Join our investing community

My new Sydney development site

Discussion in 'Real Estate' started by MichaelWhyte, 13th Jun, 2006.

  1. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Hi Guys,

    Jacque asked me to post the details of my latest acquisition so here goes...

    Those of you who have been following my deliberations and aspirations would know that I've been in the market for a property for some time now. I originally set my sights quite low, aiming for a $550K odd reno in my local valley. These started ratcheting up to $600K for something that needed a lot of work and left virtually no post-reno margin in them. So I set my sights a little higher and started thinking duplex. I offered on a block for $640K that I could have put a duplex on and taken a nice little margin out of it but missed that one due to a dutch auction and a myopic vendor. So I moved on and set my sights a little higher again. Eureka! I am now the proud owner of a MUH zoned site in Mona Vale on 680m2 for the all in price of $680K. Only a touch up on the duplex site and not that much adrift from the bottom level renos on small blocks in this area. The median for Mona Vale for a house and land is $800K, and modern townhouses in the street I've bought in sell for that mark or more. Some up to $1.2M. :eek:

    My plan now is to go the whole hog and develop it. At 680m2 I can put three on it according to council's DP. My max site coverage is also 50% so that's 3 townhouses at 113m2 each max. They'll be two stories high as my max height is 8.5m. I've exchanged contracts and am now in my cooling off period. I pay the remainder of the 10% on Thursday, then its on a three month settlement (there suggestion not mine, but I'll take it). I've then got 12 months to do the whole due diligence thing and come up with an architect, plans, council approval and a builder. I can't start building for at least 12 months as I've given the vendor a 12 month lease back arrangement as a sweetener to seal the deal. They get a reduced rent on a 12 month lease and I get an $80K discount, not bad hey! ;)

    Watch this space. I'll keep you posted as I progress the development.

    Cheers,
    Michael.
     
  2. Leandro

    Leandro Well-Known Member

    Joined:
    8th Dec, 2005
    Posts:
    228
    Location:
    Sydney
    Congratulations Michael on your purchase.

    I will "watch this space" to see how your venture progresses.

    Just a question for you, what was the motivation to leap from a small reno to a full blown 3 site townhouse development?
     
  3. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Leandro,

    Relative Merit. For about $100K more I got a site which had so much more potential. The further up the food chain I looked the better the deals got.

    Cheers,
    Michael.
     
  4. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Fantastic news! I am very happy for you, Michael, and feel confident that your diligence, dedication and organisation will pay off handsomely for you down the track.
    Are you planning to retain the entire dvpt or sell off some?
    Looking forward to the updates :) :)
     
  5. ramone_johnny

    ramone_johnny Well-Known Member

    Joined:
    15th Jun, 2006
    Posts:
    74
    Location:
    Bris Vegas
    Hey Mike - you look familiar, dont I know you from somewhere? :p

    RJ
     
  6. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Hi RJ
    Nice to see you here as well :)
    Would love it if you could post here about your reno project if you get time. The settlement on the Camira place must be coming up soon?
    Good luck with it all- nothing like planning a reno and seeing it all come together for a great sense of self satisfaction :)
     
  7. ramone_johnny

    ramone_johnny Well-Known Member

    Joined:
    15th Jun, 2006
    Posts:
    74
    Location:
    Bris Vegas
    Thanks!

    Yep it settles on the 30th of this month.

    Im ready to get in there and start painting - cant wait! However in saying that - be on the lookout for my "Im sick of painting" thread! :D

    RJ
     
  8. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    No worries RJ
    Looking forward to a new thread in the Real Estate section as of June 30th :)
    And, if you need any tips with painting, just ask. Been there done that a few times now myself :)
     
  9. Tizzy

    Tizzy Well-Known Member

    Joined:
    21st Jun, 2006
    Posts:
    69
    Location:
    Perth WA
    Hi Michael
    That is indeed an impressive action you have taken! Can't wait for the updates of your progress on this.
    Sometimes I see places advertised in Perth which are on duplex sized blocks and I think these are great opportunities. Are you able to say whether when you are looking, are these places usually advertised as suitable for subdivision? Or, is this just something you are aware of because of your research into the particular area that you are looking at?
    I'm asking because I suspect I'm missing out on the better opportunities because I'm relying on the REI to advertise a property's potential. Should I already know the zoning for areas of real estate before I go looking?
     
