July 15, 2024

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Property development guide part 7 – Researching the perfect site

9 min read

In this continuing series of articles, I’ll take readers on a step-by-step journey through the property development process.

Once you understand the importance of securing a development site in the right location and you have the big picture firmly in mind, including your target market, it’s time to move from theory to practice.

Finding the perfect piece of dirt to suit your project is going to take time, patience and a lot of homework. 

Rest assured though, the financial rewards for all of this hard graft are outstanding once you find the right site.

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Note: Remember your aim in conducting this research is to be smart and stay ahead of the market.

One of the keys to sourcing good development properties at a fair price is to build up a network of people who are well-versed in the local market because they work in it on a daily basis.

As the first port of call, talk to experienced real estate agents and property strategists.

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Tips: Let them know you’re on the lookout for a development site and the specific requirements you have.

The team at Metropole have been helping investors and developers find their perfect properties for decades now.

Why not contact Metropole and make a consultation with one of their Property Strategists?

Buyer agents with sound local knowledge can also be invaluable allies when sourcing a good site and can assist with the negotiation process to ensure you pay below market value for your property.

Make sure they know the area thoroughly and understand exactly what you are hoping to achieve with your development project.

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Tips: It’s also a good idea to touch base with the planning department at the local council, as they can provide you with an overview of any future planning or zoning changes in the area.

Obviously, it doesn’t hurt to get to know the people who could have the final say as to whether or not your proposed development gets off the ground.

Of course, as with any market research, you conduct into a business venture of a sizeable magnitude (as property development is), one of the most important steps is pounding the pavement.

Drive around and have a good look at the areas where you know there might be opportunities.

Making your profit when you purchase

While often said you make your money on a project when you buy the property, it’s not because you buy cheaply,  it’s because you buy the right property in the right location.

However with the development site is also critical not to overpay, so it’s important to conduct a detailed feasibility study to determine the maximum price you can afford to pay and still be left with a  financially viable development.

You must avoid emotion, making your purchase based solely on its financial viability as a development site and its adherence to a strict checklist of pre-determined criteria, such as zoning and planning allowances, suitability to your project, the desirability of location, etc.

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Note: Unless the potential property satisfies all of the points in your checklist or you can buy it at the right price to make up for any potential problems, move on to the next site.

You should also remember to take every cost into account; it’s not just the price tag of the site in question, but the stamp duty payable on purchase as well as all of your legal and conveyancing fees and of course all the preliminary costs associated with obtaining development and building approvals.

These added extras will impact your bottom line and need to be accounted for in your site cost analysis and pre-purchase feasibility.

Ultimately, the type of property you look for will depend on the sort of development you intend to undertake.

Do be cautious though of “tricky” sites that may require a lot more work and/or money to develop.

These include properties with restrictions such as heritage overlays that may restrict certain development or design elements, any land where a change of use or planning consent must be sought and if renovating, properties with extensive structural problems that can be costly and time-consuming to repair

A smart investor wouldn’t buy a house without a building and/or pest inspection to identify any hidden costs, so why would you purchase a development site without expert advice on the optimum development potential for the site?6354732_l

How often have you seen an advertisement for a development site for say three units followed by the phrase, “S.T.C.A.” (Subject To Council Approval), only to ask the agent what their opinion is and have them tell you that you might get three units on the site, but they are unsure of the planning laws?

The truth is that they are simply not experienced enough to give you a clear indication of the development potential of any prospective site.

I know many wannabe developers who have headed off to the Council to make enquiries with the planning staff, only to be told that unless they lodged an application, the council can’t really comment on optimal development potential.

Worse still, they may receive conflicting advice from different Council representatives and sometimes it can take a couple of weeks before the council will answer your questions.

Unfortunately, this is a typical example of how development sites are marketed, and this lack of certainty and the resulting time delays can make life very difficult for a potential developer looking to purchase the right site.

That’s why it is highly advisable to invest in a professional pre-purchase feasibility study.

The amount of bureaucratic red tape to cut through in order to get a proposed property development off the ground can be incredibly daunting for a first-timer.

Even seasoned developers can come up against unexpected restrictions and planning regulations that seem absurd.

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