The amount of time a development takes will vary

So you’ve just received your development application and construction certificate consent and it’s almost time to start building.  Just how long will the construction phase of your development take? Or more importantly, the question is how long before you start making a return on your investment?  I guess this is like asking, how long’s a piece of string?  Because the answer will depend on many factors:

-   The number of dwellings you are building – single house or multi-unit development?

-   The type of construction process: slab and brick, timber floor and walls, partially prefabricated materials, etc.

-   The size and degree of difficulty of the structures

-   The weather: how many rainy days will delay progress?

-   Material and contractor availability

-   The builder’s ability to manage his contractors – his relationship with his trades and communication skills

-   The knowledge and experience of those managing the project

-   Any issues that may arise during the development process i.e. hitting rock when excavating

Generally speaking, the build phases on Property Bloom projects range from a dual occupancy being completed within four months to a four-villa project being completed in six months.  Our granny flat developments are only two months from receipt of approval to completion of building works.

Now you have an idea on how to estimate your build time, is there a way you can save on holding costs too?  The answer is yes and it’s all about analysing your building drawdown schedule.  A simple revision to a builder’s drawdown schedule can end up saving a considerable amount of money in interest holding costs.

Typically, my builder’s drawdown schedule would go something like this for a dual-occupancy development:

Deposit – $5,000 due when signing the tender (before DA is lodged)

Slab less deposit paid – 20%

Frame and trusses – 20%

Lock up – 25%

Mould out – 25%

Completion – 10%

By requesting a change of just a few percentages over each phase we can save thousands of dollars for our clients.  This was our proposed change to the schedule:

Deposit – $5,000 due when signing the tender (before DA is lodged)

Slab Less deposit paid – 15%

Frame and Trusses – 20%

Lock up – 20%

Mould out – 25%

Completion – 20%

This is a much better schedule for our clients as there is more to be paid towards the end of the build.  Not only does this save on interest costs, but it keeps the builder ‘in the game’ as there is more for him due at the back end of the build.

If I was really good at maths, I could calculate the exact amount saved be tweaking the percentages....but alas, I’m not that clever.  So here is a challenge for all you clever readers...

Assumptions:

Build cost and construction loan is $500,000,

Total build time frame is five months from slab down.

An equal amount of time between each phase, although not likely, just to make it easier to calculate.

Interest rate 7%.

Can you tell me what would be the difference in interest payable for each scenario?  I look forward to hearing from you. Please email your answers to: jo@propertybloom.com.au