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Building Costs / Land Size Needed?

Discussion in 'Real Estate' started by Sk3tChY, 23rd Aug, 2007.

  1. Sk3tChY

    Sk3tChY Well-Known Member

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    Just wondering if anyone has had any experience with building a small block of apartments/townhouses/duplex on a piece of land?

    I was just wondering, roughly how much land i'd need to perhaps make a small apartment block, with maybe four 2br units in it? How much would something like this cost?

    Any experiences?

    Good/Bad stories?

    How much does building something like this cost?

    I'm hoping to break into the property market soon, and i've thought that maybe if I bought a big block of land somewhere out west, and perhaps built a duplex, or small block of units on it, i'd be able to make some decent money.
     
    Last edited by a moderator: 23rd Aug, 2007
  2. Jacque

    Jacque Team InvestEd

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    Hi Sk3

    First port of call is the council that you're looking at buying in. Research the zonings to see if what you want to do is first allowable, and consider talking to the local town planner as well. With over 30+ separate councils (all with their own DCP's and rules/setbacks etc) in Sydney alone, there simply isn't a definitive "one answer fits all" solution when it comes to development.

    Best of luck with your quest and keep us posted as to progress :)
     
  3. Sk3tChY

    Sk3tChY Well-Known Member

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    Thanks Jacque.

    Well at the moment all of these plans are very broad. Pretty much for now im just a little interested in building/re-building a property to either a duplex or small apartment block of about 4 units.

    I think my next step, before looking into councils, areas etc, would be to find out what costs i'd be looking at. And finding any companies that have some pre-planned buildings.

    I had a brief look at Masterton Homes, they have a duplex thats $299,000 or something, which seems a little pricey. Does anyone know any similar companies that do this sort of thing?
     
  4. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Hi Sk3tchy,

    If you're not doing a project home like Masterton or others out there then it all depends on your level of finish as to your final per m2 cost. Anything from $700/m2 for something really cheap up to $2000/m2 for a fairly high level of finish. You could pay more, but then you're definately into diminishing returns for your extra dollars.

    My three unit development in Mona Vale is targetting a pretty high level of finish so I worked on $2000/m2 for each of the two stories and used $1000/m2 for the excavated basement.

    So, at 130m2 each for three of them, that's $780K for the dwellings and a basement of 200m2 adds another $200K to take my total build cost to around $1M. My site was $700K and professional fees / interest another $100K so the total cost is around the $1.8M mark. My targeted Gross Realisation is 3x$830K = $2.5M-ish, or a gross margin of $700K-ish.

    Cheers,
    Michael
     
  5. Sk3tChY

    Sk3tChY Well-Known Member

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    Hey michael,

    Thanks for the feedback, the $700m2 - $2000m2 pricing really helps give a good idea on costs. Did you use any sort of builder in particular? Something similar to masterton homes?

    Typically I was ideally hoping for either a duplex, or set of 4 units that would fetch around $200pw. What kind of rental return would your sit give you? Or are you planning on just selling straight away?

    ps: I sent you a PM michael.
     
  6. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Hi Sk3tchy,

    I haven't tendered my plans and selected a builder yet, but it won't be a project home builder like Masterton. There's a few specialist high end builders that work in the Northern Beaches that I will ask to tender on my development and I'll post the outcome when I select one and why I did so.

    As an aside, I just realised I hadn't answered the second part of the original question around land size. My site is a touch under 700m2 and fits the three units just with a tad under 50% site coverage. I have to maintain at least 50% landscaped area as a condition of the development as well as setbacks which also limit my site coverage.

    As to rent, I am targetting $850pw per unit. So, for three units that's $133K pa in rent. At a cost of $1.8M borrowed at 7.5% that makes the interest $135K. So, I'll be basically neutral cash flow on it by renting all three out at completion. But I'm contemplating moving into the townhouse and renting out the two units and then also renting my current PPOR as well. That won't be ideal from a loan deductability perspective, but the townhouse will be spectacular and in an idealic location. Then, when Sydney booms again, I can sell my current PPOR and use that CG free money to pay off the townhouse completely and a fair whack of the deductable unit debt as well. I own my PPOR outright so selling it at the top of the next boom should free over $1M in cash. It was valued by the banks recently at $850K so it wouldn't need much growth to get to that $1M mark, and in fact patience could yield quite a bit more than that.

