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FEBRUARY 2014 API
After selling his share in a business
in 2010, Matthew Callahan was free
to pursue his interest in bricks and
mortar. But rather than target a buy and
hold investment, he dove straight into the
deep end with a development project.
About a year later, he came across the
1021-square-metre site in Lilydale in
Melbourne’s outer east after a detailed
search that lasted several months.
“I wanted to be sure I was buying
something worthwhile. I also wanted
something in this area – there’s great
infrastructure, it’s well priced. I sought out
local agents and scoured the web.”
The seller had obtained development
approval to build a townhouse complex,
but was keen to move on to other
opportunities. The approval was for five
dwellings, each with two bedrooms,
connected via a common driveway.
“I went through a pretty thorough
process of modelling the numbers,”
Matthew, now 49, explains. “I wanted to
ensure I had every conceivable cost in
there. Not only did I account for the build
costs, but I went straight to the source of
who’d be doing that work and checked
my estimates were legitimate.”
He contacted the local council to get
an idea of the contribution to open space
cost. From there, he could see what his
gross profit could reasonably be.
So, in December 2011 when he was
satisfied the numbers stacked up, he
bought the block and its development
approval for $585,000 – in cash.
“I had (money) and a silent joint venture
partner to put in (half of the total costs).
We only needed a loan for the build.”
Knowing a lender would want presales,
Matthew came up with an intriguing
idea. After some discussion, he sold the
previous owner one of the townhouses
before the site purchase had even settled.
“I struck a deal that meant not only
would I buy his property but that he’d buy
one of mine off the plan. We agreed he
wouldn’t resell until I’d sold the others.”
With one sale locked in, he went to
the bank to get a loan for construction.
He’d also obtained architectural and
engineering drawings off the back of the
town planning materials.
“It came time to negotiate with the
lender. They wanted me to get three
presales. I suggested one. They eventually
agreed and I was able to pull that one out
of my back pocket and say ‘here it is –
I’ve already got one!’”
Matthew interviewed a couple of local
builders but in the end went with one
recommended by his real estate agent.
A month after settling on the block,
works began. The dingy old house was
demolished and soon enough five new
dwellings began to rise from the ground.
“I didn’t bother changing the plans that
came with the block. I kept it exactly the
way it was. If I was doing it again, I’d pay
more attention to those drawings and
adjust certain things.”
For example, each of the living rooms
only had one electrical outlet and it was
on a far wall, so not very functional.
Buyers didn’t seem to mind.
“I had another two presales before we
broke ground. I went to a local realtor to
market the properties. He had a good
understanding of the market.”
The fourth contract came during
construction and the final was secured
prior to completion in December 2012.
Sales revenue was $1.8 million, which
after build, legal, engineering and
other costs as well as the site purchase
delivered him and his partner a healthy
$180,622 profit, or $90,311 each.
“This was a development on training
wheels,” he laughs. “I didn’t have to
struggle with the development approval
side of things, and I overestimated
my expenses and underestimated my
revenue... I safeguarded myself as much
Matthew says he
was thrilled with
the outcome, so
much so the whole
a career change.
“I’d worked in
the finance sector
before this. My
builder’s son had
business, so I
with him. And I’m
loving it.” API
IN 12 MONTHS
For his debut development, Matthew Callahan was keen to add
some “training wheels” to ensure success. In the end, he created a
six-figure profit, a stellar sales outcome and even a new career.
The original house
Use your smartphone
or tablet and your
favourite QR scanner
app to see figures, a
project timeline and a
Q&A with the builder.
The finished townhouses
æI didn’t have to struggle with the development approval
side of things, and I overestimated my expenses and
underestimated my revenue... I safeguarded myself.Æ
MY MOST PROFITABLE DEAL // MATTHEW CALLAHAN
Use the button
below to see figures, a
project timeline and a
Q&A with the builder.
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