  10. TakeStock

    TakeStock Well-Known Member

    Joined:
    14th Aug, 2005
    Posts:
    140
    Location:
    Sydney
    Well done Michael. Like the others, I wish you well and look forward to following your highs and lows (hopefully not too many lows:rolleyes: )
     
  11. Giddo

    Giddo Active Member

    Joined:
    9th Jun, 2006
    Posts:
    42
    Location:
    SE Qld

    Ooh yes My word yes. Alot of agents do not state the allowed uses, through lack of space or laziness or ignorance I suppose.
    Just look up your local council website and go to "zoning maps".
     
  12. Tizzy

    Tizzy Well-Known Member

    Joined:
    21st Jun, 2006
    Posts:
    69
    Location:
    Perth WA
    Thanks for that Giddo. I didn't realise but should have suspected that by now :eek:

    (Sigh} Never mind, learning all the time.
     
  13. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    Hi Tizzy

    Most agents will already have offered the properties with the real potential to their regular investors and developers, even before they advertise any 'potential' - realistically by the time the newspaper 'marketese' is used you're looking at a property that the 'in crowd' have already passed on.

    If you do your R&D even half as thoroughly as Michael you'll be on the right path - narrow your target area down to an area in certain suburb/s then get to know them inside out (getting past sales data, talking to every agent, valuers, door knocking, etc etc :) ) Then you'll know when a property is a great deal, 'cos you'll already have seen the sale prices of a heap like it in the past.

    Waiting for an agent to advertise a golden opportunity is a pretty dead certain way of never finding the real bargains ;-)

    Cheers
    Carl
     
  14. Tizzy

    Tizzy Well-Known Member

    Joined:
    21st Jun, 2006
    Posts:
    69
    Location:
    Perth WA
    Thanks Carl
    I've been relying a bit on one particular agent up till now. He did actually warn me that many properties go very fast without advertising. I don't want to upset the friendship either but it sounds as though I might have to explain my reasons to him for directly approaching other agents myself.
    I like the idea of letter box canvassing too. Thats something I can do that will work in the areas I am keen on.
    H.
     
  15. Jacque

    Jacque Team InvestEd

    Joined:
    16th Jun, 2005
    Posts:
    1,885
    Location:
    Sydney
    Hi Tizzy
    Don't ever make the mistake of becoming too friendly with selling agents when searching for property. After all, you want to search ALL available properties for sale, not just those held by one particular agent. As friendly as some of them are, remember that they are better friends with their vendors :)
    If you're really serious about locating a property with dvpt potential, do the hard yards and contact EVERY SINGLE agency who services the suburb you're interested in and give them a brief breakdown of what it is you're after. Maintain constant contact with them, every week if possible, to stay in their faces. Ensure you're financed and ready to go if a deal does come along and let the agents know this as well. Being in the strongest financial position upfront will stand you a much better chance of securing a deal more quickly.

    Letterbox drops are also a great idea, but be prepared for little to no response. Some private vendors also make the mistake of overestimating the value of their own property, so be prepared to offer a price based on an independent valuation or the average of 2-3 agent's appraisals, whichever the vendor prefers.

    As Carl has also mentioned, know your recent sales with which to back up your offers. Walk the streets you're interested in, if possible, to get a "feel" for the area. Even chatting to neighbours of properties for sale can yield some surprising information at times as well.

