What’s involved?
Property development can be a complex beast, and no matter how different each of your developments might be, the set of guiding principles for success remain the same. New developments require a huge amount of research and legwork, and that’s before the first shovel of soil is even turned. Whether you’re managing the development yourself, or you’ve engaged a property firm to manage it for you – it’s important to understand each stage of the property development life cycle.
Research
Before any purchases are made – and any money changes hands – you need to do your homework. You should start researching suitable suburbs and prospective sites, and also put in place pre-approved finance. At this point, you may want to consider investigating option agreements and/or joint ventures. Having a good understanding of your borrowing capacity is crucial, after all, you don’t want to end up with a site you can’t afford to do anything with. You may also want to engage your team of experts to help assess the project’s viability; a property lawyer or conveyancer, surveyor, town planner, architect, engineer, project manager, development consultants and a real estate agent to give their professional assessment of end market values and marketability of the completed development project. Alternatively, you may consider engaging the service of a development and project manager to ensure your proposed development is a real success.
Feasibility
The second stage involves testing the viability of the project, and determining the highest and best use of the land you’re interested in. This could be as simple as adding a granny flat or additional dwelling, creating a land subdivision, building town houses or maybe even a high-rise apartment complex. There are many considerations during this stage of the development process that can make or break a deal. These factors are not limited to, but include:
- Council’s development and planning policies and guidelines
- Zoning regulations
- Identifying site restrictions such as overlays and easements
- Understanding market demand and marketability of the project
- Consider and preempt any objections neighbouring residents – and on a larger scale – the wider community may have towards your proposed development
- Critical assessment and financial modelling of all costs including pre-development research and enquiry, consultants, construction, project timelines and deadlines.
Conducting due diligence through in-depth feasibility analysis before you even purchase the site will ensure your end sales realisation targets exceed predicted profit margins (internal rate of return on your investment.) This will give you a good indication of what the residual land value is today. For further help and professional support, click here to contact the Urban Greenfield Team to talk through your feasibility analysis and scenario planning.
Acquisition
Providing the project is viable, you’ll next move into the acquisition phase. This is where the land or site is purchased at a price that allows you to make a reasonable profit. Using a buyer’s agent, or property firm to find, negotiate and acquire a site for you can actually save you money in the long run. Click here for more information, tips and strategies on acquiring and financing development sites.
Planning and development approval
Perhaps the most time consuming and complex phase, the bulk planning is done during this stage. You’ll work closely with town planners and architects to ensure your development adheres to stringent local council and state planning policies, controls and legislative requirements. A registered land surveyor will be engaged to plot out site levels and dimensions, boundaries and important features such as service pits, roads and community land. You may require additional reports to support your development application including a statement of environmental effects, biodiversity study or bushfire assessment. There will no doubt be some to-ing and fro-ing with the local council and you may need to provide further information or make rectifications prior to being granted development consent. It’s not unusual for this process to take 6–12 months, sometimes even longer depending on the nature and size of your proposed development, so hang in there and keep focused on your end goal.
Construction to completion
The next step involves re-engaging your architect and selecting a reputable registered builder if dwellings are proposed, or a reliable and efficient civil earthworks company if you’re constructing a land subdivision. Make sure they have the required insurance certificates, including public liability and professional indemnity insurance prior to engaging them. Ensure you look carefully over the building contract or plan of subdivision, and if in doubt, have your property lawyer or conveyancer take a look. Just like the planning stage, the construction phase can take time – sometimes even years depending on the project. Once construction is complete, all regulatory checks are done, and relevant certificates are issued from council, you can submit the plan of subdivision for registration of individual allotments. This means obtaining separate titles for additional parcels of land and ultimately if you choose, selling, renting (if a house was built) or holding your newly constructed property development.
If you need advice about any stage of the development process, or you’re looking to buy or sell a recent property development or investment property, please contact our team today.