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two birds, one stone

Discussion in 'Development' started by sandyfeet, 22nd Jul, 2016.

  1. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    Hi all,

    I was going to wait until we settled and had our DA approved before I outlined our journey; however, we have already had a few wins and losses and I thought it might be helpful for others and myself if I started now.

    I remember when I first found SS, besides the interviews, the development section was a favourite! I always appreciated the sharing from all the guys on here and was amazed at how helpful and positive everyone was. I’ve learnt so much from SS and PC and hope somebody can get something out of our journey.

    We are still new to all of this and our project is certainly not as big and exciting as a lot of others on here, but for us, it is a step in the right direction in terms of our strategy and our own personal development/experience.

    The ‘two birds’ are our future PPOR and an IP and ‘one stone’ is a vacant corner block of land.

    Basically, we will complete a torrens title subdivision and build two 4/2/2 homes. The total coast will be about $730-$750k and at current values, each dwelling valued at $460-$470k.

    I will try and get some more details up over the weekend.
     
  2. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,949
    Location:
    Brisbane
    I'm looking forward to seeing more detail. We also have a DA in and we also are development virgins. I'll read your story with great interest.
     
  3. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Sounds good.
    Will be keen to see more details too.
     
  4. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    Here are the numbers:

    Land - $190k
    Legals/fees/engineers/certifier - $27k
    Build - $481k
    Contingency - 15k
    Onsite stormwater detention - $8k
    Torrens subdivision - $5k
    Holding costs (9 months) - 14k
    *second services - $6k

    *Total cost - $746k
    Value after subdivision - $920k
    *Profit - $174k
    *Margin - 23%

    Rent - $460 (assuming one rented)
    *Yield - 6.4% (assuming half of loan)

    *Cash input @25% - $186.5k
    *Loan - $559.5k

    *Cash out @80% after subdivision (with $460k value each) - $176.5k
    *Cash out @80% after subdivision (with $470k value each) - $192.5k

    *edit to adjust for 2nd services
     
    Last edited: 23rd Jul, 2016
    Goreng Ming, MTR, House and 1 other person like this.
  5. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    This project is located on the mid north coast of NSW, a small coastal town of a few thousand people. We purchased a 964m2 corner block, which settles late August/early September.

    In terms of our plan/strategy, we could have gone all out a couple of years back and purchased a few in QLD. A problem with a strata subdivision on our previous (and first) project held us back and gave us time to think. When I was first reading up and learning how property could help us get ahead I was reading how important it was to develop a strategy. I was seeing all these people buying multiple IPs and thought wow, how exciting, lets do it. It just didn’t seem right for where we were at and my wife especially, was not too confident with taking on $1-1.5mill of debt @ 90% considering we were about to start a family. Probably our first lesson - Your strategy has to be yours, right for you and your goals/timeframes and situation. If you’re in a relationship, both parties need to be on board with the plan.

    My wife wanted to have our own home and using all our funds to take on $1.5-2 mill of debt was going to put that dream off into the sunset (even more so now with lending restrictions). So we end up here, giving ourselves a couple years to settle/plan and build our home and an IP, whilst enjoying starting a family and not stressing…. Too much!

    So this development does a few things for us:
    - Creates equity
    - Gives us our own home, and selling down a previous PPOR with leave us with no bad debt against our home.
    - The IP is easily held with a nice yield, self managing and depreciation.
    - Allows us to have plenty for future deposits after refinancing.
    - Gives us experience for future developments. This will be our second development in an area we are familiar with and any future developments will see us need to branch out and this is still daunting for us.
    - If we need to reach out for help or a mentor for future developments, hopefully having runs on the board will give other people confidence to work with us.
     
  6. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    Some wins and losses

    - The deposit was paid in April 2015, with a settlement due April 2016. This has been pushed back twice now to late August/early September. This was fine with us as the wife was on maternity leave, which may have made finance tricky.
    - We will pay $190k for a 964m2 block. For a long time blocks in this estate were just not selling. Price and the fact they were off the plan with 2 year settlement contributed to this. We could see momentum building off the back of the Sydney boom and we jumped in and paid asking price. Within 4 months some 30 odd blocks were sold. The last few in the estate were around 700m2 and sold for $195k. More than 70% of these went to people from Sydney and the Central Coast.
    - We were able to work with the developer and have the extra sewer/water/comms/elec installed with the main works - this saved us between $10-12k at least.
    - We spoke to council about our plans and we were initially told it would go through with no problems and as we intended to do the subdivision application at the same time, they would consider the dwellings as separate, avoiding driveway, stormwater detention and fencing issues that may have arisen if it went through as a dual occupancy.

    We have spoken with council again recently and told that this will not be the case. So now we have to consider the option of either doing a DA for the subdivision and one dwelling, followed by another DA for the second dwelling, or the other option being to do the DA as a dual occ and subdivision. We are having a meeting with council and it seems we may be able to avoid a driveway issue but not the onsite detention or the fencing if we go dual occ.
     
  7. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    floor plan and site plans

    excuse the hand drawn plans.... and yes they will be going to council like this (maybe slightly revised) :)
     

    Attached Files:

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  8. LifesGood

    LifesGood Home Building & Development Consultant Business Member

    Joined:
    26th Jun, 2015
    Posts:
    646
    Location:
    Perth WA
    Wow, those hand drawn plans. Wonder what council will think!
     
  9. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    update:

    plans have gone to water authority and are now approved after a few hassles. on their mapping they could not see the additional water and sewer services that were laid with the initial subdivision works. we had to chase up the developer and the surveyor, both of which were very slow at returning calls/emails and get the updated WAE through to them - all good now and approved!

    as outlined above we had a problem with doing a DA for a dual occ where we would have to install ugly stormwater retention pits. we have decided to avoid this by doing the DA for first dwelling + sub, lodge new lot and complete DA for 2nd dwelling prior to any construction. this results in maybe an extra 2 months of planning/approval but we wont have big ugly holes in the yards. it will however save us about $10k in costs.

    as were still learning the development game and this is a pretty straight forward dev in the scheme of PC ill keep adding some lessons for those thinking of starting with a simple/easier project:

    -be diligent with following up/returning calls to professionals/your team. im sure the surveyor got back to us as in the end when he got sick of me leaving messages with his phone/email and reception. all he had to do was send a PDF he had on file and this took 2 weeks!

    find good people and trust them - we have a private certifier and he helped us with our plan and the staged DA process to avoid the retention pits. he has also advised how we may be able to avoid an expensive brick fence for the subdivided corner block.
     
  10. sandyfeet

    sandyfeet Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    134
    Location:
    South Coast NSW
    also had a rental appraisal from an agent for our loans and they came back with $480 each, up from my original $460
     
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  11. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
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    Location:
    Perth, Melbourne, USA

    Love your work:)