Skip to main content

Estimate Feasibility - Buy house, build house with contractor, build house with commercial manager










I endeavoured to do a feasibility for a client ito his options of acquiring a new home in a security complex in Stellenbosch, South Africa.
 

The options are as follow:

1.    Buy an existing house from an agent.
2.    Buy a stand and build a new house with the contractor and his architect.
3.    Buy a stand and build a new house with me as the commercial manager and his architect.
4.    Buy a stand and build a new house with me as the commercial manager and my architect.
  
FEASIBILITY – WELGEVONDEN – 3 BED 2 BATH 1 GAR
Scope:
1.    Best value for money investment.
2.    Design of house based on best sales / m2 of house. It affects the ROI (Return on Investment) of the project.
3.    People stay on average 7 year in a house before they sell it, therefore investment has to be based on the fact that it will be sold within 7 years.
4.    Ways that risk need to be minimized defined as:
a.    The probability of loss.
b.    The probability of not receiving what was planned at inception.
c.    The difference (or potential variance) between expectations and realizing what was planned at inception.
d.    The expected or most likely return and the variance of it.
e.    The likelihood that the investor will not receive the expected rate of return on the investment
5.    Trust that the project will be a success.
6.    3 Bedroom house, 2 bathrooms & 1 garage.
7.    Average size of house = 145 m2.
8.    Average sale price of houses in Welgevonden R 9000
9.    Cost of house required = 145 m2 x R 9000 = R 1 305 000 VAT inclusive.
10. Costs of finishes will vary outcome of feasibility.


Estimate Feasibility Comparison:
· Column: 1 – Buy house as is
oSize of house = 140 m2
oR / m2 incl. VAT sales price = R 8 572
oAgent sales commission @ 7,5 % = R 85 856
oROI = -15.22 % if sale occur at R 9000 / m2
· Column: 2 – Normal - Buy stand & employ a contractor
oSize of house = 140 m2
oR / m2 incl. VAT Contractors Construction price = R 5 800
oAgent sales commission @ 7,5 % = R 82 895
oROI = -33.49 % if sale occur at R 9000 / m2
· Column: 3 – Appoint – Commercial Manager (CM) + Owners Architect
oSize of house = 140 m2
oR / m2 incl. VAT Commercial Manager Construction price = R 3 850
oAgent sales commission @ 7,5 % = R 110 527
oROI = 6.03 % if sale occur at R 12 000 / m2
· Column: 4 – Appoint – CM + CM chosen Architect
oSize of house = 140 m2
oR / m2 incl. VAT Commercial Manager Construction price = R 3 850
oAgent sales commission @ 7,5 % = R 138 158
oROI = 29.51 % if sale occur at R 15 000 / m2
 


Popular posts from this blog

Interpret property info the right way

Jacques du Toit, property strategist at Absa, says in order to understand information about price growth, a good grasp of the factors that drive it is necessary. “Many factors can influence price growth. These factors relate to the property market and the household sector, which may include demand and supply conditions, initially driven by economic growth, inflation, interest rates, employment, household income, debt, the affordability of housing, etc.” He says the average price of houses in certain segments is calculated by dividing the total value of properties sold in a specific period in a specific segment by the number of those properties. “The overall average of middle-segment housing as defined by Absa – small, medium and large – is calculated by using the samples of each segment. It is thus a weighted average that is calculated.” Read the whole article

Financial Advice That Can Do Serious Damage

Buying property is better than renting. A common refrain, even on the heels of the bursting real estate bubble, is that renting an apartment is "throwing money away" compared with homeownership and the ability it offers to build equity and wealth. As if staggering foreclosure rates and underwater mortgages aren't enough to make a different case, consider that it is not just mortgage payments to worry about. There are interest payments, property taxes, homeowner's insurance, furnishings, utility bills, maintenance and repairs to add to the mix. Treating a home as an always-appreciating investment is no longer a smart strategy, and those who base their ability to pay a mortgage on projected earnings, rather than current paychecks, may be dangerously optimistic. Resolutions That Will Save You Money Make paying off debt a priority. Reducing your debt and excising the interest payments and accompanying fees is usually a good idea. But paying down debt shouldn't derail ...

Home: Tips to greening your home

1. Be conscious and aware of your energy usage. Instead use gas heaters rather than oil or electric heaters. 2. Install a solar geyser or heat pump for long-term benefits. 3. Look at your window dressings like curtains and/or blinds to maximise internal insulation. 4. Install insulation on the roof where applicable. 5. Landscape home gardens according to the orientation of the building and existing window schedules. Plant evergreen or deciduous according to winter and summer months to create shade in areas where there are big windows that receive full sun in summer and in the winter months the leaves fall to allow the sunshine in; this will give you natural heating and cooling of the building. 6. Fit carpeting where there are tiles or use a rug to create warmth in cold areas. Recycle organic waste and use it in the garden instead of using fertilisers. These can be stored in summer to keep the temperature down. 7. Recycle waste. Recycleable waste that goes in...