South East Brisbane development blog

Budget should be more like 450-500k per dwelling for those high specs with a 280sqm plus living area imo.

 

Hi Leo

Yes. I put it under budget. $500k min if luxury house.

Can I ask how will you title your share driveway?

 

We might opt to go the easement route or not, still haven't decided yet mate. Easement route would probably avoid most disputes in the long term.

 

Consider the aspect when designing; another popular feature is also having ground floor master to provide some separation for families. Most estimators look at kitchen estimates based on $/LM of benchtop....$$$ quickly depending on your selection on that second long kitchen design!

 

Hi Lara

You are right. I may over budget for this house. I have to reduce kitchen length:

Below are my items to be considered for house design for cost effectives:

- Traditional cornices. Square set or shadow line corners are lovely but they're more expensive than traditional cornices.

- Reduce ceiling heights. 2550mm for the ground and 2400mm for the top.

- Use standard size of doors and windows

- Tiling to living areas is very practical instead of real wood. You can get porcelain plank wood look tiles which are quite economical.

- Use prefabricated trusses in roof construction

- Only design large spans where you need to. This will reduce the requirement for engineers details - another extra cost.

- Single skin timber stud framing is the most cost effective wall construction type to install and alter in the future if required.

- Sub-floor construction - The most economical is concrete pad footings with brick piers, supporting a timber floor frame. Concrete is expensive, and is not as cost effective as timber framed construction.

- Avoid wall mounted lights (wall washers) that illuminate down the wall - this will require the plaster finish to be of a top level of finish - very costly

- Check all forms of firewalls between the buildings. Some systems are cheaper than others and just as good.

- Different claddings cost different amount for similar look. For example James Hardie Axon is about the same price as JH Easylap but looks way nicer in my opinion. JH Matrix is very very expensive and best avoided or only small 'wow' amounts used

- Reduce your wow to small items with big impact - a feature colour at the entrance, a splashback in the kitchen

- The other big saving to be made in this area is by minimising bathrooms and wet areas – they have a high cost per square metre due to the extra trades, finishes and fittings that they require. Think about how you might be able to consolidate two wet areas into one to save on both the area involved, the high cost to finish the space, and in the longer term, the extra time spent on cleaning!

- Lightweight construction uses the same structural timber stud frame as used in brick veneer construction, however doesn’t require the non-structural brick skin (that’s right, it is the timber frame that holds the roof up anyway). The brick skin can be replaced with any number of lightweight cladding materials that might be timber, compressed fibre cement, polystyrene foam sheets, or even Colorbond steel.

- While brick veneer is taken to be our most cost effective type of construction, there are many situations where lightweight cladding will prove a more cost effective and attractive option.

- For example, upper floor additions can be designed with more flexibility and built at less cost simply because it is easier to structurally support a lightweight wall than it is to support much heavier brick walls.

 

Based on my finance plan below, profit is not enough to encourage me to carry out development right now. So, the strategy is to get reconfiguration DA approval but will not start construction until house price goes up the next 2-3 years. It is very risky to develop the site but cannot achieve the expected prices and holding costs keep increasing.

 

@melbourne171 I agree it just doesn't stack up at all mate on any of the scenarios. Best to accept the reality rather than do what some insane people do when they say " well the return on TDC might only be 11% gross but the profit I'll be making is 125k! That's a lot of money! "

 

Apologies for been critical here.. generally I would've done my DD and fine tuned this xls spreadsheet over and over and over again to see if there are enough fat in the deal, BEFORE I make contact with selling agent. But it appears you have done the opposite..
Most who developed would agreed that those numbers does not work...not sure it works in 2-3 years time as well.
A quick look at the figures I think you are on conservative calculation and does not allow contingency...

 

Hi RetireRich

Thanks for your very constructive criticism . Yes, I missed contingency fund. I have also found that I missed quite a few items in the previous calculations, including landscape, paving and pool.

I do not know how much the new service connection costs. Therefore, I have given allowances of $2500/each service. Total allowance is $10,000. Can you help me to estimate new service costs?

Also note that I give a high estimated amount of build cost i.e. $1600/m2 . If this build cost is lower, more profit can be gained.

Feasibility does not look good at all. However, before buying this IP, I have considered development potential as a bonus for this site. If I cannot do it now, wait for next few years for capital gain as it was I bought at a good price . I am living interstate anyway, and do not need to pressure myself for development.

My strategy is to get the DA approval costing about $10k-15k within next 3 months and select one of the following options:

1. Sell it with DA approval if CG is appx $100k-$150k. Then, move to the next project.
2. As the DA approval expires within 2 years (or 4 years), postpone construction until market up trend.

Any suggestions?