    Cheers,
    Michael
     
  7. Sk3tChY

    Sk3tChY Well-Known Member

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    Michael,

    1. Is Masterton good in your opinion? Is there any recommendations for cheap, yet decent builders? I wouldn't be able to afford the best at first, so something of good quality would be the way to go for me.

    2. 700m2, and what your building only takes up 50% of the site? What are you going to do with the other 50%? Any reasons for not perhaps adding on an extra unit?

    ps: God Dayum, you must be building some nice units, and they must be in a dam nice area if your hoping to get $850pw..!
     
  8. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Yes, I think Masterton are quite good. I trust you've been researching here: DUPLEXES - Dual Occupancy Professionals I haven't built with them but they seem good for the price.

    The other 50% is landscaped. Its a requirement of my local council that at least 50% of the site is retained as landscaped area. So that limits my developed area site coverage to not more than 50% of the total land. In my case, I am pretty much right at that limit. I've attached a very zoomed in version of my landscape plan. Its best viewed in A3, but can't paste the PDF as its too big.

    Yep, a very nice area. Right in the heart of Mona Vale on Sydney's Northern Beaches. Less than 1km to the beach and to Bayview on Pittwater and to the centre of Mona Vale's shops and cafe strip. Central to everything and a very high level of finish. The second image is a roughed up photo montage from Pittwater Rd which doesn't really do it justice, but might give you an idea of what it will look like.

    In fact, I spoke to one company which sources executive rental properties for high net worth foreign expatriates whilst in Sydney and they said they could probably tennant my units for up to $2K a week if I was to furnish them. I'm thinking of going that path and putting in the full home cinemas, smart wiring, modern furniture and already planning on 900mm stainless ovens/rangehoods and modern kithen / bathroom anyway. Might add another $20-30K per unit, but I own the furniture and stuff and it gets me an extra $1K a week so would pay for itself pretty quickly.

    Time will tell whether that option will work though. I'm considering giving that guy my top unit and letting the bottom floor unit directly. That way I'm buffered a bit against vacancies if the expat thing results in both being vacant at the same time.

    Cheers,
    Michael.

    PS The landscape plan is a bit flawed in that it names Townhouse 1 and Townhouse 2. What's labelled townhouse 1 is actually the footprint of the two units one atop the other. What's labelled Townhouse 2, is in fact the two-story townhouse that we're contemplating moving in to. The basement is accessed from the bottom right of the landscape plan where you can see the driveway.
     

    Attached Files:

  9. Smartypants

    Smartypants Well-Known Member

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    Plus it is depreciable which will help offset the extra initial costs.
     
  10. Sk3tChY

    Sk3tChY Well-Known Member

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    Yeah, I looked over them, found another decent looking mob by the name of Valley Homes, the seem to have some decent packages as well. Would you happen to know any other similar companies?

    Looks very nice, I sent you a pm before with me email, if you don't have it I could PM you again, it would be nice to see the A3 version, you could email it to me if you don't mind. If its too much hassle thats kool, I might be able to get some ideas.

    How much did that block of land set you back?

    Well at $2000pw, I think it would be pretty hard to find some good long term tennants. You could probably live in a nice set of furnished apartments somewhere for that price.

    expat? And how would you be buffered? (sorry if the question is dumb, i dont understand, would you be leasing the place to him for a set price pa, regardless of it being tenanted or not, and then let him rent it pw at wateva he chooses, which is how he'd try make his money.)

    ps: Michael, how much does it roughly cost to get everything planned out kind like yours? Like drawings, measurements, plans etc.
     
  11. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Yeah, no worries. Will email it to you to check out.

    $700K but I think I got a good price. My rough budget is $700K block, $1M build and $100K professional fees and interest. Total $1.8M cost.

    This guy lets them for as much as $4K a week in the hot locations like Mosman overlooking the bay. But if they want Northern Beaches then you can't get a better location then the heart of Mona Vale. But if I can't get good continuous tennancy using this approach then I fall back on the $850pw standard long term tennancy approach to locals.

