澳洲Australia property Avg profit margin on small developments?


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


I know it's different with each project, but for those members who've done small developments (duplex, small townhouse and unit developments, etc) what is your average profit margin?

i.e assuming normal build costs of $1000 - $1200 per sqm, how much profit (as a %age of all costs) do you expect to make?

I'm just investigating the development business and was hoping to get some rough figures.
Alex  

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this is a "piece of string" question. depends on so many variables.

we'd been looking for a dual occupancy site for a while now and several of them just didn't yeild any profit after purchase and build costs, but as an example, the last two we looked at (and bought property 2) ...

property 1: purchase price $360k (incl costs), knockdown and rebuild cost for 2 houses $540k total $900k ... value sell price for each around $450k- ... no profit. this is an okay suburb but not in high demand for new housing, more demand for reno'd old houses.

property 2: purchase price $380k (incl costs), knockdown and rebuild cost for 2 houses $540k total $ 920k ... value sell price for each around $600k+ ... projected profit of around 280k. this is a desired suburb with similar houses being built, but they are still rare and in hot demand.

you have to find out what the market wants in the area you're looking at and do detailed costings (and always figure in a blowout percentage even if you have been generous with your costings).  

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We have just finished building the first house on a block we are sub-dividing in Port Kembla. The 954 sq metre block of land cost $280,000 (inc stamp duty) the first house $185,000 (2 storey 4 bed dble garage en-suite) and the second house will cost $122,000 (single storey 4 bed dble garage) Plus sub costs, landscaping, carpets etc say another $60,000 total just under $650,000. Completed value will be approx $870,000.
Definetly worthwhile but also if you are in NSW Eagle homes have a good range of duplex designs and last time I looked you could build a decent duplex for around $250,000.

Sparky  

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When I first got involved with development i was taught a rule of thum was you should make at least a 20% margin on the total of all your development costs including interest.

Currently this is almost impossible to achieve without significant risk.

But it is not as simple as margin on devlopment cost. One must take into account many, many other factors including the time frame over which the project runs and that your money is exposed and the potential risks of the project.  

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Michael Yardney said:
But it is not as simple as margin on devlopment cost. One must take into account many, many other factors including the time frame over which the project runs and that your money is exposed and the potential risks of the project.Click to expand...
Hi Michael,

Care to elaborate on this topic please? I'm sure many people would love to hear about this subject.

Its one part of your book that I felt was missing - taking it to this next level.

Cheers,
Tom.  

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TomL said:
Hi Michael,

Care to elaborate on this topic please? I'm sure many people would love to hear about this subject.

Its one part of your book that I felt was missing - taking it to this next level.

Cheers,
Tom.Click to expand...
Property development was missing in my book on purpose.
But the bonus chapter available to purchasers gives a brief introduction to this topic.

We cover property develpmnet in fine detail at my annual Real World Real Estate Workshop in June each year  

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Michael Yardney said: ↑
When I first got involved with development i was taught a rule of thum was you should make at least a 20% margin on the total of all your development costs including interest.

Currently this is almost impossible to achieve without significant risk.Click to expand...

What about now?
Is 20% easily achievable?  

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We had a bank valuation not a market valuation so I was hoping to have some real figures but nooo ... I still have to guess based on recent sales.

Total spend will be around $230k (only $170k borrowed so lower holding costs) and the final value will be around $520k. But I think we're a pretty extreme case.

Our next project will be a duplex. Working on $1000/sqm and a design out of a Fairmont Homes catalogue that is duplexable (the base price is actually well under $1000/sqm but we all know the price in the catalogue isn't what you pay) it'll be a $400k build, probably worth $500k+ at the end.

Using the listed prices though it sounds cheaper at $215k for the houses + $X for foundation beefing/septic/floor coverings/extras + $45k land. Fairmont apparently doesn't return calls to try and work out what $X is. The standard design in 'special deluxe' with single carport is listed at $107k.

Not hard to see the appeal of developing ...

Edit wow, I got to talk to someone: $X is 25k/10k/15k/10k so lets round that to $300k = 150-200k-ish profit and $600pw combined rent. Knew there was a reason this seemed appealing :)

Love the standard "what do your footings cost?" "well, you need a soil test for that ..." "I just happen to have one here" "Oh, $12,500 then" :D  

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Here are my figures. Still early days as the plans are not through council yet but it should be close.

4 bed house on 1000 sqm corner block
Cost $300,000
Reno $10,000
Revalued at $350,000

Subdivide back and build a 4 bedder
Cost for house $185,000
Finishes $15,000
New garage on existing block $20,000
Fees etc $25,000
Total $245,000

Similar 3 bedder 100 meters away just sold for $380,000

Like i said figures may change but plenty of margin to play with. This is my first go at development but it should work out well for me.
Cheers  

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devo76 said: ↑
Here are my figures. Still early days as the plans are not through council yet but it should be close.

4 bed house on 1000 sqm corner block
Cost $300,000
Reno $10,000
Revalued at $350,000

Subdivide back and build a 4 bedder
Cost for house $185,000
Finishes $15,000
New garage on existing block $20,000
Fees etc $25,000
Total $245,000

Similar 3 bedder 100 meters away just sold for $380,000

Like i said figures may change but plenty of margin to play with. This is my first go at development but it should work out well for me.
CheersClick to expand...
Are these 25k for approval, council fees, etc..?  

