#property developers melbourne

Learn how to define your project scope, avoid the headaches and set yourself up for success!

Congratulations on taking the first step towards constructing your own property development! Like all successful projects, it is essential that you have 5 key elements; 1) a strong vision, 2) an experienced team, 3) a clearly defined scope, 4) a plan that beats the feasibility test, and 5) ability to execute (aka blood, sweat and tears!).

If you have come to a halt at step 3, don’t worry you’re not alone. If you’re doing your research you will have noticed that there are many different property development strategies that can deliver healthy profits.

Therefore, before you set off on a wild goose chase, it is best to define your project scope, to enable you to build your knowledge, master the pitfalls/benefits and set yourself up for success.

To help you assess your options, below are the 4 most common types of projects:

Residential: as the name suggests, this involves building apartments, townhouses or units for residential purposes. It is important to research your area and understand the local Council’s requirements, particularly if you are planning on subdividing the land. Click here to learn more about the subdivision process

Commercial: these are developments designed for office buildings, hotels, retail outlets, restaurants and shopping centres. If you research the BRW Richest People in Australia, you’ll find that this is the type of development has led to many successes, but beware it does come with associated risks.

Mixed Used: are buildings that consist of a combination of residential, commercial or industrial uses. The designs are physically and functionally interconnected. An example of this is an apartment development with retail or office shop fronts on the ground floor and residential apartments above.

Industrial: involves factories and warehouse developments. The most distinctive characteristic of an industrial space is clear height. However, once again, you need to research the specific areas and Council zones that allow you to develop these types of properties.

Now that you have assessed the different development options, you can begin to make decisions about your project scope. Once this is firmly checked off your list, you need to ensure that your arm yourself with the following crucial tips to delivering a wining venture:

Do your due diligence – look for properties that are undervalue and can ensure a solid return on your investment (this means doing your homework, carefully calculating the numbers, not over capitalising and meeting the needs of the market)

Think outside the box to the unlock potential in your property – sometimes bulldozing a house and rebuilding apartments/townhouses may not deliver the lowest possible risk and highest profit – you may be able to subdivide, build a couple of townhouses and renovate the existing house and achieve a better outcome.

Build an experienced team: speak to experts such as project managers, town planners and mortgage brokers that specialise in larger scale developments to help you avoid any risks and pitfalls.

Build cost-effectively: consider your networks, look into wholesale options to ensure that you don’t over spend on your build and reach your target profit.

Research and watch the market – particularly in the current conditions it is important that you intuitively know your target investor and buyer. To do this, we encourage you to reach out to your Real Estate network – they would be happy to provide insight about your target audience and information about the local area.

Seek out tax and legal advice to ensure that you are well protected and you can avoid any hidden surprises throughout the development.

Stop your development from falling over with these 8 steps!

Property development is a bit like a good game of Jenga – you need to start with a solid foundation, be in the right place at the right time, and it requires careful decision-making along the way.

Many people leap into property development because of its lucrative results, however it is important that you don’t move too fast or jump ahead of yourself without establishing a plan and/or considering the future ramifications of your actions.

So, to avoid your development from falling over, we recommend that you do your homework, understand the process and follow the 8 steps below:

Research and due diligence

When you are looking for a site, you may find that you need to review over 100 properties before you find the right one that stacks up. To help minimise time and effort, build a team of experts around you and be sure of your vision and scope for more information see our article titled:

“Key decision points for a rookie property developer”.

Feasibility assessment

If you are new to the property development game, a team of consultants can provide advice on how to carefully assess the feasibility of the development and ensure that you have enough fat to withstand any unexpected hurdles along the way. In addition to your development consultants, your team should consist of a Solicitor, Surveyor, Arborist, Architect, Town Planner, Engineer, Builder and a Real Estate Agent. By effectively crunching the numbers, you’ll be able to determine whether the deal will deliver the end game that you are striving for.

