the cost to build 3 townhouses

Are you wondering about the cost to build 3 townhouses in Melbourne? 

You’re lucky because that’s exactly what we will discuss in this helpful article.

There are several reasons why you’d want to build three townhouses in Melbourne, but the most common reason is to maximise the value of your land. 

A real estate development can be an excellent investment if you have a block of land suitable to build two or more townhouses. 

Some people even keep a house to live in while selling the others or even renting them out for passive rental income.

Whatever the reasons, townhouses don’t build themselves. And builders don’t work for free. 

There is a significant cost involved in the development process, and not all of it is construction costs.

You’ll learn all about the different costs here, so keep reading to find out more. 

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Construction Costs are Rising

One thing to note here, and you’ve probably seen or read this in the news lately, but construction materials costs are increasing across the board. 

cost build 3 townhouses melbourne

This means that raw materials used in construction cost more today than they did a yeast ago.

Think timber, steel, electrical cable, concrete – all the things that come together to build a home. All these materials have risen. 

This is due to various factors, including the lingering effects of the pandemic and global disruptions to supply chains and logistics networks.  

As a result, the cost to build property has risen. A build that used to cost $900,000 now costs an additional $200,000+ more. That’s a significant list of property developers getting hit in the hip pocket.

This can be problematic, especially if the suburb’s housing prices haven’t risen in line with these costs. It can hit the hip pocket hard. 

Materials won’t remain as expensive as supply chains snap back to normal and COVID-19 slowly becomes endemic, but we’re not yet there. 

prices going up

Lots of Variables

Like any large-scale project, a real estate development process has many variables. Costs can vary depending on many factors. Delays cost money, as do disputes.  

Every day has a dollar value attached, which fluctuates depending on what’s happening each day. 

You should avoid thinking about how much it costs and instead re-frame your perspective to how much I should spend. You don’t want to overcapitalise on a project and then suffer a net loss. 

Breaking even is not ideal, though – you don’t lose anything, but you don’t make anything either. And your time is finite, so you don’t want to waste it if you don’t have to.

Have Airtight Figures

Any residential property developer worth their salt will have airtight numbers and accounts. There is no margin for assumptions, guesswork, or a laissez-faire attitude here. You need to think in terms of actual costs and net profit.

cost to build 3 townhouses melbourne

Double-check, then recheck your figures. It all needs to add up on paper. This is especially the case when working with your lender, who will want your feasibility and projections locked in before they’ll start loaning you money

The Various Costs Per Stage

Each development project has several stages, with costs associated with each stage.

Here’s a list of the different stages:

  • The purchase
  • Early development
  • Middle development
  • Construction
  • Marketing
  • Holding (bank interest)
  • Completion

It’s worth noting that the costs listed in this article exclude GST.

This is because, in most cases, you should be able to claim the GST as a tax deduction and cancel it from your expenses. 

Now before we start breaking into the numbers, I want to point out that these numbers are estimated market costs at the time of posting this article based on our experience.

I also want to point out that our costs are significantly cheaper based on our buying power.

The Purchase

build townhouses

Now, this cost will not always apply, especially if you own land that is suitable for development. If you own the land outright, you’re laughing. In that case, subtract the figures in this section from the total. 

Otherwise, to develop real estate, you need a suitable block of land. These figures are based on Melbourne’s average house prices, around the $1.1-$1.2 million mark.  

These costs include the home price, stamp duty, conveyancing, and other adjustments. 

Early Development Costs

early development costs

These are costs incurred from the purchase date until the town planning approval stage. Typically, this is the first ten or so months of a project. 

In addition, such costs include land surveying, such as the re-establishment survey and the features and levels survey. They also include drafting the plans for three townhouses and planning costs.   

Middle Development Costs

middle development costs

Are you still interested in the cost to build 3 townhouses in Melbourne? Well, keep reading because we’ll continue to lay it out for you.  

Next are your middle development costs; these are the expenses incurred from the planning permit approval stage until construction commences. 

Furthermore, this includes the demolition of the house on the site, construction documentation and interior design fees. It also includes the cost of connecting services to the site, such as power, NBN, phone lines and water. 

