In the last few weeks I completed a dual occupancy project
in Muswellbrook, a town in the Hunter Region of NSW. This project took two years from the time
that I found the land to the time that we had both four bedroom houses tenanted
at a record high of $500 per week. Sounds like a long time for a dual occ...but
time was on our side.
We were able to buy into a subdivision in a prestigious
estate before the land was registered.
This is not a game for everyone as often registration can get pushed out and in
this case that’s exactly what happened but patience prevailed.
It didn’t matter about the delay, we were literally buying
land off the plan and in the time that my client exchanged contracts (on a
minimum deposit as negotiated as one of our terms) to the time that he settled
on the land, it had increased in value by about $30k. This is unusual but we had been able to buy
in early, get a great deal and get
the pick of the sites in this release.
Property Bloom negotiated an awesome price of just $142,000 for
a 1066sqm block of land which represented a 15% discount off the original
asking price. What’s more, this land developer ended up naming the street after
me. That was totally unexpected and I was
honoured. Perhaps now this street will
see more strong growth because of its name!
So, whilst we were waiting for the land to register, we
didn’t sit around twiddling our thumbs, we were busy producing a concept plan,
I wanted two large four bedroom houses as my research had told me that was what
the mainstream market was looking for. It meant we’d appeal to both families
and contract companies who looked for houses they could put 3-4 men into whist seeing
out their contract, usually to the mines.
Property Bloom commissioned two builders to tender on the
project. As we got closer to registration and the civil works were completed in
this part of the estate, which means the infrastructure such as roads,
guttering and footpaths were built and the lots were finished being sculpted,
then we ordered our detailed or contour survey. This is required before you can finalise
plans. We were well into the design
phase by now. As registration
approached, the DA plans were completed, a builder engaged and we had out ducks
lined up, ready to lodge the DA with council as soon as the registration took
place.
Council approval took just five weeks and we had our
Construction Certificate plans finalised and lodged within another few weeks.
Before we knew it we were under construction.
But was this good timing? As we
started building it just happened to be at the time NSW saw one of its wettest
years in history! Our builder rallied,
completing the project well within the 26 week contract period and we had
Christmas during this time.
So the longest waiting period was the time between securing
the land on a low deposit which meant holding costs were minimal yet capital
growth took place on the land.
As we neared building completion, we interviewed agents and negotiated
a discounted management fee for our client, appointed the agent, discussed what we wanted to achieve and then stood back while they did what they do best which
was to achieve a record high rent for us. It’s important you mange this part of
your development closely as the one time you have to attract the highest rent
is when your properties are brand new. Property Bloom was able to save our client
thousands of dollars by negotiating the terms of management.
Here are the high level results of this development in a
nutshell:
·
Equity created:
$158,000
·
Gross Yield:
8.3%
·
Depreciation in Year 1: $22,242
This is an awesome example of a successful development as
several factors came into play.
On first impressions a project may seem to take too long but
when you drill down to the detail it’s often not until you finalise the
timeline of a project and reflect on what happened over the entire project that
you can see the real results. In this
case, time really was on our side as the price for land increased during the
registration period and this combined with a speedy approval and build phase and
a strengthening rental market meant our client benefited in more ways than one.
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