    Nope. He gets a fee for placement and a percent of the rent, but I wear the vacancy risk. Given the significant rental upside it might still be better to go this way even allowing for 50% vacancy. But he reckons he runs at about 80% occupancy and has heaps of unfulfilled demand for this sort of housing stock. I'm buffered by tennanting one to a local on a nice stable $850pw so that when the expat one is vacant I still have some income from the other one helping with the rent repayments. If they were both on the expat thing and vacant at the same time then the cash flow would hurt if I hadn't squirelled some of that extra income profits away for a rainy day.

    My architect was $20K and another $10K odd for other professionals like arborists, landscape designers, geotechs, traffic engineers, accessibility consultants etc etc. And that's just to DA submission. It will probably cost me another $20K to get the CC drawings done and tender documents for the builders. Professional fees at around $50K is what I've budgeted. I'm spending this out of cash as I go along so in reality my loan will be less than the $1.8M I mentioned if I can keep doing so. Its still all deductible and helps with my ultimate LVR.

    Cheers,
    Michael.
     
  12. Sk3tChY

    Sk3tChY Well-Known Member

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    Ouch, fair bit of money, but I guess its worth it in the end. :) So the $100k, is basically for all the planning, drawings, measurements, etc..?

    Holy christ, so like $100,000 just to get all the planning and approval?!?!

    Could you go into a little more detail on the kind of things you need to get done, and rough costs... If you don't mind... Like drawings, measurements, and wateva else, I don't have a clue really.
     
  13. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Sk3tchy,

    Its actually only $50K for professional fees as I mentioned in that last post. The other $50K is the capitalised interest on the $1M build cost over the development timeframe.

    Beyond what I mentioned above there's not much else.

    Cheers,
    Michael.
     
    Last edited by a moderator: 29th Aug, 2007
  14. DaveA

    DaveA Well-Known Member

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    I think this could quite be the opposite. Where do u think the imported CEO of companies live? In a fully paid for luxury unit in a small distance to the CBD, most are 2 year initial contracts...

    I must say 50k is lot cheaper than i thought it would be to set that all up...

    Congrats Michael to be in a position to be able to complete this...
     
  15. Sk3tChY

    Sk3tChY Well-Known Member

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    Ahhh k, thanks man. Sorry this is prob a pretty dumb question, but what you mean by $50k capitalised interest on the $1m build cost...?

    (still kinda new to alot of these things, learning quickly tho. :))
     
  16. MichaelWhyte

    MichaelWhyte Well-Known Member

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    Thanks Dave,

    Fingers crossed. I just got off the phone to my architect and he said the planner in charge of my case is likely to make a decision with regards to our application by the end of next week. We think its going to be a yes with conditions, but there's no gaurantees.

    I tell you what, if I do get a yes then there's going to be a hell of a celebration on Friday! And next Friday is my birthday so that's one hell of a present if it works out that way! :D

    Its also, coincidentally, exactly one year from the initial settlement date on that site. So that gives you an idea how long this all takes. We haven't been sitting on our hands and have been pushing as hard as we can from the day we settled.

    Cheers,
    Michael.
     
  17. Sk3tChY

    Sk3tChY Well-Known Member

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    Ahhh k, I see. Although for $2000pw you could probably live in a hell nice serviced apartment in the heart of Sydneys CBD. One that comes to mind would be Frasers Suites along Kent St, Sydney.

    Then again, your prob right. If you can get $2000pw then all the best I spose. :) I wish I could get $2000pw for something.. :p
     
  18. Sk3tChY

    Sk3tChY Well-Known Member

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    Congratz man, you best keep us posted. :)
     
  19. MichaelWhyte

    MichaelWhyte Well-Known Member

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    I'm borrowing the $1M to develop the site. As I build it over a 12 month period I'll be drawing down on that approved construction loan as I hit my development milestones. Once drawn down it incurs interest, which I am capitalising. So, at the end of the 12 month build phase the loan will be $50K bigger due to the interest capitalised over that period. This is an additional cost factored into my feasibility study.

    Cheers,
    Michael.
     
  20. Sk3tChY

    Sk3tChY Well-Known Member

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    I see, dam so much goes into these things. I'll def be asking for some guidance on these forums when the time finally comes for me to take on something like this.

    Mine of course will be on a much much smaller scale to start off with, hehe. :p Im thinking hopefully i'll find a nice bit of land somewhere, where I could build one of them Masterton/Valley Homes duplexes and fetch maybe $300pw for each. :)