Furthermore, we’ve included some miscellaneous costs typically incurred, such as insurance and council rates. 

Construction Costs

construction costs

Now we get to the exciting part. This next section is about construction costs. The actual costs will be realised in build tender process.

These costings are assuming a fixed price, complete turnkey build. This means that everything is included to make the townhouses ready to live in.

It includes all building costs, landscaping, letterboxes, clotheslines, and everything in between.  

Construction Costs Breakdown to Build 3 Townhouses Melbourne

Marketing Costs

Let’s keep exploring the cost to build 3 townhouses in Melbourne.  

Townhouses don’t sell themselves. If you want to make a profit, you need a project marketing and sales campaign to sell them. 

This approach is based on selling off the plan, which is advisable as you get to see your profit sooner than if they were listed once built. 

These costs aren’t as high as the others we’ve outlined, but they are still some costs you need to consider.

For the purpose of this exercise, we aren’t going to be selling – but if you were selling, you would need to consider 3D renders, banners, brochure design and printing.

Bank Interest / Holding Costs

Next, up is the bank interest on the loans, otherwise known as holding costs. 

Furthermore, interest is usually accrued throughout a project, and we recommend paying it off in full using the sales proceeds. Interest capitalisation is always good if it is an available option.

Otherwise, you continue to accrue interest, and the bank makes more money off your back. Once the development finance is paid in full, you pay these costs to the bank. 

It is impossible to estimate these costs because everyone will be different depending on their circumstances.

But it is a cost that does need to be considered. I suggest reaching out to a broker to get some clarity about your own finances.

Completion Costs

3 townhouse completion

Now we get to the final costs incurred at the end of a project.

This includes your legal and subdivision, registration of titles, and if you decide to real estate agent’s commissions – for the purpose of this, we aren’t selling we are holdinghttp://selling holding.

If you decide to sell, you’ll need to consider agent fees which can be anywhere from 1.5-3.5% of the sale price.

Total Estimated Cost to Build 3 Townhouse

Below is a breakdown of the total estimated cost to build 3 townhouses in Melbourne. Please remember, this is only a guide to give you an idea and get you heading in the right direction.

These are our best estimates based on our experience at this time. 

cost to build 3 townhouses

Building 3 townhouses, you can make a decent living if you steamroll the success of a project into the next one, using the profit to fund another development.

The goal isn’t to retire early on your first development, but to set yourself up to have a steady stream of income rolling in. 

What About Market Cycles?

We all know the property market has peaks and troughs. However, a savvy developer can make a profit in any market. 

Worry less about the market cycle, and focus more on upskilling, learning, and developing relationships and networks. Learn how to create efficiencies and leverage connections.  

If you dedicate yourself to learning this game inside and out, you’ll look back in ten years and realise that the hard work was worth it. 

Seems Like Hard Work?

If you’re reading this and are curious but a bit daunted by all the steps and processes, there may be a solution for you. 

Here at Little Fish, we are townhouse development experts. Our bread and butter is development managing these projects, day in and day out.  

We can work with you to project manage the process. Sure, we have a fee, but it’s not that much compared to the profit you stand to make. 

If you don’t have an appetite to get your hands dirty on the ins and outs of a project, we can get it done for you and cheaper than if you did it yourself. 

In addition, we can save you money because we have buying power and knowledge. Our team know how much materials cost, how much builders cost and how much all these various costs are, as you can tell by this article when we break it all down for you. 

Furthermore, Little Fish also has long-lasting business relationships with various vendors, so we get wholesale prices on materials. This means cost efficiencies for our clients, as the saving is passed on to them.  

So, if you want to get into development without the heavy lifting, we can step in and do it for you for a modest fee considering the profit that you can make.

Wrapping Up

little fish property developments

We’ve outlined the cost to build 3 townhouses in Melbourne in this informative article, covering all the stages of development.

If you’re keen to learn more or want to embark on your own property development journey, get in touch with the friendly property development team at Little Fish.

We would be happy to consult with site acquisition and help in any way we can. 

We’re always happy to chat in more detail about your specific needs.