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Property Development

Regardless if you are an property investor looking at expanding your portfolio or a looking at taking that first step into the Property Development Market we can provide you with some insight into the diverse, complex and sometimes tricky business of Property Development.

When you are entering the world of Property Development it is important to note that you will need to create a team of experts that can assist you through the process. Depending on the complexity of your development, these may include some of the following:

  • Real Estate Agents
  • Finance Broker
  • Accountant
  • Lawyer
  • Town Planners
  • Architects
  • Engineers
  • Building Contractors
  • Development Managers
  • Quantity Surveyors
  • Property Strategist

As a general rule with Property Development, if you are looking to develop a large project (more than four units) you will need to secure a commercial property development loan. A commercial property development loan will provide the funds to construct multiple properties on one title. If you are looking at developing four or less units, such as duplexes, triplexes or townhouses you can secure funding through a residential property development loan.

Below we have provided you with the nine steps guide you through the expectations of Property Development.

This stage in the process will require the developer to start investigating properties that fit within their finance pre-approval.

During this stage it is important to note that a feasibility study will need to be conducted and as such would be a great time to consult some of the experts you have bought onto your team.

In order for an accurate feasibility assessment to take place please consider the following requirements:

  • A solicitor to check the contract of sale
  • Town planning to determine the site’s development potential
  • An architect to design the development concept
  • Your builder or project manager to advise of the build cost

Always be sure to consult with the planning department of the local council, this will ensure that any future planning or zoning projects are advised as this may limit the developments future.

By now you should be ready to enlist a Buyers Agent to start the task of negotiating contract terms and finalising the purchase of the land.

It is recommended to always use a Buyers Agent as they have a greater understanding of the development process and in a majority of cases the fees charged by the Buyers Agent will be covered by the savings you will acquire in their negotiation skills.

Through the discussions you have with the Buyers Agent you should be considering how much you are willing to pay for the land and the end value including the dwellings. This will provide you with an opportunity to work towards becoming a developer that makes a commercial profit.

If you haven’t already consulted with an architect, you can request the development plans that fit within the planning regulations set out by the local council guidelines.

As this stage can be quite complex it is recommended to consult your Town Planner, as they can provide assistance by offering feedback throughout the design process, assisting in writing the development application, all while handling any further requests and objections.

At this point you will need the services of a Land Surveyor, who will establish the title land boundaries, conduct a survey surrounding properties and the potential impacts from your development. It may also be required that your Land Surveyor would need to consolidate a number of titles into one title, in the instance that you have purchased more than one block or plans are drawn up for subdivision.

Once development approval has been granted this is the stage where you will finalise your your build plans and this will require the involvement of an architect and engineers.

Your architect are considered your creative designers for your development but they can also assist in town planning, consultation and preparation of working detailed drawings and finally administrating the building contract.

It is important to know that while your architect can assist with bringing your development to life, you need to ensure that the development will be structurally sound. In order to do this you will need to consult with an engineer and in some cases you may need more than one type of engineer. These different types of engineers may include:

  • Geotechnical or Soil Engineers – they test the soil in order to establish the necessary conditions required for a structural engineer
  • Structural Engineer – they work above the ground to ensure a structural design that is both functional and cost effective, by working with the architect to consider the weight of materials
  • Civil Engineers – they design the roads and bridges, so from a residential development property this may not be required
  • Hydraulic & Fire Engineers – they work on high-rise apartments or commercial buildings to assist with pipes for water, gas, waste as well as fire hydrants, hose reels and sprinkler systems

Now is the time to start looking for the right builder. This can be a daunting process so you can always enlist the help pf your Project Manager.

When looking for the right builder it is advisable to sort out recommendations. These recommendations could come from friends, family, or even your architect.

It is important to only employ a registered building practitioner and be sure to request a copy of all their builder’s insurance certificates.

Once you have decided on a builder, the contract between yourself and the builder should include overall terms agreed by both parties and outlining the price and the payment schedule.

More importantly it will outline the scope of the development project, who is involved in the development project and what each party is expected to do to contribute to the development project.

Construction has started and you are on your way to completion.

Please bare in mind that some build can take anywhere from six to 12 months, as you will need to take into consideration poor weather, and other potential disrupters.

If you have taken on a Quantity Surveyor to support you through the Development Process they will assist in ensuring that the payments are made to the building contractor.

During the construction, a Building Surveyor will need to certify that work has been completed in accordance with regulations and also to specific building standards.

Upon completion of construction, the build is complete and you can finalise the project.

It is now the time to submit the plans for subdivision in order to obtain separate titles for each dwelling.

This is the time you finalise your decision on either leasing or selling your development property.

What do you do with your property development upon completion?

You have two options:

Option 1 – Sell Your Development

There are some developers that prefer to use their property development for a short term profit as opposed to long term profit. The advantage to selling your development is that you will make a profit straight away, pay off the development loan quickly and then move onto their next project with both more experience and more funds.

The disadvantage to this decision is that there is no opportunity to make more money from the property.

Option 2 – Retain for Long Term Investment

By retaining the property development for a long term investment you can also benefit from the following:

  • Higher rental yields through the tenants paying retail rent for your wholesale investment property.
  • Greater financing opportunities as banks will use the development properties current market value to allow you to refinance and withdraw additional funds.
  • Capital works depreciation allowances which are available to different properties depending on their type, industry and construction commencement date.

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