How to get started in property development

Property development can be daunting, so I’ve put together some FAQs to help address some of the important questions that will arise as you start your development.

This has been broken down to a three-part series:

1. Getting started
2. Design, planning and approvals
3. Construction time

Today I will talk about getting started.

What is a developer?

I quite like this description:

“Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end” Wikipedia 

I especially like the words ‘create, imagine and orchestrate’, as this is exactly what we do at Property Bloom.  When we find a development site, I will stand on it and spend some time visualising what can work on the land,

What’s my development strategy?

Only you can answer this one.  It’s important to determine your development strategy and your investing criteria before looking for a development site.

Your strategy may include:

• Land subdivision
• Renovating and adding value to an existing dwelling
• Dual-occupancy or low-density development
• Renovating an existing dwelling and building new villas/units also on the land
• Medium-density development

How much money will I need?

Well, that’s like putting the chicken before the egg. You should set a budget before you find your site. Your budget will help to determine your development strategy.  A simple land subdivision will be less costly (but not necessarily quicker) than a larger villa/unit development for instance.

How much profit should I be making?

Profit can come in many forms: long-term capital growth, rental yield, depreciation or tax returns and equity, even self-fulfilment.   As part of your strategy, you will need to determine your financial and personal objectives.   Do you want to sell immediately?  Are you planning to hold and refinance to draw out the equity you’ve created?  Are you developing to hold, rent and build your portfolio?

Each decision will mean different outcomes, and you need to seek the advice of professionals on this. Start with your accountant to ensure you understand the GST, CGT and other tax implications of your plans.

What’s the one thing you need before you put an offer in?

A conditional loan approval.  Knowing that you have a preapproval to a certain amount is a valuable negotiation tool. Tell the agent that you have your finance approved as you make your offer so he or she understands that you are serious and can follow through on your offer.

What are the four crucial pre-purchase checks needed?

• Pest and building report – if there is an existing house you are going to keep/upgrade
• Ident survey – this will show the dimensions, description of the property, any covenants easements and/or encroachments to the land.
• Review the sales contract – use the professional services of a conveyance or solicitor, but you can easily check the 149 planning certificate to ensure it is recent. This document will tell you the zoning and if the property in a flood-prone, bushfire-prone or mine subsidence area and many other environmental factors.
• Confirm with the council what can and can’t be done with the land, and you should have a good understanding of council’s development control plans.

Two important steps to make once you exchange or secure the site:

Order a contour or detailed survey – this is needed to supply to your architect or draftsperson and your builder so they can start work on your plans.

Order a geotechnical report – this will determine the site and soil classification and ultimately have a bearing on then engineering for your slab or footing design.  If you think the site could be risky, for example if you think it may be undermined or have a water course near or below it, have a geotech report done before you exchange or secure the site.

Who do I need on my development team?

• Property specialist accountant and solicitor
• Finance broker or personal banker
• Surveyor
• Architect/draftsperson
• Builder and other tradesmen, such as plumber, electrician, carpenter
• Consultants such as an engineer and private certifier
• Quantity surveyor
• Development project manager  – to guide you through the entire process

Getting started can often be the hardest step. Once you’ve found your site, completed your due diligence, worked out just what you are going to be doing with it and managed to secure it, then the best parts are yet to come.  Let the creative process begin.

Look out for part two next Thursday.