WA Development Advice Needed

Hello all,

Have been reading a lot on the PC and planning to explore new horizon of developing a existing property into 3 townhouses in Doubleview WA.

Just conducted a feasibility study on a existing property in Doubleview which I am inclined to buy and I was just wondering if the figures make sense or Have I missed something?

Purchase Price AUD 795,000.00
Stamp duty & settlement costs AUD 35,000.00
Demo and other Works AUD 35,000.00
Council Approval & plan costs AUD 25,000.00
Two Storey Townhouse Prices AUD 690,000.00 (approx 230K per House)
Finish Off Works AUD 35,000.00
Interest for 2 years @ 6% AUD 120,000.00

Total Cost of the project = 1.74 Mil

Selling Price @685K Each AUD 2,025,000.00
Agent Commission @ 5% -AUD 101,250.00
Settlement and Misc Costs -AUD 20,000.00

Net Profit excluding Tax: Approx. $175,000.00

Project timeline between 1.5 to 2 Years

Please share your thoughts @sanj @MTR @Perthguy @Westminster and all other PC users

 

> Two Storey Townhouse Prices AUD 690,000.00 (approx 230K per House)

How many square metres are the townhouses?

 

@Perthguy
Thanks for replying
Total area inc. Garage & Alfresco is approx. 175sqm

 

That construction cost seems low. Have you had it costed by a builder?

@Oshawott @Cruskits have some experience in costing such a development and can probably say how much they are spending

Agent commission on selling is around the 2.2% not 5%

 

I was going to say this:

I am currently building a townhouse in Cloverdale at approximately $1,500 per square metre for a middish range spec.

 

Numbers seem.very tight, also you'll have to pay gst which hasn't been accounted for. There are better opportunities out there imo.

The price for construction is too low imo, I'd be budgeting higher plus you need a contingency for the inevitable blowouts/unplanned events/items

Rushing off to a meeting ATM so can't respond in full but as an initial gut feel the site is worth no more than 700k if the sale prices are accurate at 685k each and at 700k even thats a bit of a push imo

 

Based on the numbers you gave, even if correct, it's only a 10% return on total costs..

 

Yes GST and CGT apply. No 50% discount even if hold for > 12 months.

Are you borrowing the lot? So in effect return on equity is infinite? How is debt being secured?

 

So on those numbers the profit seems to be 10% or so? Seems too low. And then a few experienced posters on here think the costs are underestimated as well.

Maybe best to find a different project.

If you're starting out, why not look for a retain and subdivide?

 

There are a number of sites in Doubleview or Scarborough that have gone for low 700s so there is better buying sites.

 

GST! GST!!!!

And factor in cgt to get to after tax costs and factor in cashflow events.

I think the tax effect will take a lot of fun out of this sadly.

 

+1 too tight

However would it take 2 years to build in current market?

Contrbution fees council?

Perth market price sensitive I would want a minimim of 25-30% just in case you need to drop, selling may also take longer = additional interest payments

All = too much risk

 

Thanks for valuable comments

 

Thanks for reply and that's the whole idea to get knowledge from experienced people from this forum.

 

Tend to agree and that's the reason why I thought it might be a sensible thing to put on PC and get opinions from other seasoned investors/developers

 

True

 

I couldn't find any
May be I am not looking hard enough

 

Thanks for feedback

 

sorry late to the party. there are some question marks in the figures you gave above.
1. what other works are included in this price? demo alone is approx 20k.

2. 2 storey build costs for 178sqm@ 230k sounds doable, BUT need to verify is 230k just for the house itself (i.e. not including anything SITE RELATED?)if it is just for house itself, then you have room to build a bigger one around 200sqm. i believe 178 for the area a bit small given competition?

3. finish off works i assume turnkey items - maybe add another 10k to the budget to get nicer things in.

4. agent commision - as mentioned anything from 1.5% -2.5%

5. site related costs - is there a slope? is laneway paved yet or need to do yourself?

6. actual land size, be aware that you might need to get variance approved if you are buying 1 of 2 kinds of lots in the area. there is pretty much just 2 sizes of blocks in area.

depending on the pocket you buy in and the land orientation, there are some going for 700s. but if you are building small one then i'd hazard a guess 680k would be around spot on.

 

Are there really any sites and suburbs in Perth for under $700k that you could purchase now, develop within few years and actually make 20%+ on?

Or is it more or a buy now, wait 3 to 5 years play?