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  1. #1

    Default What is the value of a resource consent?

    Hi all,

    True Freshie, first post!

    I have 2 townhouses on the North Shore that I am thinking of selling in about 6-8 months time (knock off large % of those damned mortgages). I can just sell as-is, but from discussions with a couple of architects and planners know that the site could be redeveloped to hold 4x decent quality townhouses. I am not a developer and don't want to be, but am exploring the option of commissioning / doing all the design and resource consent, and then market it to developers as a "build ready" package. General advice seems to be that this would be worthwhile, but given that the all-up costs of doing so seem to be getting close to $100k, I am trying to get a better feel how much "value" this would add from a developers perspective (and therefore is it worth the risk to incur the up-front costs). I am also looking to try and find a couple of developers to have this conversation with, but thought would tap into the collective wisdom here as well

    Thanks in advance!

  2. #2
    Join Date
    Apr 2016
    Posts
    2,343

    Default

    I used to do this for a living prior to the GFC. In my case it was simply a case of buying well and factoring in the increased value against costs so it was quite easy. For example buy a subdivisible property for 500K. Spend 100K on it. I now had 2 sections worth 800K so could sell for mid 7's and everybody was happy.
    Your case is a little more complex as you already own the deal. Given the current lending environment I would tend to not bother and just sell them. The days of devs paying moon beams are over, temporarily anyway, until the Reserve Bank frees up some lending. But to help you work it out a simple formula is:
    Final value of your 4 sites. Let's say 350K each. 100K to do the work required so that's 1.3 mil max a developer would pay. But that is a retail buy and they will expect a discount otherwise why bother. So work it out simply on that basis and see if it works out.

    A method to maximise your potential gain but not without risks is to JV with a developer. You put in the land, they do all the work and fund everything else. Once the homes are built and sold, at settlement you get paid for the land and a share of the profit on each building.

    Stuart Shutt at Sentinel Homes is a good guy to talk to about either option. Long term developer builder and as honest as they come.
    Last edited by Bobsyouruncle; 03-08-2017 at 02:48 PM.

  3. #3

    Default

    Are you positively geared? What would be the outcome of selling now?

    There are a few issues you face trying to predict things, there's a damn election for one and every party has attached their cart to the housing horse. That's only 50 days away so you could wait until then and reevaluate.

    The other issue is funding for developers is hard right now. So they can afford less and are projecting less out into the future. I think this is temporary however. I'd hope the new government takes a good look at the RMA, the cost of construction overall and the lending environment and we can build more homes.

    So some temporary things... unless you have to sell I would wait.
    Free online Property Investment Course from iFindProperty, a residential investment property agency.

  4. #4
    Join Date
    Apr 2016
    Posts
    2,343

    Default

    The other thing to consider Simon is that if you can afford to hold you should. You only bought 2 townhouses but you are getting inflation proofed growth on the 4 underlying sections. So growth on those 2 will outperform almost any other hold you have. Sell the dog and the wife and keep the townhouses :-).

  5. #5

    Default

    Hi Bob, Nick,

    Thanks for the feedback. Based on this and other discussions current thinking is to bring to market say Feb next year (post election, market setting, summer optimism), and probably do a planning report of some sort setting out options for people to pick from. Could keep holding, but I have a number of others that will give me that inflation proofed growth, this is the only one I have that has 'value add' potential. Might give Stuart a call as well

    Cheers, Simon


 

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