Design and concept

Leveraging the experience of your Architects who understand the requirements of the local Council, you’ll have an opportunity to sketch the design of your development. This includes internal and external plans that outline the size of the development, car parking requirements etc. It is important that you do this prior to purchasing the site, as your Architect will be able to quickly assess whether you can incorporate extra units, townhouses or apartments, which will naturally feed into your feasibility and decision making process. At this point, it is also worthwhile sourcing a few building quotes, so that you can also plug these costs into your assessment.

Make an offer and purchase

If steps 1-3 receive a big tick, you’re ready to make an offer (to fly through steps 1-3, it is essential that you have your team in place prior to starting to look at sites). At this stage, you should speak to your Solicitor about whether you should use any “subject to” clauses in the contract (i.e. subject to finance, subject to arborist report etc), as this will provide you with a safety net if not all elements are ironed out at the point of signing the contract of sale.

Town Planning Application

At this stage, you will work with your Architect who will submit the town planning application to the local Council. The Architect needs to ensure that the planning regulations are in accordance with the Council’s guidelines.

Permits and Documentation

Once the Development Approval (otherwise known as a DA) has been issued, it is time for the Architect and Engineer to provide the necessary documents to secure a building permit. At this point, many developers often assess whether they progress to construction or jump out and sell the property with plans and permits for a healthy profit, but without the risk of construction.

Construction

Once you have received the stamp of approval and you’ve decide to see the project through to the end, it’s time to clear the block and get your engineers and builders on site. Depending on the size of the development, this stage usually takes 8-12 months. Whilst the build is taking place, the Developer is usually working hard with the Agent to generate pre-sales and to sell as many properties as possible off the plan (which is attractive to many buyers due to the tax and stamp duty benefits).

Completion

Throughout the project and towards the end, you’ll be busy communicating with investors, generating sales, watching the budget and project plan, organising a body corporate (if required) and engaging your Solicitor to set setting up the purchase settlements. Near the end, you need to source your certificate of occupancy, builders insurance, body corporate insurance, landscaping and of course, organise a celebratory party once all of the sites have settled!

Closing comments Property Development is a deeply rewarding experience (beyond the financial benefits!), one that you’ll certainly feel you earn throughout the various stages, but ultimately it will be an opportunity for you to leave a legacy in a community and generously provide much loved homes to many local residents.

Have you tackled a few renovations, perhaps built your own home and/or invested in the odd property? If you’re passionate about property and are ready to springboard yourself into your next project, perhaps it is time to seize the opportunity and explore becoming a passive property developer?                        

Many people shy away from the next level, however there are a number of ways you can be involved in a development, learn the ropes but minimize the risk (speak to us if you would like more information).  To whet your appetite, today we thought we would share with you the top 3 the benefits of becoming a passive property developer.

  1. Healthy profits and the ability to  buy property at wholesale prices

Capitalize on buying property under-market, without the fat built in for developers, real estate agents and/or project marketer’s commissions.   Particularly during the current market, you can make a healthy return in 12-24 months if you’re building a townhouse, or 18-36 months if you’re undertaking a larger apartment project (assuming you need to apply for a permit – if a permit is secured the time frames can be expedited).   At the end of the project, you can decide to either sell for a profit or hold, to benefit from the rental return (it is one of the very few ways you can source positively geared properties in Australia’s capital cities!).

  2. Build your own legacy and help Melbourne’s growing population

The Australian Bureau of Statistics (ABS) has observed Melbourne being the fastest growing Australian capital for the last 11 years, and it is anticipated that by 2050, Melbourne’s population will have reached between 5.6 and 6.4 million.  To compensate for this growth, it means that property developers will not go out of business anytime in the near future! 

Once you have one development under your hat, you can use this as leverage and continue building on your portfolio. Extending your legacy throughout your city and creating a great nest egg for you and your family.

  3. Set yourself up for success – with tax & finance benefits!

A big benefit of property development is the tax benefits, holding onto the property and depreciating its value over time, will certainly help your end of financial year tax bill (particularly if you’re still working in full-time employment). Furthermore, for those who have been in the game for awhile, they will benefit from high loan to value ratios and an ability to access a wider range of finance options and loans (which is advantageous given that the banks are currently tightening their belts and approval rates).