    Above all, enjoy :)
     
  16. Tizzy

    Tizzy Well-Known Member

    Joined:
    21st Jun, 2006
    Posts:
    69
    Location:
    Perth WA
    Thanks Jacque . I appreciate you taking the time to share that advice. It gets tough when one agent has already introduced you to a couple of good deals. I feel I should be loyal and wait for him to follow up on any recommendations I make about prospects I've heard about and wait for him to advise me about new stuff that comes into his agency. But, it has felt a bit passive lately on my part. And because he is busy I don't think he always calls other agents out of his area straight away. Time for action!
    The same difficult situation has come up regarding accountant choices and bank choices. The more I've been studying, the more I'm starting to realise our needs are changing. I have to move on and seek out loans that suit our individual situation and accountants that understand the philosophy of CF+ and PI generally.

    I don't expect to get a bargain by letterbox dropping, I just hope to actually get a look in! In Perth's market at the moment anything decent is gone before the ink is dry on the ad. So I intend to give it a try in one particular street tomorrow.
     
  17. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Update: Conducted preliminary market research this weekend

    Kay and I spent most of Saturday visiting current developments in our street. There is a heap of townhouse developments all along the street we’ve just bought in, with the cheapest finished product retailing for $650K. We got lots and lots of pamphlets from the developers with floor plans and architect names etc. We also got loads of good ideas and took heaps of photos. There is a very simple layout which seems to be common across several developments that has three bedrooms upstairs and a split living / dining+kitchen downstairs. We think we’ll adopt this blueprint for out townhouses and tweak it with an architect.

    To that end, we scanned one of the ground level floor plans in then scaled it to our site. From there I tried a heap of different orientations on our site before settling on a simple staggered terrace sort of layout. The attached pictures show our current thinking on site utilisation. One assumes we can build a single garage for each townhouse and avoid doing excavation, the other assumes excavation and the building of full double garages below ground with basement access to the townhouses. There is significant added cost to the excavation but it would definitely result in a higher valuation at completion. Also, the council regulations might require double garages for each townhouse and/or prohibit reversing out onto Darley Street anyway. So we might be forced to go the excavated basement parking route.

    Pictures attached showing our current thinking for the site.

    Regards,
    Michael.

    PS Tizzy, the guys above have given some great advice. We did our own research into the potential of blocks before settling on this one. We started out just thinking duplex, but this one allows three so our "land cost component" per completed dwelling comes down quite a bit. Keep posting and you'll get heaps of assistance along your learning path. :D
     

    Attached Files:

  18. TryHard

    TryHard Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    863
    Wow Michael - EXCELLENT layout and use of space - well done ! :D
     
  19. Tizzy

    Tizzy Well-Known Member

    Joined:
    21st Jun, 2006
    Posts:
    69
    Location:
    Perth WA
    Looks brilliant Michael! Not sure what the norm in Sydney is in upmarket townhouses, but in Perth the really attractive ones have the double undercroft/ basement if you can get it in and the budget makes it. Internal access to townhouses from a garage are such great safety features for people living on their own too.
    Thankyou for sharing this journey I'm finding its a bit like a good novel. Can't put the blessed thing down!
     
  20. MichaelWhyte

    MichaelWhyte Well-Known Member

    Joined:
    5th Oct, 2005
    Posts:
    798
    Location:
    Sydney, NSW
    Thanks Carl!

    We're pretty stoked too. Basically, this weekend's work confirmed we can definately fit three very nice two story townhouses on our site. The council zoning suggested we could from a street frontage perspective, but we weren't sure the 50% site coverage would allow for three. The footprint on these is within that 50% limitation, so we can definately do them as laid out.

    We're still in the preliminary planning stage but at least now we won't be going to an architect with a blank sheet of paper.

    Tizzy, each of the single garages would have internal access to the private yards for each townhouse so in effect are secure access to the properties anyway. For two of the three they would probably be undercover with one of them actually attached (the top one). Only one would be exposed to the weather, and in reality could be put under a pitched roof if that added some value. The excavation would add significant cost, but it might be justified if the double garage over the single would mean the valuations at completion justified the expense. More research work required yet before we make a call either way.

    Cheers,
    Michael.