1. Client Brief
Prior to completing this stunning development in Edgewater, our clients had previously purchased two adjoining sites with a view to eventually construct up to 16 apartments. For their third acquisition, we were engaged to find a another smaller site that could create some equity in the short term, to assist in funding the future development of the larger project. Having only previously utilised CPA in a buyers agency capacity, the client saw strategic benefit in our ability to provide end-to-end development consultancy and project management oversight. Running a successful business in regional WA, our clients wanted to expand their property investment portfolio; however, with a demanding business to run and not being located in Perth, they were not well-placed to oversee the project from start to finish. Having undertaken a regional residential development project previously, the clients had an understanding and expectation as to the way the property development process works. With a detailed understanding of the client brief and expectations, our acquisitions team was able to source and secure a development site, and we were entrusted with managing the entire process from beginning to end.
|Estimated Development Costs||$1,471,324|
|Potential Sales Income||$1,650,000|
|Potential Profit Margin||$178,676|
|Indicative Gross Yield||4.84%|
|Margin on Development Cost||12.14%|
|Internal Rate of Return||13.60%|
2. Property Sourced & Negotiation
Our acquisitions team expertly negotiated this original dwelling for a very competitive price of $463,750. As always, CPA look to acquire property for clients in areas we feel will outperform the wider Perth property market. To this end, the median house price in Edgewater in Q2 2018, when the property was acquired, was $500,000. The most recent REIWA data release shows the median house price in Edgewater, Q4 2019, is $505,000. This represents a 1.00% increase since acquisition. For reference, during this timeframe, the Greater Perth median house price fell by 6.8%. Further evidence of CPA’s ability to research and acquire properties for clients in areas that have the potential to outperform the Greater Perth market. (Source: REIWA)
3. Design and Subdivision
CPA worked closely with the design and drafting team as well as the appointed surveyors to look at potential outcomes, before concluding that the most profitable development outcome was to develop the site with two villas (both with street frontage) and a townhouse (accessed via a common driveway) at the rear. Our intensive development research and investigation process allows CPA to review all potential development options in line with council and planning regulations, appropriate site designs, sub-market supply and demand, and potential feasibility outcomes to ensure the outcome is the most appropriate for the client, site and market.
4. Development Outcome
Our clients are delighted with the designs and project feasibility, which has potential to return a very healthy profit (should the clients proceed to sell). However, the clients brief was to develop and hold their investments. Given our leasing team had intimate knowledge of the product and the massive advantage of early access to the site (being the project managers) we were able to generate significant interest from potential tenants before handover even took place. Gross yield on the investment is projected to be in the order of 4.8% p.a. (based on Total Development Costs). The clients are delighted with the project outcome and already discussing their next potential venture with Capital Property Advisory.