Retain & Subdivide

Matt and his team are well informed and connected in Perth real estate cycles and have consistently been professional, proactive and fast during the 2 investment property purchases I’ve made using their services. Well worth the fee given the additional value in finding a high potential return property and negotiating with the seller.

Bryan and Ana

1.Client Brief

As a young family looking to increase their equity through property development, our clients sought both property investment and development advice to begin their search for the right property with Capital Property Advisory. New to developments, our clients were looking for a potential subdivision site with the ability to retain the existing dwelling, in an area local to the Perth CBD, with an approximate purchase price of around $650,000 – $700,000.

Property Purchase Saving $30,000
Potential Profit Margin $142,165
Margin on Development Cost 17.5%
Internal Rate of Return 22.8%
Project Timeline 12 months

2.Property Sourced & Negotiation

Within the month, our acquisitions team sourced and secured a fantastic subdivision site perfectly meeting the clients’ brief. Through our understanding of planning, we were able to secure a site with potential subdivision, where the agent and seller were unaware of the potential in the site. The property was a beautiful character cottage in a sought after area requiring minimal renovation and update with potential for a new street-facing lot at the rear. Continued negotiations saw the initial advertised price from offers between $665,000 to $685,000 expertly negotiated down to an agreed price of $650,000. After the due diligence period and relevant inspection reports reviewed, a further $5,000 was negotiated from the asking price, bringing the final purchase price down to $645,000. A saving of $30,000 off the median advertised price for this house.

3. Subdivision

As part of the negotiations, the seller agreed to sign approved subdivision forms to expedite the subdivision and reduce holding costs for our client, with subdivision applications submitted prior to final settlement (after all due diligence checks were reviewed).

4. Development outcome:

Above and below you are looking at our preliminary feasibility numbers. As we near completion of this project, the story shows the result that can be achieved by engaging experts who understand the Perth market, as well as specific sub-market areas and how this can truly deliver an exceptional project outcome.

 

The Margin on Development Cost (MDC) has increased to 23% and total profit is now estimated at $187,087 – an increase of nearly $50,000! The clients are ecstatic with the result we have achieved for them and have already purchased their next site with a view to develop in the near future. This increase is a result of two primary factors.

 

1. Our preliminary feasibility studies are always conservative with contingencies built in for both time and costs. We are also very realistic with our end sales values – never inflating the numbers in an effort to push a client into a project, and;

 

2. The target suburb has very limited supply of land with demand steadily increasing, putting upward pressure on prices and positively impacting our bottom line.

 

Land Purchase Price $645,000
Stamp Duty & Settlement $28,382
Consultant Fees $40,153
Construction & Contigency $60,900
Rates & Taxes $3,663
Selling Fees & Settlement $25,770
Estimated Interest & Finance Costs $19,701
Less GST input Tax Credits $-11.643
Estimated Development Costs $811,926
Potential Development Sales $985,000
Less GST Collected in Income -$30,909
Potential Income $954,091