Sqm cost for a 17 unit development

Hi,
I have a build cost question so hoping someone could assist pls.

I am a long term buy and hold investor for resi prop across Aus (mainly in melb) and will be building on 2 of my large blocks as my first develop project. Both in Frankston, Vic - first one with 6 x dble story townhouses (3 x 3 and 3 x 2 beds with 2 beds around 120sqm inc garage & porch and 3 beds with 140sqm). The other one is 11 dble story townhouses, 3 x 3 and 8 x 2 bedders, with 2 beds around 95sqm and 3 beds 125 sqm inc garage.

The permits for both are expected in coming months and I plan to build immediately after. Both projects are architect designs.

1- Is $1500/sqm fully inclusive cost for both projects sounds ok, given that the suburb's median is well below Melbourne's median and associated finish. The build area for first is 800 sqm and second is 1400sqm approx.

2- Does it make sense to start both projects at the same time ? Would economies of scale for say 17 t/house project be any better than 11 t/house project ? Ideally, in self-funding the build, I would like to start one after the other however might look at borrowing some if the simultaneous build offers value.

3- I have not sought any build quotes as yet (been waiting for the permits) but I would really appreciate any recommendation for any builders from the forumites if you have used any builder for multiple town house projects and very pleased with the end result.

4- I am overseas with work very frequently and it will be impossible to micro manage this project. Given the size of the project, could this be 100% outsourced to a builder where they could be expected to finish all of it whilst providing reports remotely. In other words, since it is my first build-project, is it normal to expect that defining the project in elaborate details and outsourcing it to builder could potentially affect quality of the build or cost overruns ? Just trying to get my head around the going 'best practice'..

Thank you in advance for any feedback.

Harris

 

@Harris

1. Refer to a QS - LINKY, even $2k may be cheap.
2. There wouldn't be a significant saving even If they're next door (still have 2 sets of prelims)
3. @MTR might chirp in
4. Keep your architect involved - they'll call tenders, oversee the project, administer the contract, review progress claims & variations, attend site meetings etc

 

Thank you Scott for the kind note.

I have looked at the link and the proposed cost for a two story town house appears $2,000/sqm on the lower end which is quite higher than I have budgeted (on the advice of a couple of consultants I earlier chatted to). The numbers won't work on that sort of build cost but I shall investigate more.
Can I ask if it is a normal practice for an architect to be involved with the entire process as you highlight ? I wouldn't think they would be managing the building process where my key concern is maintaining timelines and costs.

The sites are level for one and has a very slight slope towards the end for the other but have been told that there are no cost issues in building the townhouses and quite easy to work on.

Is there a builder or 2 someone could recommend that I could email the current drawings to in order to get an approx cost/sqm inc all engineering/ drainage, landscaping costs.

Thanks
Harris

 

It really depends on what you mean by fully inclusive for the $1500 do you want that to include site costs, retaining, clearing, town planning fees, engineering, water management, open space levies? Or simply construction + turnkey items like tiling, landscaping, window treatments, paint??

I would say that there is little economy of scale and even if you awarded them to the same builder they may prefer to do one then roll onto the next as they won't have enough subbies to do both at once. Starting one 3mths after the first might work well though for rolling trades through but I don't think would give any great discount that make it worth it

 

Thanks Westminster.
By 'fully inclusive', I meant all build related costs but not including architect, town planning, consultant fees for drainage, sewerage, traffic consultants, CHMP (which alone is $16k for each site), project management, quantity surveyor etc but includes turnkey to the stage where tenants could move right in.

Thanks

 

Then I’d say it’s about right, especially as it’s Frankston and you’re unlikely to put gold taps in

 

Thanks Westminster.

 

Nothing like going in deep on your first project.
How are you financing the project?

 

likely to self-fund at this stage however haven't investigated the outside funding options available properly, given the spanner thrown at the banks with the new APRA rules + the royal commission and the eye watering going rates from private-office/ lower tiered funders on project funding.

thanks

 

Theres a bunch of great mortgage brokers on here that could help you out for a loan. But I imagine anyone that can self fund a project of your size wouldn't have too much trouble getting a loan for the construction

 

Rolf Latham (from good ol' Somersoft days) helped me fund 80% of my portfolio from 2003 right until 2012 or thereabouts. One of the best in the industry by a country mile...
I have significant equity in a listed company that I floated hence the self-fund option is an alternative to access capital via simply selling down a portion of the shares to fund both developments. The only downside this option has is that I cannot capitalise on significant costs inc interest etc, in case I decide to sell a few units down the track.
Thanks

 

It all depends on what you require as an absentee developer.

An independent project manager can look after all the contractual and construction aspects and use the architect when design issues arise or the architect can supervise, provide design input as required and administer the contract. It all depends upon the skill set and capabilities of each organisation, only you can assess this.

Variations will arise eg latent conditions, wet weather, adjustment of PC items, delay/acceleration costs etc - who would you propose to review these (QS, PM or architect/administrator)?

Standard contracts for larger projects are usually drafted around an administrator, architect or other independent party to administer the contract with the builder and Principal being the two parties to the contract.

A design & construct contract wouldn't be appropriate so proper guidance is needed depending on your direction.

Under no circumstances use your own contract or a lawyer's contract - an MBA/RAIA contract will meet your needs and If all turns to sh¡# has been tested in the courts.

 

Thank you Scott for the feedback. Would be helpful if someone could recommend a build project manager that they have dealt with or know of within Melbourne that I could chat to and potentially employ for these projects.
Regards
Harris

 

Most architects provide or can provide this service. Most drafters don't. It's a significant advantage of using an architect for the process, and not just think of them as designers

 

I developed 3 sites with a total of 14 units a couple of years ago. Staggered the commencement of them 3 months apart and used the same builder. I was similar to you in that the construction was mostly self financed.

I took a slightly different route and went cost plus with a small builder. Ended up saving about 10% on the turnkey costs based on the various quotes I got pre construction (better for the ~$300k savings in my pocket than someone else's). Required a lot more monitoring work, but I enjoyed it.

In terms of cost savings due to economies of scale, I don't think you will get much. As Westminster mentioned, most builders will probably stagger the build anyway, so they can roll their tradies from one project to the next.

Good luck!

 

Thanks Tufan - will chat to my architect.

 

Appreciate the note.

Can I ask if your project consisted of single or dble story units and what was your turnkey cost per sqm and associated level of finish ? Mine are all dble story and given I aim to keep them post build, I wonder if there is any benefit in using better quality finish with relevant increase in build cost or just go with whats around in the neighbourhood. If I increase the finish-level, I would want a higher yield/ rent but the area agents tell me that it wouldn't necessarily translate into higher rent, given the number of available properties.

Thanks again for the feedback.

 

I would go for better build quality rather than finishes quality (feel free to shoot me down). Better built requires less regular maintenance whereas higher quality finishes require more frequent replacement to 'keep up appearances'.

 

Ok- I meant the overall quality of build + finish. The aim to is to offer a better product vs competition to ensure year round occupancy but not that good that it might lend itself to be priced-out for majority of the tenancy market. Thank you

 

I retained all of mine and use them to generate income. They were all single story double brick & tile units. I up spec'd mine, and put in a higher quality finish that what was on offer around the area. It made a difference when prices (and rent) in the area dropped, and it made it easier to find tenants in a difficult environment.

Higher quality finish may not make a yield/rental difference for you now, but may in the near future.