Booragoon R25 Development

[DexV2]

Recently bought a 735sqm house in Booragoon for 880k. 4 x 2 layout.

I really think I've got a good deal for this one. Since it's subdivisible and a 370 sqm single storey home could fetch 1m. At the same time I can retain the exist house. It's current tenanted out till December which would allow me to start preparing.

Vision

Gonna split property down the middle so both lots have a frontage. Will hopefully develop the empty plot (unless I want the quick cash from the land itself) and renovate the other block.

The renovation is pretty much cosmetic with a few structural here and there. And hope to get the renos done by mid of next year due to full-time study.

These are my rough numbers:
land (stamp duty etc.) - 915k
construction -200k
reno - 44k
holding cost - nil
total (factoring 15% profit for reno and 25% for development) - 1.485m
I'll let you all working out the potential end profit .

This will be my first IP and first reno/development.
Will continue to update my journey.

Any possible suggestions/discussion (builder/material sourcing etc.) let me know!
Dex.

 

[D.T.]

How / why is holding cost nil?

 

[DexV2]

How / why is holding cost nil?

Bought the home outright using a SMSF, no loans.

 

[MTR]

Recently bought a 735sqm house in Booragoon for 880k. 4 x 2 layout.

I really think I've got a good deal for this one. Since it's subdivisible and a 370 sqm single storey home could fetch 1m. At the same time I can retain the exist house. It's current tenanted out till December which would allow me to start preparing.

Vision

Gonna split property down the middle so both lots have a frontage. Will hopefully develop the empty plot (unless I want the quick cash from the land itself) and renovate the other block.

The renovation is pretty much cosmetic with a few structural here and there. And hope to get the renos done by mid of next year due to full-time study.

These are my rough numbers:
land (stamp duty etc.) - 915k
construction -200k
reno - 44k
holding cost - nil
total (factoring 15% profit for reno and 25% for development) - 1.485m
I'll let you all working out the potential end profit .

This will be my first IP and first reno/development.
Will continue to update my journey.

Any possible suggestions/discussion (builder/material sourcing etc.) let me know!
Dex.

Hi Dex

You will need to include head works, western power etc. around $30,000 - 40,000.
A land surveyor can also provide you with information/ quote on the work required.

As you are splitting the land into 2 lots, the property/block size is no longer 735 sqm (development site), therefore you need to determine the real/actual value at 367 sqm with the reno. I expect it will be less than the purchase price, contact RE agents in the area, and compare similar sales figures for similar product.

Estimate on construction costs at $200,000 IMO is way too low, if you are trying to achieve end value of $1M I believe you will need reasonably high specifications, more like $270,000+, however this is also dependent on what you can fit on the block.

In the first instance I would find out exactly what you can build on the block, otherwise how can you determine end value, size of the home is important.

I am doing something similar to you in Kardinya and what I worked out is end value can vary greatly as it is dependent on the location, the size of the block, the size of the house, quality/design. Also, don't compare older properties to new builds, totally different kettle of fish.

DT mentioned holding costs, I would be allowing 6 months of interest payments for the build and include this in your costings.

Its late and I am brain dead, can not think of anything else for the moment.

MTR

 

[MTR]

Bought the home outright using a SMSF, no loans.

So costs for new build will be cash money, no borrowed funds????

 

[spludgey]

Bought the home outright using a SMSF, no loans.

I would personally at the very least factor in an opportunity cost of the amount that you would get in interest if you had the money in a high interest account.

 

[DexV2]

@MTR yeah everything would be payed by cash term.

@spluedgey that's the good idea. I'll factor it into the costings

 

[DexV2]

Hi Dex

You will need to include head works, western power etc. around $40,000.
A land surveyor can also provide you with information/ quote on the work required.

Estimate on construction costs at $200,000 IMO is way too low, if you are trying to achieve end value of $1M I believe you will need reasonably high specifications, more like $270,000+, however this is also dependent on what you can fit on the block.

In the first instance I would find out exactly what you can build on the block, otherwise how can you determine end value, size of the home is important.

Yeah I have already factored in 44k into the above costing.
That's awesome! I've been looking in your market as well Have you found a builder for your project? Care to share?

Thanks so much for all of that. So much to consider, good effort for late night post.

City to surf time!
Dex.

 

[Jamie_]

How could your fund possibly have 900k+ in super by the age of 21 (and with a strong Masters behind you meaning you would really only just have started working) - (I know next to nothing about SMSF)

 

[D.T.]

How could your fund possibly have 900k+ in super by the age of 21 (and with a strong Masters behind you meaning you would really only just have started working) - (I know next to nothing about SMSF)

Prob a combined family one

 

[MTR]

Yeah I have already factored in 44k into the above costing.
That's awesome! I've been looking in your market as well Have you found a builder for your project? Care to share?

Thanks so much for all of that. So much to consider, good effort for late night post.

City to surf time!
Dex.

Now I am really confused 44K is only the reno??
What about headworks?

Also R25 zoning I think means you can only build on 50% land component, this includes double garage/storage. This will not be a huge home unless you plan to go double storey, are you sure you can achieve $1M??? Its important to keep the figures real, guestimates don't work when you are developing.

Cheers
MTR

 

[westminster]

Recently bought a 735sqm house in Booragoon for 880k. 4 x 2 layout.

I really think I've got a good deal for this one. Since it's subdivisible and a 370 sqm single storey home could fetch 1m. At the same time I can retain the exist house. It's current tenanted out till December which would allow me to start preparing.

