This year we completed the most development projects for our clients in our business history but it wasn’t until I sat down to lunch with one of my builders and team last week that I’d even had time to reflect. We wanted to celebrate the massive year we had all had. My builder had turned over a record amount and his business was up 15% – not bad in these ‘tough’ times. Property Bloom had also a record year which shows in new wrinkles forming on my face, I need a holiday!
At lunch we looked at some stats I put together on what we’d achieved.
There were some high lights but also some low lights. Whilst I had one builder go into liquidation which I would not wish on my worst enemy but wanted to mention in the light of another large NSW builder – Procorp was swept into Administration a few weeks ago. We completed this three unit project early this year and I had coffee with my client only this morning. Of course it wasn’t what we had expected, the delay and added cost of finishing construction with another builder is very frustrating but Property Bloom managed this process smoothly for them. After getting no less than five quotes to complete their triplex, we saved about $80,000 by using our smaller, renovation builder. He was more affordable because he was on the tools himself. At the end of their project the tax rebate from the high depreciation was a good reward together with the high yield they are getting. So they were not too sad but this was definitely a low light for us.
We also completed two other projects that started off very differently to how they ended. We had planned for three unit projects but ended with dual occupancies due to a sequence of unexpected events at the local council who had their planning powers taken from them and an independent planning panel suddenly put in place that proceeded to reject DA after DA without warning or giving us or anyone else a chance to modify plans. These circumstances were well beyond everyone’s wildest imaginations and so these developments were impacted by a situation totally unforeseen.
We are extremely proud of this year because the highlights far outweigh the low ones. The reason I’m even mentioning low light projects is because we all need to understand the risks in property developing and also because I’m an honest person. It’s not always beer and skittles!
If you are going to develop property, you need to be prepared for the unknown. It’s like unwrapping a Christmas gift and not knowing what’s inside until all the wrapping is gone and the contents revealed. A development site is somewhat similar; it’s not until you get through each phase – site selection, design, planning and construction that you really know what you will end up with.
So now I’m going to boast of one of great results. This three unit project surprised even me when we finally ‘unwrapped’ it – it was truly the gift you always wish for.
Our first signal that we were off to a good start was sourcing an off the market site directly from the land developer, a farmer who was subdividing off some on his very flat, well located land a 1090sqm lot which our client paid $195,000.
We completed the project with fourteen months, including design, DA approval, CC approval, Finance approval and construction. The build time was 25 weeks.
The equity created through the development process was a massive $222,301, representing a 16% Return on Investment (within 14 months).
The gross yield was 7% upon renting the villas.
The best result we achieved was to bring in the project $38,623 LESS than what was originally estimated. Our initial estimates are done before we have any plans and based on our experience on similar projects.
There were many other very successful developments and as I reflected on this with our team and builder at lunch overlooking the vineyards of the wonderful Hunter Valley, we summarised it quite simply into the ingredients for successful developments; finding good sites, implementing good systems, running a good team and having great clients, ones that make quick decisions and let us get on with what we do best. Thank you to all our wonderful clients and I wish everyone a safe, relaxing and happy Christmas. I’m looking forward to a nice break myself so I can try and better our bumper year in 2013.