WA Would this development have made a profit?

Block $790k
reiwa.com - 101 Campion Avenue, Balcatta

Assuming all 4 sold for about the same $465k ie $1.86 million

reiwa.com - 101 Campion Avenue, Balcatta
reiwa.com - 101C Campion Avenue, Balcatta
101 Campion Avenue – Balcatta

a bit over 12 months from start to finish.
Would this have been a money maker?

 

My coffee coaster sums

Block $790k + stamps = $830k
Turnkey construction inc heads works $210k each = $840k
Holding costs = $70k ish
GST Margin Scheme 7% approx = $117k

My total not including tax $1.857

Yes construction might have been less but that's probably what I would have allowed in a feaso

So that would have been a negative project in my mind. Hopefully they didn't lose money on it - so maybe they are a builder - but if not then ouch

 

Thanks.
So really you would have only wanted to pay $600k for the block to make it worthwhile?

 

No that would give about a 10% return on TDC approx.

 

So at a sale price of $465k per unit you either need to pay less for the block ($500k?) or sell the units for more.
Interesting to see a couple more "investors" having a go at the other end of that street.

 

Pretty much - or be a builder and be able to construct for less or not be borrowing money or intent on not paying GST which is pretty much impossible now that it's collected at settlement

There is only so much you can control in a project feasibility and lots of statics that don't vary much. Buy in price is one of them that you can control but the market and the seller also control that so you can make all the offers you want at the price that makes it feasible for you but they don't have to accept it.

 

Presumably in this case they didn't think the end values would be $465k

 

Wrong product, too high acquisition cost, this was never going to be a sufficiently profitable project. Not when end values are Sub 500k and you're paying 200k per sits in acquisition costs. And not when the end product is one that is already heavily oversuppli3d within a 5km radius

 

They must have made money or they are good at selling ideas.
Building permit was $740k to build units
https://www.stirling.wa.gov.au/your...2017/building/building-statistics-august-2017

They are doing the same at other end of street again on a $800k block
https://www.stirling.wa.gov.au/your...018/building/building-statistics-october-2018

interesting to see what these ones sell for

Looking at building permits then Googling developers have lost all over Balga/Nollamara/ Westminster in last 2 years and some have been started in last 12 months and they are still building them.

This looks like another loss to me.
2.4 million building permit 1.5 million land plus other costs and selling from $420k (was from $440k)
2-8 Canterbury Court, Nollamara, WA 6061
https://www.stirling.wa.gov.au/your...s/2017/building/building-statistics-july-2017

Do some developers like to lose money? People hoping the market has turned?

 

Weird and interesting.

Mainly because the sum on a building permit or a DA only needs to be the construction amount. You could spend extra on turnkey items, landscaping etc.

 

Another one that I wonder why. $2.2 million building permit. 12 units Sold $210k another at $250 so I guess all in that range
16 Chisholm Way, Balga, WA 6061

Another 8 units $1.55 million permit for sale from $2 million
39 Ashbury Crescent, Mirrabooka, WA 6061

Apparently Mirrabooka is a hidden gem. Not much to dislike a Centerlink, bus port and a Halal McDonalds.

New data reveals Australia’s cheapest capital city suburbs
"
WESTERN AUSTRALIA

Mirrabooka is 10km from Perth and has a 12-month median house price of $322,000.

According to Ms Conisbee, that’s because it was an area with a lot of new subdivisions and estates, which are traditionally less popular with Aussie buyers.
"
Damm I would have never have guessed that was the reason for lack of popularity

 

Mirrabooka is a weird suburb and is likely to stay that way. There was plenty of vacant land around the shopping centre Mirrabooka Square so all intensity zoning has been put there which has a lot of merit. However anyone buying in the rest of the suburb thinking it would surely be rezoned will be waiting a long time as the density near the shops will meet their infill targets.

So the rest of the suburb is full of cheaply 80s build 3x1/4x2s and a healthy dose of Homes West.

Gentrification will be a long time coming but if I had to chose between living in Balga and Mirrabooka then I’d probably take Mirrabooka north of Boyare ave.

 

@spoon

 

This thread just shows how important it is to buy in areas that make sense where end value is higher, as build cost, hold costs same product will be the same

not sharing

 

Or like another project in that area pay $600k for the block. $200k more profit than example in first post.

 

Pick up that thread from @Shogun and read the above.
@Westminster unless I am mistaken, the payable tax on the project should be around the $33K under the GST margin scheme 7% ?
GST at settlement

Buying price : 790K
Selling price : 4x465 = 1860K
GST Margin Scheme 7% x 1860K = $130K
Tax refund: (1860 - 790) x 0.091 = 97K
Tax paid on the project : 130 - 97 = $33K

 

PS : I have no real experience in this, just following the ATO page web

 

I believe any profit would then also be taxed at 25% , base rate entity corporate tax rate.

 

I gave some high level numbers, I can't confirm how accurate they would be but yes it looks like I did use the wrong sum for GST and it should be around $130k not $117k.
As to your next 2 lines. I'm not sure what the intent with those figures are. The Margin scheme withholding cost is rough 7% is to try and take into account the sum of the end product minus the cost of the block and is used instead of withholding 1/11th at sale of the 4. The actual figure needs to worked through by the accountant but in your example at a high level yes the $130k withheld might be too much and the ATO may return $33k of it. However you don't get a choice as to how much is withheld when selling, it is either 7% or 1/11th and then you claim it properly at your next FY tax return.

There is still CGT/income/company tax on top of that to be considered.

 

That is my understanding as well.
you DO need to pay the $130K at settlement (actually, 1/4 each time you are selling an unit) and then, you can claim back the $97K once all houses have been sold (probably next financial year, better watch out for the cash flow here)
Then CGT/income/company tax depending on your situation: an accountant can answer that question.

I agree, lucky if he breaks even.... :$