, see how long you can last just on yours and stash every cent you can from hers to grow the buffer.

    Photos, I need photos!
     
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  6. Cruskits

    Cruskits Well-Known Member

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    Hi Blacky,

    Thank you so much for taking the time to reply. It means so much to hear from other people who have gone through the same thing. Especially when you have not so positive thoughts going creeping into your head about everything you have worked for :)

    I was umming and arring (is that a word) about posting but your response alone made it all worth it...

    Yes we are all about the buffer :)

    I remember walking through yours a couple of years back now (at a home open) when we first started looking at doing this. It is people like yourself who have inspired and helped us others to "have a go".

    Hope all is well in KStan
     
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  7. Cruskits

    Cruskits Well-Known Member

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    Hi BD,

    Just checked the plans, they are 7m wide each.... With 1.2 walkway down the side for access to the back one.

    My girlfriend and I explored a lot of triplex build home opens in Scarborough (over 6 months). When we walked into this one we knew this was "the one" because in all honesty it was the one that the Mrs. agreed to build :)

    The two street frontages is pretty cool and I know a few other builders in the area have now copied this style. Our builder has built 3 of these before all for investors who have sold all of them on completion. 93 Northstead, 95 Northstead and 111 Westview. He is now building ours plus I know he's building two others pretty identical also in Scarborough. I just checked the Stirling Website and I know he's building the latest one for $1,133,000 (the Internet these days).

    I watched the sales of 95 Northstead and 111 Westview. These both went on sale at the peak of the Perth market end '14 at $829,000 for memory or $819,000. They dropped their price pretty quickly after a few weeks and all got snapped up around the 780,000 - 790,000 mark. All in all sold pretty quickly once they met the market...

    I still keep in contact with the selling agent of these two, he emailed the other day (as they do).... I also met with three of the bigger selling real estate agents from the area and run our ideas past them. 2 said go side by side and the other said go one behind one behind one with side access.

    Short answer, from the outside it didn't look like a hard sell, but I'm not the agent, vendor or buyer :) if I was, I probably would have been like "damn that was hard" it's so much easier when it's not you....
     
  8. Cruskits

    Cruskits Well-Known Member

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    Mr D,

    It was just a design we really loved when we walked in to the house we saw at a home open. I asked for the builders details and went from there.

    We priced up to get rid of the poles in the kitchen (one is structural and the other side s just for show) and find some other way to support the second storey pad but eventually decided against it. It would have been $12,000 to find another solution. I wanted to but my GF wouldn't let me.

    We tried to take as much emotion out of it as possible building an investment. So we just said we want the exact same. We were living in regional W.A. And it was just easier to just say " do it the same as 95 Northstead". It isn't our dream house but it was the best we could find at the time...

    Values have been hit and no I don't think values have held up in scarbs over the last 12 months. One thing I Ng going in our favour is that there is not too many brand new triplex build for sale ATM or has been for a while. A lot of the brand new stock coming on the market is multi units of 6 or so...

    This did come on the market and sold in a couple of weeks recently, I don't know the sale price.....

    87C Northstead Street Scarborough WA 6019 - Townhouse for Sale #121960050 - realestate.com.au

    This one has been on the market for around a year now or at least it feels that way... I know it was originally on the market for 850,000....

    2/113 Westview Street Scarborough WA 6019 - House for Sale #122037334 - realestate.com.au

    Not to sure what is going to happen over the next 6 months. Hoping with the Scarborough foreshore redevelopment that is s starting next month and ending around summer '18 will help over the next couple of years especially when complete....

    I define fly know that redevelopment blocks peaked at around $930,000 last year and I just saw one sell recently on Burniston st (693sqm, which they all are) for $830,000 I think.

    I could only dream of finishing these, refinancing and going again.... All new territory for me so actually not too sure what is possible moving forward but me thinks we are going to run into a few financial (bank) blockers :)
     
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  9. Cruskits

    Cruskits Well-Known Member

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    Hi Myf,

    Yes those drawdowns are getting bigger and bigger $3,500 last month :) and I haven't got anyone to pay the rent yet!!!!!

    Hahaha looking forward to it getting more terrifying..... said no one ever!!!! I'll need a good "happy place" to go to when it gets too much :)

    Yeah I never worried too much about buffer before but now it is definently at the forefront of our thoughts.... Every dollar counts at the moment. We have been laying low these last few months.

    Thanks for everything @Westminster, you are an absolute star!!!!
     
