Thinking about First Development

So I am about to embark on doing the research for a development project.

I have 3 properties
2 in the Wollongong City Council ( WCC ) one of which is 18m frontage and 556m2 block in Figtree NSW and the other being 23m frontage on a 580m2 block in Horsley NSW. The third is in Shellharbour City Council area is 560m2 with a 17m front. Would any particular one stand out as the best candidate to look into developing? I am thinking of doing a duplex, if anyone is familiar with the areas I have mentioned, id be keen to hear your thoughts and or experiences.

Clearly haven't done anything like this before so just trying to work out where to start

 

Its all about the numbers. Assuming they can all be developed ( i have no idea) choose the one which shows the best returns for risk when you run the numbers. If the returns on all of them looks subpar then don't even dream of going ahead just for the sake of it. The deal has to stack up from the beginning or forget it.

Where to start? A BOE feaso to see what your dealing with.


my 2 cents.

 

People quote a return of 20% on costs - not sure which costs (interest, GST etc). Anyone care to comment on what costs should be factored in?

If you sell the end properties, GST payable on sale (using margin scheme?) plus income tax (no CGT discount applicable)

If building to rent then different tax outcome.

 

Are you talking knock down, or building a granny flat behind?

 

Well I was thinking knock down and build duplexes depending on costs. But I do have the cash sitting there for a Granny Flat and the Figtree one has a double garage at the back which could easily make way for a 2br granny plus garage. Would imagine the rent would be in the realm of $250 plus for a 2/1/1 granny flat in Figtree close to the shops, and gong CBD and uni

 

Why destroy perfectly good houses to build duplexes though? Cost you 25k-ish to demolish, which is perfectly livable and you are currently renting out?

Think about the 12months of no rent coming in you have to still service the loan.

Think about the current loan on the block that you have, then add about 400k to complete the duplex, what are your LVR's?

Are you after higher cashflow from the properties? Or, are you after the equity of having dual properties on the one block to potentially sell at a future date?

 

Currently the LVR on the entire portfolio over the 3 is $350k on 1.65m so approx 20-25%

My thought process was just to try and use that to my advantage and build them and have higher cashflow from passive income etc.

Just at a cross roads as to what to do and how to move forward. With the capital growth its been easy sailing so far. But now I'm just looking for the next step

 

Currently the LVR on the entire portfolio over the 3 is $350k on 1.65m so approx 20-25%

My thought process was just to try and use that to my advantage and build them and have higher cashflow from passive income etc.

Just at a cross roads as to what to do and how to move forward. With the capital growth its been easy sailing so far. But now I'm just looking for the next step

 

What is the estimated rent per unit, and what are you currently getting for the house on the Horsley block?

 

Hi @Leo2413, ive seen you write BOE feasibility in other posts, but not sure what it is, even tried googling! Can you provide a description?

 

Hi @lixas4 , its just a quick way to work through your options by putting in the main numbers on the 'Back Of the Envelope' to see how the return looks before getting into a more detailed feasability.

Back of the Envelope Analysis (BOE): Your Investment Master Key - Part 1 | Trident Real Estate Capital

 

Back of envelope! Well there you go.

Cheers

 

Well if I were to do 4/2/2 or a 4/2/1 I imagine the rental would be up around 550-600 each

Currently it rents for $400 per wk

 

I know Shellharbour and Figtree quite well, but Horsley, not so much.

I think the success of a duplex in Shellharbour area is very dependent on how close the property is to the beach/lake Illawarra, train station and shops. I have noticed quite a few developers building duplex's in Shellharbour that are within walking distance of these facilities and they seem to sell quite well. I think you have to keep in mind, the type of people buying duplex's in Shellharbour are people who want to live as close to the beach/lake Illawarra as possible, but don't want to live in an apartment and can't afford to buy a stand alone house close to the beach on land >500m2.

I haven't seen too many duplex's in Figtree, but house prices in Figtree have been sky rocketing in the last 2 years (starting to catch up to Sutherland Shire prices), so a duplex may succeed in the current market.