How To Determine The ROI On A Melbourne Multi-unit Development
Determine the ROI
Before you invest your limited time and money into the Melbourne property market, you’ll want to know whether you’re making a good investment. After all the risk, hard work and money you’ve poured into your future-proofing project, was it worth it?
What is the average return on a Melbourne Townhouse investment?
Most investors can expect a return of at least 15% on their Melbourne property investment. This number is subjective and the right number for you may be higher or lower.
You may already have a specific figure in mind when you are considering investing in the Melbourne property market. Whatever your desired return is, we recommend testing the potential of your multi-unit development profit before you commit to the project.
Ultimately, a successful dual occupancy development comes down to thorough planning and research. The most important step to complete early on in the planning stage is a feasibility assessment.
What is a Melbourne Townhouse feasibility assessment?
A feasibility assessment takes into account the land costs, planning expenses, bank payments, and fees and construction costs. The costs are held up against the current property market prices (likely sale costs) to find out your potential return on investment (ROI).
How to conduct your own feasibility assessment:
STEP 1: Determine your land capacity.
Before you can start your feasibility assessment you’ll need to know the capacity of your Melbourne land. What you are able to build on your land is determined by the local council.
STEP 2: Conduct market research
Research the asking prices for similar properties in the Melbourne suburb you plan to invest in. Note the potential sale price for each dwelling.
You may find this article helpful: Best Melbourne suburbs for townhouse development in 2022.
STEP 3: Research your expected costs for the entire project
By researching the estimated costs involved in a multi-unit development you will be able to determine your expected ROI.
The main costs to consider include:
- Initial costs
- Planning and preliminaries
- Construction costs
- Other costs (Such as taxes and real estate agent fees)
STEP 4: Cost breakdown
In a spreadsheet, breakdown your costs into the following categories:
- Land Purchase
- Acquisition
- Bank deposit
- Bank deposit amount
- Estimated stamp duty/legals/misc
- Lenders mortgage insurance (IF applicable)
- Cash requirement
- Loan amount
- Anticipated Finance interest Rate
- Total Finance
- Loan to value ratio
- Land loan amount
- Construction loan amount
- Total finance
- Funds Required with Finance Construction
- Land deposit
- Stands legals
- Construction deposit
- Total cash requirement
- Project forecast
- Unit 1 sq
- Construction budget Lot 1 inc gst
- Unit 2 sq
- Construction budget Lot 2 inc gst
- Unit 3 sq
- Construction budget Lot 3 inc gst
- Total Turnkey development cost
- Total Development Cost
- Anticipated Sale Prices
- Unit 1 Target Sale Price
- Unit 2 Target Sale Price
- Unit 3 Target Sale Price
- Sale total
- Gross profit
- Liabilities and third party expenses
- Council public open space contribution (applicable only to 3 or more units)
- Anticipated construction interest
- Anticipated land interest
- Anticipated interest total
- Anticipated agent fees rate inc GST
- Anticipated agent fees
- Anticipated expenses other (sub division
Click here to view one of delcon design and construct’s property development summaries to see what your feasibility assessment might look like.
Can a multi-unit development builder conduct a feasibility assessment?
Yes! But do your due diligence when considering who to trust. Some builders will amplify proposed numbers in order to gain your business.
For clients in Melbourne, delcon design and construct offer a free, no obligation feasibility assessment. With years of experience in multi-unit property development in Melbourne, we understand the different markets and where the largest profit potential exists.
Contact the multi-unit development specialists at delcon design and construct on: 1800 335266 or email: info@delcon.net.au.
The right time to begin investing in the Melbourne property market is now. The sooner you get started the better.
Determine the ROI