Many would-be property developers don’t start building units or townhouses because they don’t know where to start. If you want to get involved in the development of new townhouses or apartments, then a great place to start is understanding the process. It’s not that hard especially if you engage a competent professional project manager to hand hold if you’re new to the game.
Here are 5 tips to consider in order to make the most out of your development. They are by no means the only considerations but well worth considering just the same.
1. Have a development team and finances ready
Here you look for a block of land with potential for building units or townhouses because the land needs to be zoned correctly for this type of project. Most land isn’t. A Town planner can help with this as can a visit to the local council, though that can frequently be confusing. A Property Development Manager is possibly a better bet at this early stage because his wider skill set will help with other questions that will inevitably arise.
At this stage you should already have your finance in place so that you know your limits.
You should also have a team of consultants organised who can advise you as to the project’s viability. Unless you bring a lot of experience with you, these should include a property development manager who can coordinate the whole process or individually, a solicitor, an architect, a surveyor, a town planner, an engineer and an estate agent to advise honestly on end values and marketability.
2. The figures – know the numbers & plan cash flow
Make sure you discuss your development strategy with an accountant and understand the possible tax and GST implications if you are planning to sell. That’s because ‘selling’ creates a tax event and GST can have cash flow implications. You will also need to estimate your holding costs such as interest on your loan and rates. This can be a real drain on finances if the process drags out and you are not getting any income from the land to help offset your holding costs – so time is money in this type of development. Try negotiating long settlement periods from the vendor or buy under an option if you do not own the land. Planning Cash Flow can be one of the most critically important things you need to do – failure to do so has seen many projects still born. [11 steps to find out if your project is feasible]
3. Get a competent professional on board
Getting a Project Manager to manage your project can save you a lot of time. It can also mean the difference between making a profit or suffering a loss. They can give you advice on the development process and application cost indications, including costing’s of Operational Works – right through to all the final legal paperwork at project’s end to get all the new titles so you can effect sales.
4. Determine the type of development which is best for your property
To find out what can be built on the block you need to assess the local council’s policy towards development and see how many new dwellings can be put on the block. This differs from council to council and even within the same municipality. Again, the Project manager can assist here as well as discussions with an experienced & competent local real estate agent.
You also need to assess what the market wants in that particular area – what type of property would sell or lease well. It is important to design and build a project that is marketable – the right size and the right type of dwelling for the demographic that wants to buy or lease in that locality. You can’t always build any style of dwelling – it has to adhere to set standards within the area – like the number of storey’s of an apartment building, especially when the norm in the vicinity are bungalows, or houses with one owner.
5. Construction – building units or townhouses
Builders can be Developers but that’s rarely the case. Quite often, whilst they may know a lot about building, they rarely know a lot about property development – they are two different things.
Many people think that construction is property development, but it is really just one of the stages. Construction is what a builder does; most developers are not builders. Property developers are a bit like the producer of a movie. They come up with the concept and then orchestrate the entire project. Most developers never really get their hands dirty.
As developer, it is imperative for you to hire a builder/contractor. Obtain quotes from builders and organise finance for the construction phase of the project. How do you pay them? The norm is to pay the builder progressively at the completion of each stage of development – not in lump sum. This stage can last 4-12 months depending on the size of the project.
We completed 11×3 bedroom town houses in Springwood for our client, Milos Bolic, featured here.
After your property is completed, then you can have the development refinanced, leased or sold.
While this is the last stage of the development process, it is always advisable to begin with the end in mind – have an exit strategy right at the beginning of the project. This involves having a clear market, with a few already-interested buyers, and sadly – what to do if the project you worked hard at does not drum up the desired number of offers. In which case, it’s time to avail of the services of a real estate agent.