Thinking about Building Units or Townhouses? 5 boxes to tick first!

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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 if you’re new to the game.

Here are 5 tips to consider – not in any order – to make the most out of your development. They are by no means the only considerations but well worth considering just the same.

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 storey’s of an apartment building, especially when the norm in the vicinity are bungalows, or houses with one owner.

The figures – know the numbers & plan cash flow

This is called feasibility.  Also, if you are planning to sell them, make sure you discuss your development strategy with an accountant and understand the possible tax and GST implications.  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]

Construction – building units or townhouses

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.

Builders can be Developers too 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.

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. The building stage can last 4-12 months depending on the size of the project.

Here at SCM Projects we have been managing home unit and townhouse projects for more than 10 years. We completed 11×3 bedroom town houses in Springwood for our client, Milos Bolic, about 4 years back and more recently in 2023 this magnificent block of terraced apartments in Bellevue Terrace Clayfield.

Have a development team and finances ready

A visit to the local council, though that can frequently be confusing. A town planneer can possibly help with this. A Project Manager is possibly a better bet at this early stage because his wider skill set will help with other questions that will inevitably arise such as building matters or questions about civils and provision of services etc..

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 from a planning viewpoint, not necessarily from a feasibility viewpoint, that is “is it doable?”. Unless you bring a lot of experience with you, these should include a Project Manager who can coordinate the whole process or individually you will need, a solicitor, an architect, a surveyor, a town planner, a structural engineer and possibly a variety of other consultants such as electrical and an estate agent to advise honestly on end values and marketability.

 

Get SCM Projects on board

Getting an experienced Project Manager   such as SCM Projects 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. We 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. We take your project from concept to completion

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.

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