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Subdivision feasability and costs for subdivision and building!

Discussion in 'Development' started by couq, 19th Sep, 2016.

  1. couq

    couq New Member

    Joined:
    19th Sep, 2016
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    Location:
    Melbourne, Australia
    Hi Somersofters and Property Chat,

    After using Somersoft to help with development knowledge and finding my property I am now in the near the start of my first development starting. I am wanting some help with the feasibility and also help with costs and breakdowns.

    Summary:
    Property: 3 bedroom in Reservoir on 580 block
    To build: knock down of existing house and build 2 x 2 bedroom 2 bathroom townhouses size 108.45 sqm with carport each at front and 1 x 2 bedroom 1 bathroom townhouse at rear with carport 90.89 sqm including carport

    House : $510,000
    It is currently tenanted until April 2017.
    Associated cost for buying including LMI and stamp: $40000
    Permit: $20000
    Cost to build: $650000. This is to include all demolition, build, landscaping and subdivision costs. Only costs on top will be Telstra connection and Council contribution

    Total costs: $1.22 mil
    Numbers for projected value:
    End value

    Unit 1 $500 - 550k (front)
    Unit 2 $500 - 550k (front)
    Unit 3 $450 - 480k

    End value conservative: $1.45 mil. I will have to do more look into these values because they may seem a bit high to me considering they are in Reservoir East (near Northlands)

    I am in the process of going for a construction loan.

    The questions I would love to get help would be is this project feasible?
    Is the costs build of 3 townhouses at good specs (ie floor boards etc) with all costs and landscaping for $650000 about right?
    What are the costs included in this $650000 and how much would subdivision, landscaping, building all costs individually?
    Are there any other costs/steps I should be aware of as this is my first development?

    Thank you in advance!
     
  2. Leo2413

    Leo2413 Well-Known Member Premium Member

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  3. MrFox

    MrFox Well-Known Member

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    Other cost would be: GST, agent fees, marketing, conveyancing and body corporate set up. (If you are selling)
    Also holding cost (no rental income when you building) and interest on the construction loan. Add all these up and there is not much profit in it and no equity to pull out at the end. I am using your resale values which I think are high for the product you have described. See below what two bedders go for in the area and compare to your project:
    Reservoir, VIC 3073 Sold Property Prices & Auction Results
    From your description 580 m2 block the units (2 x 11,5 sq. and one 10 sq) will have to be double/triple storey so you will loose about a sq. of living area each in your stairwell. This will make them very small. This must be in a high density so I am assuming close to amenities which would be a good thing.
    I am not trying to be negative but if those numbers you supplied are correct, this would be a very risky venture.
     
    Phase2 likes this.
  4. Tonibell

    Tonibell Well-Known Member

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    Location:
    Sydney
    Do you already own the site or is this a potential purchase ?

    Might be worth getting a DA and seeing what you can sell it for.

    Based on your numbers it is a marginal project - if you don't own it already then keeping looking.
     
  5. melbourne171

    melbourne171 Well-Known Member

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    building cost depends on the build size and specs. I spend $300K+ per unit (3 beds) for double storey brick house with average spec.
     
  6. melbourne171

    melbourne171 Well-Known Member

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    To save the builder margin cost, sign the contract upto lockup stage only. The rest can be handled by ourselves by using trades and chipies. Builder charges margin on the building cost for his profit.
     
    Last edited: 6th Oct, 2016
    Phase2 likes this.
  7. Turbo_C

    Turbo_C Well-Known Member

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    Location:
    Mackay
    I have had others recommend against, and for this. I suppose it comes down to knowing your time cost, if you have the spare time to undertake these jobs and it's worth it to you then go for it. If you get a better return on your time spent elsewhere do that instead?
    I would be interested to hear how many seasoned developers undertake this, and to what extent?
    The capital need not to be an issue here, as you can add provisional sums into the contract and have the builder draw down and pay you out the cash which you then use to pay tradies or yourself if you do the actual work, assuming the builder agrees. Is this correct?
    Def interested to hear others experiences with this and lessons learnt.