 

You can only sell DA if it stacks up, generally builders will want at least 20%profit

I would just rent out and do nothing until I see the market rising then revisit all options. Putting together DA now is costly just my thoughts

Anyway, good on you for giving it a go

 

I recall you were saying the block had some easement or flood prone? you probably won't ascertain if there are further surprise ($) until you lodge DA or in the construction cycle, especially the servicing...it all depends on the service provider. for example, it may require underground electrical cable instead of overhead... reconfigured lot may not accept sub meters and require individual meters..

are there any slopes in the land... even a gentle slope in either direction requires retaining walls and it could cost 5-15k

the build cost you quoted today may go up in 2-3 years time...I have seen SE QLD builder increase their build cost around 2.5% per year...so your $1600 becomes $1700 in 3 years time.

your holding cost seems a bit light side.
say demo house to plan sealing (property sold) is 12months.
80% x 700k (property) + 50% x 840k ( build cost) = 980k. on 5% interest is 50k!

also your site cost of 18k is a bit conservative..i thought this to be reasonable for 1 dwelling cost.

i can't really advise you what is your next step unfortunately

 

Hi MTR and RetireRich

Thanks for your feedback.

The block is on flood overlay which requires about 22-25cm soil fill according to flood report. It is very gently slop block about 12 degree.

Fortunately, all the sewage and stormwater manholes are located in the block rear. This will save me a lot of money. Currently, it is a dual occupant IP with separate electricity meters. So, I do not need a new meter. However, I do not know if the Council require underground electricity pit or not. I recall that that Council still has required an underground pit for previous subdivision project but I do not know much about Brisbane Council requirements. Can you give me estimate cost for following items?

1. Connection to existing sewage manhole inside the block - (or it included in the builder's cost)
2. Connection to existing stormwater manhole inside the block, including Retention (or it included in the builder's cost)
3. Underground electricity pits

RetireRich has pointed out my incorrect holding cost. I did not including the holding cost for borrowed construction cost. I have updated the holding costs, going up to $60k, very conservative calculation: (700k + 1m / 2) x 5% = $60k.

Soil fill cost: 530m2 (based on engineer report) x $30/m2 = $16k. I have not think anything else except for 3 palm trees removal which included in demolish cost. Please suggest anything else?

[Paragraphs was removed as my calculations are wrong].

 

I am a little confused, not surprising

The builder would be working the numbers on everything, but their building costs would be less.

So what would you make if you sold the DA?

I would be very careful that the end prices are correct, especially for high spec values and I would have thought high spec would be around $1800/ m2.

Its far more important to find out what buyers want and what developers are building in the area you may be overcapitalising? Also you may be able to get away with lower end build but tweak it a little with what buyers want, hope this makes sense.

 

Thanks MTR

Thanks for your more fruitful ideas.

I am doing research about what buyers want and what developers are building in the area. The IP is located in Camp Hill, one of prestige suburb in SE Brisbane. I have found some interesting sales on RE.com.au. Sales on the same street, same land sizes, no city view but different house quality, have huge price differences, between $700k and $1.3m. I will share with you and ask for what your thoughts?

Nice weekend.

Cheers

 

Nice work

No point reinventing the wheel, copy a model that works/sells and build what people want.

Don't let the ego get in the way, first priority is to make money.

MTR

 

If the stormwater/sewerage is onsite(inside the lot) then cost should be minimal and included in the builder's quote, unless there are some nasties during the construction...
Underground cabling could cost anything up to $20k.

your quote for site cost is not site costing..it is basically a requirement to satisfy the flood overlay. there is a site costing for the building envelope that builder would only quote after a survey, contour and soil testing...

a 12 degree slope in either direction would require retaining walls. if the lot is reconfigured then RW should considered 2 lot individually. you should estimate 5-15k.

 

It sounds a lots of costs involving in this development, compared to previous one in Melbourne. Better stay calm and do it slowly. Oh, I have not included my travel costs, health & family issue costs

 

I agree with MTR that it is important to not overcapitalise. To make profit, the most important is to reduce the build cost (the largest proportion). I think about building project houses with i.e. Metricon on the lots, excluding flooring, applicants, pool, fences and interiors. Costs for such project houses are about $1200-1300/m2. Then, I will source supplies/tradies at the best prices to do the rest to cut the builder margins on these.

The disadvantages of this can be increasing in the holding costs if I do not manage tradies well and cause the project delay.

 

Another way to cut build costs is to employ a clever architect that produces good designs while reducing sqm2. Effective way of reducing overall build costs but not end values

 

Check your GST calculation.

Equity employed looks light too - you're assuming a 85% LVR lend on TDC which is pretty aggressive financing?