26 Seddon St, Ivanhoe VIC 307926 Seddon St, Ivanhoe VIC 3079
It's pretty clear to us how you can best build wealth through real estate:
Easier said than done obviously. Successfully complete a development, and you'll have another crack; fail, and probably not. The rewards to development are great, but the downside potential is real. Below I'll explain how we help clients succeed.
Assessing project profitability is a pretty extensive process that involves studying planning schedules, construction costs, sale results, and much more. We've conducted hundreds and hundreds of feasibility studies, and our advice to anyone seeking to get into property development is - appoint a professional to do this work (whether it's us or not).
Most uninitiated developers don't really understand this, and it's why so many fail to succeed. The truth is that of all the development-friendly properties on the market across Melbourne at any one time, fewer than 5% of them deliver a strong profit. No kidding. By the time you factor in stamp duty, professional fees, holding costs, council contributions, construction, selling fees, GST, etc, etc, the opportunity for +/- 20% profitability is very rare.
So much of our resources go into continually analysing project profitabilities across hundreds of Melbourne suburb.
We have a database of all properties sold across all of Melbourne, and we update this every month, and analyse it to determine the relationships between the prices of land, houses, and townhouses.
Over the last couple years we've purchased sites from as low as $0.9m up to $3.0m+. The types of projects we've attained for clients include renovations, knock-down rebuilds, dual occupancies, duplexes, multiple townhouses, and full land subdivisions. Each type of project was selected and attained based on specific client budgets and objectives.
This type of budget typically lends itself to residential developments of 2-3 townhouses in affluent areas where the completed dwellings appeal to affluent 2nd/3rd homebuyers and downsizers (buyers who will pay a premium, as opposed to investors and first homebuyers who are more budget conscious).
In late 2020, a client appointed us to find a profitable 2-3 townhouse site for +/- $1.5m. The existing dwelling needed to be rentable, should they wish to sit on it for a while. And, the area needed to promise strong capital growth, should they choose to retain some or all of the completed townhouses.
We missed out on a couple suitable properties - one at auction from a bidder that wouldn't stop, and the other because my client prevaricated through private negotiations (he kicked himself after). Having examined these properties in detail together, Chad and his brother were confident of our processes in assessing sites. At a high level:
I found a ripper off-market that suited, Chad and I met the agent on-site together, and we literally signed up the $1.3m offer in the kitchen. Looking back, it was one of the best purchases we've made for a client - not only because it was well below market value and profitability was massive, but because we had established such a strong level of trust with our clients that they were comfortable acting upon our advice with the urgency needed.
Good property development consultants are bloody busy these days. Call an Architect or Town Planner or Builder out of the blue saying that you want some help developing your first property - good luck! The sad reality is that those consultants who jump at working for you are probably the least equipped to do a good job for you (why aren't they busier?!). And the fee proposals provided will likely be much higher than what an experienced developer receives because you're not a known quantity.
They prioritise our work at discounted rates because we have history - they know we're not time wasters who don't understand the planning process and how everything fits together. We make decisions quickly, and don't circle back to them once made.
Black and white, right or wrong decisions are pretty rare in property development.
Do you cut the tree down prior to application? Do you push for 3 back-to-back townhouses or for 2 larger side-by-side houses? Modern, contemporary, traditional? Downstairs Master or no? If yes, is a secondary Master upstairs required? Is a lift needed? What type of build spec will buyers pay for, and at what point do we reach diminishing returns? The list goes on and on.
Some want to be heavily involved, whereas others are happy to simply be in-the-know. The same clients usually appoint us to manage the construction tender process.
The feasibility we conducted prior to purchase made clear the size and spec of townhouses that we wanted, so our brief to two of our preferred Architects was straightforward: three double story, semi-detached, street-facing, contemporary townhouses about 28 squares in size, each with downstairs GUEST suites and upper story MASTER suites, plus two further bedrooms and an upstairs LEISURE.
In addition to the Architect, we briefed in a Surveyor, Arborist, Town Planner, Traffic Engineer, Landscape Designer, Civil Engineer, SDA Consultant, and a few others. We attained and reviewed fee proposals, and recommended the appointments that Chad made.
After a lot of frustrating back-and-forth with Council, we eventually attained the permit that we intended. Since Chad purchased the property, local median $ prices have increased 22%. The resale values we estimated at the time of purchase are now much higher, though cost escalations in the construction industry have amounted to about 15% over this period.
We are now working to finalise all construction documentation and will tender the build to two of our regular builders.
A lot goes into purchasing a property suitable for profitable development, and, it's hard work completing the project with so many consultants to manage and a myriad of difficult decisions to make. But, we love our job, and we're proud of the wealth we help clients make through real estate.
03 9497 5429
