Subdivision $8,000,000 land

Just wanted developers opinion of the case study below.

Below is a massive block of land for sale. Do you think a JV with a group buying together will make money after subdivision sales?

Land subdivided to a smaller block of 450 to 500 Sqm sells for around $500k each.

So 20,000sqm / 500 = 40 blocks x $500k = $20 mill in sales

sALEoffers over $8,000,000
Residential Land
97 Worcester Street Rouse Hill, NSW 2155
Size 20,000sqm

https://m.realestate.com.au/property-residential land-nsw-rouse+hill-201264873

 

That's a very simplistic way of looking at it.

You will probably lose around 1/3 of the land to roads, public open space and road reserve/verges. So likely to only get around 25-30 blocks out of it.

Then you need to pay for roads and running all the utilities into each block, drainage etc etc. That may cost $2m

Then the council may have a levy imposed on all new blocks to help fund infrastructure in the area. Could be another $500-1m here.

So you now have

$8m (probably plus GST) + $2m + $1m + holding costs for 2-3yrs = $12m at least

End value = $12.5m at 25 blocks or $15m for 30 blocks

Sorry to break the bad news

 

as @Westminster said you will need approx 1/3 land for parks, etc. best to contact good town planner and have meeting with council.

@AndrewTDP can assist you, if you are serious at purchasing the land parcel.


Box hill just had a land release and sold around 28 blocks at $550K each(approx) and was sold in a day


issue wil be around finance

lower lvr
upfront cost for infrastructure

 

btw

@MTR

not far from what i recommended you couple of years ago!

 

vendor is looking to achieve same price as if it was subdivided..

and bank of china will fund it..

phew

 

BD - what do you think the infrastructure costs will estimated to be ?

 

WM- yes Iam looking at too simplistic view. I guess if u can put in big money then u will also make big profits

 

No more like risk vs return.

 

Not if you skimp on due diligence

 

@zack

allow min $90-$120K a block inc council contribution.

this is just top of head figure..

i guess if one has to ask this question, best to stay away from such deal.



it may end up in tears and financial loss!

 

Without trying to be rude, an $8m development is far more complex than a standard 2 block subdivision and it sounds like this may be a bit out of your league (and mine).

I complex due diligence process would be required and there may be many hidden costs. There may be drainage issues, acid sulfate soils, sensitive environmental issues just to name a few whcih could add thousands to the cost of each block.

Spending more money on the property is no guarantee of profitability. I used to work for a developer. We spent nearly a $100m buying a piece of land and the servicing costs and special requirements to develop meant it was not feasible. 10 years later the land sits as farming land and probably wont be developed for another 20.

Proceed with caution.

 

DB - why stay away from this deal? if the DD and numbers works then wouldnt be worth approaching it?

 

@Zak

not sure whats your experience level is on this one!

couple of question, you asked on other thread indicates that you haven't done this before. (i could be totally wrong)

saying this, if you can employee experts in this field for Due Diligence and Project Management, it may work out better for you!

However, quick calculation suggests that vendor is asking too much!

may not worth it!

better opportunities out there for this sort of investment $$$ and less risky!

Feel free to give us a call and one of the expert can talk you thru ins and out of it.

 

no i havent done this before but iam looking for opinions and curious what you have said before.

Really appreciates your input.

 

Yes but it has to be the right deal and it's very complex.
There can be big profit, but big risk and it's a long term project.

To start with the land needs to be appropriately zoned for development. It doesn't necessarily have to have the end zoning you want to achieve but the ability to be upzoned - in WA we call it Urban Deferred/Urban Development. If it's just farmland then you might just be dreaming.

Then you need to develop a Structure Plan which may or may not need to encompass other blocks of land. It is common for these to be around 20-30 acres. You'll need input from other neighbours and agreeance.

You're looking at around 3-4years before you are finished. What the market does in that time can be anyone's guess.

Rule of thumb is total area minus 30% then divide by the size of blocks = how many blocks you can realise from the project. You want those blocks at a whole sale rate of around 50% of the end value (ie in this case $250k each) and that *should* then allow you to have a good profit at the end after paying for everything.*****

***** that is super simplistic back of envelope/napkin rule

 

MTR - what was the price for this piece of land a couple year back?

 

Blacktown Council will hit you hard for infrastructure costs and a lot of those areas have no water or sewer as yet. You'd probably have to enter in to a agreement to fund the provision of services.

I looked at a smaller parcel (8000sqm) for a client and the costs for providing infrastructure alone were prohibitive.

The land would need to be bigger to get a better level of interest from a large developer. And you'd have to factor in at least 4 years holding costs.

In addition the land is zoned RU4 Primary Production Small Lots so you would need to rezone the land, and that's at least another 200k in costs. And at least another 2 years. It would have to be done as a precinct instead of a stand alone, so you would need other landowners to join in.

The only upside is that it is not floodprone.

If you are looking for a bigger project, there's a recently rezoned parcel of land in Wyong Shire for 3.5mill with a concept design for 24 lots that can be increased to around 28 due to recent LEP changes, or a client of mine is selling a 7 lot subdivision site in Schofields (no DA approval but house designs etc all done) for 2.5mill - that one will probably be lodged in the next week so may even have an option to buy it as an approved site.

It's massively overpriced for what it is. For $3mill it would be a tempting for a long term landbank, but it is simply not worth the money when you can get sites that are appropriately zoned for similar money.

 

Im all for thinking and aiming big but looking at a $8m site when u havent done a development before is asking for trouble

 

agree totally. Not something an amateur can do.

i rang up the agent and was told the current zoning for this land is R3.

R3 meaning is a medium density zoned and not farmland.