Vision

Gonna split property down the middle so both lots have a frontage. Will hopefully develop the empty plot (unless I want the quick cash from the land itself) and renovate the other block.

The renovation is pretty much cosmetic with a few structural here and there. And hope to get the renos done by mid of next year due to full-time study.

These are my rough numbers:
land (stamp duty etc.) - 915k
construction -200k
reno - 44k
holding cost - nil
total (factoring 15% profit for reno and 25% for development) - 1.485m
I'll let you all working out the potential end profit .

This will be my first IP and first reno/development.
Will continue to update my journey.

Any possible suggestions/discussion (builder/material sourcing etc.) let me know!
Dex.

I don't get how you have worked out a total cost of total (factoring 15% profit for reno and 25% for development) - 1.485m

I'm not sure that a 185sqm 3 x 2 single storey house would fetch 1m in Booragoon but I haven't looked at the area. You would need to go a nice spec and I would estimate $250k plus for that.

This one which sold for $930k is a high spec - this would not have been cheap to construct. I would estimate it would be $300k or more to construct something like this.

I think your figures should be something like (sorry very very rough)

$915k buying
$40k splitting block into 2 and getting in services
$250k for a 185sqm 3 x 2 single storey house with a medium spec
$50k reno main house

$1.255m total cost


Sales values
$800k for mid level 3 x 2
$NFI how much the existing house would be worth. Maybe $700k?
$1.5m

Approx 20-25% gross profit.

Be very careful with your sums, your comparables and what you want to achieve. This could be a real winner or it could end up with not making the SMSF much money

Ensure no one lives there from the SMSF and you are careful to comply with all SMSF rules

 

[DexV2]

Just to clear things up, I have been very blessed to be in a well to do family with my dad willing let me have a go in IP from start to finish. If not a 21 year old Master of Pharmacy student could never afford.

Thanks for helping me with the calculations guys!
@MTR - i am budgeting 10% of the house value on reno but in my feasibility have allocated contingency cost.

@westminister - I have already factored in subdivision cost but not to the extent of 40k (so I'll change it as per your recommendation). As for the "total (factoring 15% profit for reno and 25% for development) - 1.485m", before I bought the land I made sure at the very least I would get out 15% profit from the reno and 25% profit from the build before I would even think about going any further.

@everyone - in regards to my expected resale value. RP data has more property sales that are not seen on RE.com, all I'll say is that on the same street as mine a single storey home was sold for 1m just recently.

As this would be might first project a 20-25% would be great, it would be a great learning experience.

 

[DexV2]

That said, those are optimistic resale values. Still would be happy with much less, but who doesn't like to dream big!

 

[sanj]

That said, those are optimistic resale values. Still would be happy with much less, but who doesn't like to dream big!

Alarm bells are ringing with this post tbh. There is no place for optimism or dreaming big when doing DD, especially on a devvy site.

I wish you all the best though, good to see someone your age giving it a go.

 

[westminster]

Just to clear things up, I have been very blessed to be in a well to do family with my dad willing let me have a go in IP from start to finish. If not a 21 year old Master of Pharmacy student could never afford.

Thanks for helping me with the calculations guys!
@MTR - i am budgeting 10% of the house value on reno but in my feasibility have allocated contingency cost.

@westminister - I have already factored in subdivision cost but not to the extent of 40k (so I'll change it as per your recommendation). As for the "total (factoring 15% profit for reno and 25% for development) - 1.485m", before I bought the land I made sure at the very least I would get out 15% profit from the reno and 25% profit from the build before I would even think about going any further.

@everyone - in regards to my expected resale value. RP data has more property sales that are not seen on RE.com, all I'll say is that on the same street as mine a single storey home was sold for 1m just recently.

As this would be might first project a 20-25% would be great, it would be a great learning experience.

Good to hear that there are some good comparables and even some from your street. Booragoon is a fairly large and diverse suburb so a value in one street doesn't always relate to a sale in your street. Do you know which builder built the one that fetched $1m? I would be interesting to get a quote from them and see how much that cost.

15 and 25% is a good place to start.

Will you be keeping them for the SMSF?

 

[MTR]

Interesting thread, as I said am doing something similar in Kardinya, looked at sale prices from $880K to $620K same product, what is the difference??? why such a gap/variance ???

I mentioned earlier
Location, size of the block, quality/design of the property.

For example in Kardinya there are at least 3 pockets to buy into, most desirable will fetch a premium to less desirable which is not even considered Kardinya by the locals therefore inferior price.

This is why I stress the importance of doing DD, not only looking at comparable sales but discussing product with experienced RE agents in the area.

If you know what you are dealing with then you make better choices.
All the best

 

[MTR]

That said, those are optimistic resale values. Still would be happy with much less, but who doesn't like to dream big!

Absolutely, shoot for the stars, go for it, mix it with the right homework/dd and you have a winner

 

[DexV2]

Alarm bells are ringing with this post tbh. There is no place for optimism or dreaming big when doing DD, especially on a devvy site.

I wish you all the best though, good to see someone your age giving it a go.

I'm dreaming big however still quite realistic in my goal, if I hit my target of 10-15% profit on this I know I would be over the moon. (my number has been crunched for 13% profit minimum.

 

[DexV2]

Will you be keeping them for the SMSF?

Yes, all profit will go right back into the next project.

Correction, the Allerton link you posted was the one that was sold for 1m not the listed 930k. Rather weird but need to check again on RP data.
I too am really interested to find out the building cost. Gonna call the agent sometime this week to see if I could get the name of the builder and go from there.