Your first development project

You sure is a ROCKSTAR!! Very impressive and encouraging. I hope I'll reach your level one day.. Do you have any tips for newbies on any pitfall to look out for?
Thanks for sharing. Really appreciate it.

 

Hi Jess,

Sounds like a good project! Thank you for sharing!
Are you still developing in Sydney or have you moved interstate?

 

Still in Sydney! We have about 4 years of projects lined up and then plan to be financially free. We enjoy it but, not sure we will completely stop in 4 years...

 

Have a healthy motivation. Be grateful for where you are and what you have. Work with honesty and integrity. Jump in with eyes open. Seek out specific advice from experts who have runs on the board. Research and analyse carefully. Begin small and safe if finances are limited. Develop a team around you and treat them respectfully. Reward those who work conscienciously for you and treat people the way you like to be treated.
That'll do for a start!

 

Wow, very impressive. I am sure that will keep you very very busy!
I guess you can always take mini retirements after four years.

 

I am doing my first development (currently working on the CC). It's a mixed commercial and residential building and I can share some of my experiences:

• Time - I have a full time job and only work part time on this development. It requires many meetings with the architect, council, town planner, etc. It was difficult for me to manage the time as I needed to take leaves to attend the meetings.
• Parking spaces - the number of parking spaces can limit the development potential of the site because Council requires x number of car spaces for each unit. There are some solutions such as car stacking and car sharing but not ideal.
• Funding - Some consultant fees and Council fee cost more than we thought (e.g. Section 94 development contribution, Building Construction Industry Long Service Leave Levy, etc). We are planning to have a lump sum contract with the builder but I believe there will still be unexpected costs during the construction.
• DCP - if a new DCP is going to be published soon, it may be better to submit the DA after the new DPC is published. In our case we added an extra level probably due to the new DCP.
• Neighbours - there are a few buildings next to our site and they ran a petition to object our development! Fortunately we have a good architect who is familiar with the area and we had a design that can reduce the impact to the neighbouring buildings and got the DA approved.

Overall it was time consuming, stressful but learnt a lot and I am happy with the overall results at this stage.

 

I posted in detail about my first development here
http://somersoft.com/forums/showthread.php?t=81774

I learnt a lot from the process even though it wasn't a huge success financially. Have a read about it if you want to learn of some potential struggles you can face.

To summarise here is what I learnt.
So - what are my lessons learnt (so far)
1) developments require more cash upfront than you can imagine. Be well liquid before starting.

2) cater for worst case. Have a viable exit strategy for every stage of the development. I didnt have one, so I was in a position of high -ve capital at several stages, meaning that if I bailed out I would have lost the cash. It meant that in order to recover the money invested I had to carry on.

3) Dont rely on your capital for servicing the project. One day this will run out.

4) I would probably say that in reality I jumped into developments too early in my investing career. I should have built a stronger capital and income base before taking the first step - but the numbers just looked too good to resist.

5) Employ the best - the best project manager, the best lawyer and the best accountant. Without these professionals working with me I would never have made it this far. They dont come cheap - but are worth every penny.

6) I still have more learning to do.

Blacky

 

Hi Jess,

Are you or your partner a builder by trade? Whats your background?

 

Hi Reindeer,

Thank you for sharing.. Looks like a pretty complicated first project! Do you have a project manager that will be managing the whole development?

Do you mind sharing the purchase cost and the estimated build cost?

Definitely a project with a great learning curve! Please keep us posted on your development and updates!

Starlite

 

I am going to hire a project manager during the construction. The land is owned by my family outright so there is no purchase cost. We've spent around 200K to get the DA approval. CC will probably cost us around 550K (including architect, consultants, Council fees, etc) The estimated building cost is around 15-16m. All cost includes GST.

 

Sounds really interesting, Reindeer - would you consider starting a thread for your project to give more details (land size? Storeys? No of units??) and updating as you go along?

I know I for one would love to hear about this sort of larger project in more detail. Best of luck.

 

Hi hobo, the land size is around 1100 sqm. 3 basements and 7 levels above. Total (commercial + residential) is 55 units. I may start a thread later once I've got the CC.

 

Hi Reindeer,

Looks like its a big first project! Definitely start a thread later on, I will definitely follow it with great interest. Best wishes and luck! Please keep us all updated..