Many would-be property developers don’t even get started 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.
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 development. 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. 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
Make sure you discuss your subdivision strategy with an accountant and understand the possible tax and GST implications if you are planning to sell. 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.
3. Get a competent professional on board
Getting a Project Manager to manage your subdivision can save you a lot of time. They can give you advice on the subdivision process and application cost indications, including costing’s of Operational Works. You need to use a surveyor to prepare your subdivision plan, though in our experience involving a project manager at this stage is often a sensible step to take. If you’re researching a new area, the first place to start could also be the local estate agent.
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.
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 storeys of an apartment building, especially when the norm in the vicinity are bungalows, or houses with one owner.
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. They 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.
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.