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Edmond Dantes said: ↑
Are these 25k for approval, council fees, etc..?Click to expand...
Yes. Town planner included.  

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sparky23 said: ↑
We have just finished building the first house on a block we are sub-dividing in Port Kembla. The 954 sq metre block of land cost $280,000 (inc stamp duty) the first house $185,000 (2 storey 4 bed dble garage en-suite) and the second house will cost $122,000 (single storey 4 bed dble garage) Plus sub costs, landscaping, carpets etc say another $60,000 total just under $650,000. Completed value will be approx $870,000.
Definetly worthwhile but also if you are in NSW Eagle homes have a good range of duplex designs and last time I looked you could build a decent duplex for around $250,000.

SparkyClick to expand...
Hey Sparky

Are you happy with Eagle? Thats who i am building with. I chose them for two reasons.
1 was the price. They are one of the cheapest.
2 was their designs. The one i picked was the only one i found out of all the project builders that actually fit my block ( 20 by 20).
Interested to know how you went with them.

Im building the hummingbird series 7 by the way.  

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Devo - do they both have to face the street? if so, yours will be on fronting one side of your (corner) block, right?  

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devo76 said: ↑
Hey Sparky

Are you happy with Eagle? Thats who i am building with. I chose them for two reasons.
1 was the price. They are one of the cheapest.
2 was their designs. The one i picked was the only one i found out of all the project builders that actually fit my block ( 20 by 20).
Interested to know how you went with them.

Im building the hummingbird series 7 by the way.Click to expand...
Hi Devo,

Not Sparky here, but I'm just finishing off a duplex development with Eagle homes in Sydney right now.
Will never use them again, and I doubt anybody who has used them will ever do so either.

Check out the reviews here, 10 reviews and all bad:
http://www.productreview.com.au/showitem.php?item_id=67638

I had to do alot of the planning and follow up work myself.
Had to go to council many times and modify plans myself to meet DCP and write up reports myself to get the design passed.
Eagle should have done all of this, but if I didn't do it, it probably would have just halted and taken longer.
Will still make a good margin on the job.
They are just extremely difficult to deal with, slow and disorganised.

Good luck.  

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Edmond Dantes said: ↑
Devo - do they both have to face the street? if so, yours will be on fronting one side of your (corner) block, right?Click to expand...
Mine has the original house facing the side street with the garage to the back of the main street. I have removed the old garage and im building the house facing the main street same as the original garage. I will have to build another garage for the original house which will also be facing the main street. Hope that makes sense :eek:  

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I haven't asked the council what they charge to do a strata division for an attached duplex. I'd imagine it is a much cheaper, more straightforward process than a full split with two totally separate titles. TBH I'm still in research mode, since it *seems* like a good idea but there are a lot of hidden costs.

We paid about $12000 (plus some site specific extras) for a full split in our council, which was actually right in the range the town planner said it would be. The largest single expense was getting a water meter installed.  

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Ace in the Hole said: ↑
Hi Devo,

Not Sparky here, but I'm just finishing off a duplex development with Eagle homes in Sydney right now.
Will never use them again, and I doubt anybody who has used them will ever do so either.

Check out the reviews here, 10 reviews and all bad:
http://www.productreview.com.au/showitem.php?item_id=67638

I had to do alot of the planning and follow up work myself.
Had to go to council many times and modify plans myself to meet DCP and write up reports myself to get the design passed.
Eagle should have done all of this, but if I didn't do it, it probably would have just halted and taken longer.
Will still make a good margin on the job.
They are just extremely difficult to deal with, slow and disorganised.

Good luck.Click to expand...
Yes im finding some issues here also. Luckily my town planner is on to them so apart from delays in plan changes. They havent been too bad yet.  

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Had a look at the reviews. mmmm not good.The general quality is not suprising and i was expecting that. Even higher priced project builders are average. So i wasnt expecting too much in that area. As im not living there. I just want it to be OK nothing more.

The service issue .I am finding a bit slow but i do tend to keep on them and i find that keeps things moving.I needed the plan changed for council to approve the DA. A simple change resulted in a 3 week wait.If i was in country i would have jumped on them.

So for an IP and for the price i think it will be fine. I have a building background so i will know what to look for.  

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Devo,

Yes, the changes in plans are a major delay.
From first appointing Eagle Homes, it took over 2 years before getting to the DA stage!!
Lucky we had a tenant in place and were not in a rush to build.

Had to make many changes, through no fault of my own, and each change took around 1-2 months, with some major delays in there too.

Salesman to head office transactions were where most problems were encountered.
Just not professional and considerate of other peoples time, causing great inconveniences.  

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Ace in the Hole said: ↑
Devo,

Yes, the changes in plans are a major delay.
From first appointing Eagle Homes, it took over 2 years before getting to the DA stage!!
Lucky we had a tenant in place and were not in a rush to build.

Had to make many changes, through no fault of my own, and each change took around 1-2 months, with some major delays in there too.

Salesman to head office transactions were where most problems were encountered.
Just not professional and considerate of other peoples time, causing great inconveniences.Click to expand...

Same here. The property is currently pos geared due to a granny flat so hold ups are not costing me much.
My DA got knocked back on a few things at first. One being the eagle homes House had a gararge that did not meet council requirements for internal measurments.

I chose from the start to get my town planner to do the DA and get eagle to just supply the plans. Best way to go i think.  

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