    Here are my costs from a 2 lot subdivision project; keep in mind these costs don't include any professional costs for designing dwellings, such; architecture, contour mapping, soil tests, landscaping, etc
    Sub-division Costs
    Town Planner Fees $4950
    Slope Stability Report $2761 (slope sensitive fee)
    Rear Lot storm water/access design & signoff $1595
    Reconfiguration of a Lot Fee $1536
    Plan Sealing $1362
    Cadastral Survey $4242
    Infrastructure Charge $28000
    Title Lodgement $710
    New Services Costs
    Energex Switching and Feild Audit Fee $629
    Council design lodgement fee $240
    Energex Design Submission Fee $497
    Civil engineering electrical design $3080
    Electricity Works to Pillar $5495
    Telstra subdivision works $918 (anticipated)
    CCTV sewer inspection report $330
    2x Hot tapping & Water Meters $8360
    Council low risk water connection fees $513
    Total $65,218
    Keep in mind also, these are the costs before any mistakes are made,
    so far I have added $900 in mistakes, not including increased holding costs due to project delays
    Forgot to mention these costs include GST
     
    Peter P and Perthguy like this.
  8. PacMan

    PacMan Active Member

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    Are these costs for a subdivision in QLD?
     
  9. Turbo_C

    Turbo_C Well-Known Member

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    Yes and no, specifically GCCC 1 into 2 ROL, code assessable, under the new city plan

    Keep in mind also your sewer connection works could cost up to $10k quite easily, make sure you know where the 150mm mainline is located (NOT the 100mm branch lines) and if the trunk line doesn't come up to your property boundary, look very closely at how much it will cost to connect to it. If your lucky your council will allow you to run a CCTV inspection. If your lucky twice the report will prove the existing 100mm line can support 1 more connection. For a 3 lot subdivision this is imperative as you likely wouldn't get permission to run 3 dwellings into 1x 100mm sewer line
     
    Perthguy likes this.
  10. LCT

    LCT Member

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    Adelaide
    Is this what you would pay a surveyor to find out for you?

    If so, at what point would you get the surveyor in so you can see if the property is feasible or not before signing on the dotted line?
     
  11. Turbo_C

    Turbo_C Well-Known Member

    Joined:
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    Posts:
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    Location:
    Mackay
    Hi LCT, the summary of costs I posted was to get the DA and comply with all conditions on the DA, to effectively sub divide the lot. The surveyor components are a contour (slope sensitive lots only) and a sub-division survey or cadastral survey which is required by council when you sub-divide. By sub-dividing a lot you are creating new internal boundaries, for these to be pegged out correctly the surveyors are required to measure from the external boundaries. Once this is complete you will be given a Sealing package which you submit to council. Once council approves you take it to your lender who then re-vals the new lots, you also need to submit the approval and plans to the land titles office so they have record.

    I dare say for smaller developments you would not pay a surveyor before you secure the property. A town planner will tell you if its doable, provide a fee proposal at no charge and a summary of approximate costs you should expect to pay to carry out the sub division (arborist 5k, surveyor 3k, council fees 2k, etc) You can also visit council and ask (or pay a small fee) for property searches which will show the locations of infrastructure in the street, like sewer lines)

    I'm the wrong guy to ask about when up to engage a surveyor though. After securing the lot I managed to find format plans via one of the vendors previous sales ads, which I tracked down and had sent through to me free of charge (thought I was quite clever) I might have saved $500. Got the DA and went on my merry way installing the infrastructure, only to find out the original format plans didn't take into account a street light setback, which forces the VXO over 500mm, now the water meters need to be moved over 500mm, there goes my $500. Nobody told, me not the TP, not even the civil plumber who does this stuff every day!

    Tldr; ask @Leo2413 i believe he will tell us to engage a surveyor after securing the lot and before undertaking any civil works.
     
    Last edited: 30th Oct, 2016