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  10. Big Daddy

    Big Daddy Well-Known Member

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    Thanks cruskits, your profit margins are very nice. If i wanted to do a similar thing it seems like not much profit if buying land for 850k and spending 1.13k on build.

    If you don't mind me asking, did you pay a lot less for construction or did you buy the land cheap and tip in a lot of cash?

    1/93 northsted is a kickass design.
     
    Last edited: 9th Mar, 2016
  11. Big Daddy

    Big Daddy Well-Known Member

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    Why do you guys think 87c northsted has not sold?
    Is an upstairs kitchen a bad idea ?

    Is it the small alfresco (not much cover )?

    Is it the front elevation which makes it feel too close to the other townhouse? (Duplex)

    The narrow entrance and corridor when you open the front door?
     
  12. mrdobalina

    mrdobalina Well-Known Member

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    How did you figure out the profit margin from the info provided?

    He mentioned the level of debt, but this does not equate to the cost base.
     
  13. Big Daddy

    Big Daddy Well-Known Member

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    I assumed he either got the land for a good price or bought ages go, construction was alot cheaper or he chipped in alot of cash. If its the first two then he has done very well. If not, then 12.5% is still a decent return for some great looking townhouses in a great area. I have saved some of the pictures in the online listing to give me some ideas.

    Calcs if someone were to take on this project today:
    Comparable land sales: 830k -From cruskits info in the post above
    Stamps and Settlement fees for land sale : 35k - My estimate
    Actual build cost: $1,133,000 (im guessing turnkey and titled) -From cruskits info in the post above
    Holding Costs : 50k - My estimate
    Selling Fees 45k - My estimate
    Selling Price : 780k to 790k - From cruskits info in the post above

    Costs= 2,093,000
    Sales : 3 x 785k = 2,355,000
    Profit = $262,000 = 262,000/2,093,000 = 12.5%
     
    Last edited: 9th Mar, 2016
  14. Cruskits

    Cruskits Well-Known Member

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    Paid $757,000 (they were asking $795,000 slow market back then August, 2012, much like now) We started bidding at $695,000 on advice from a friend. Was originally going to offer around $750,000.....

    After costs etc. $783,000

    Sold Price for 52 Northstead Street Scarborough WA 6019

    Did a full reno $21,500 and rented out for the next 3 and a half years. My girlfriend and I did it ourselves in our school holidays. Was so intense...... and rented out for $500 (don't know why it says $480. I think there was a rental boom around then so maybe someone bid it up?

    52 Northstead Street, SCARBOROUGH WA 6019 - House For Rent - 8156444

    Construction cost $1,090,000 plus change......

    Total $1,873,000

    tipped in $163,000 from the sale of another property

    Total $1,710,000 owing today.....

    Yeah we do like the design, hence why we built with this guy. We went into a lot before choosing this one and jeez there is some different stuff out there.....
     
  15. Cruskits

    Cruskits Well-Known Member

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    They were asking $850,000 for a long time and I think that put a lot of potential buyers off? The design and colours are a bit off and it is the middle unit of 3...

    Thats my thinking anyway. The front door doesn't do it any favours either......
     
  16. sanj

    sanj Well-Known Member

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    If the above figures are accurate to some degree then no, it iseems definitely something you wouldn't do in today's or any market. there's no contingency, gst etc.

    you'd be lucky to have 100k in your pocket at the end
     
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  17. Cruskits

    Cruskits Well-Known Member

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    Yeah holding costs around $62,000 during the build
    Plus we were down $1100 a month over 3 years and half years it was rented out so another $40,000
    plus the $21,500 reno costs
    We got some decent tax returns though in the time.... like $20,000 a year. Not sure how much was to do with the Scarborough house but it would have been a fair bit....
     
  18. Cruskits

    Cruskits Well-Known Member

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    This is al
    Land sale - yep
    build cost surely you would get it a little cheaper considering todays conditions with builders - but yep (and yes turnkey+titles)
    holding costs - pretty close
    selling fees - yep thats what I have it about
    selling price - obviously you only know when you sell, but I think that is around the mark maybe $20,000 less on each to make sure
     
  19. Cruskits

    Cruskits Well-Known Member

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    Yep GST and CGT not considered in any of my figures if you were going to sell all three.

    $100k is a $100k though.......
     
  20. No Probs

    No Probs Well-Known Member

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    Good on you for giving it a go! How exciting.