I thought as my final story before we close for the year and take a little break, I'd share with you a case study on one of our best property development results for 2014.
The Development Strategy - House Renovation, Torrens Title Subdivision, Three Bedroom, Two Bathroom Duplex construction, Strata Subdivision.
What an adventure this development was. We started our journey after locating a fabulous three bedroom house on large block of land for our lovely clients Lean & Alex, a very hard working couple and savvy property investors wanting to boost their portfolio.
On the land there was room to build a three bedroom, two bathroom duplex facing a secondary street.
Property Bloom negotiated a nice discount off the purchase price and terms including a low deposit and extended settlement with access to start our renovations.
Our main concern was drainage and vehicle access to the secondary street as it was not a certainty that council would approve our orientation of the duplex because there was a small section that could be classified as a laneway that led to the secondary street. However, there was some existing guttering that had been completed by a developer a few blocks up and a stormwater drain within a few meters to direct our run off to.
To add to the complication, a new Local Environmental Plan (LEP) and Development Control Plan (DCP) came into effect during our settlement period. We had to ensure our plans would meet all the new requirements.
It was decided that we would lodge a DA with two stages; firstly a two lot Torrens Title subdivision and the second stage to construct the duplex. If we lodged a DA for a three unit development (including the existing house) we'd need to provide space for visitor parking and complete certain upgrades to the house that would not necessarily increase its value but would be costly. By subdividing first we could maximise the area for the duplex and make it more spacious. It was a more lengthy and complicated process, but gave a far better design result.
We used the settlement period to complete the house renovations and work on the concept plan for the duplex. The house was leased at a strong rent which offset holding costs whilst we worked on the duplex design, planning and construction phases.
After much research and several meetings with Council we lodged our DA.
The DA process was frustratingly long which we put down to the planners also getting their heads around the new LEP and DCP requirements. Finally we received the consent but then found conditions around the timing of when the subdivision should be registered that we wanted amended. We wanted to start construction before the subdivision was registered which would be a much quicker process. So we lodged a Section 96 application and were granted permission for the subdivision to be registered before the release of the occupation certificates, so after constructing was completed, this saved valuable time.
The actual construction went very smoothly thanks to our wonderful builder and our clients even received some credits for provisional sums that were not needed.
Property Bloom set up a relationship with a national housing group that required new properties to lease to their government tenants, so our client received rent from the date of Handover and are on a long term lease with this agency.
Here's the actual financial results of this project:
Total cost including house purchase, stamp duty, legals, renovations, design and planning process, subdivision and turnkey construction: $693,574
Total Valuations on completion, including house and two 3 bedroom villas: $840,000
Equity created: $146,426
Gross yield: 8%
Our client's portfolio was boosted by three properties created from one.
I hope you've enjoyed our stories this year. I wish all our readers and the wonderful people at Property Observer a safe, relaxing and happy Christmas. May 2015 bring you much joy and happiness, and a maybe a shiny new property development!