Are you thinking about undertaking a residential property development but are unsure how much your future townhouses will be worth so you can complete your townhouse feasibility with confidence?

Well, stick around because, in this article, I’m going to share the exact process we here at Little Fish use to calculate the potential future value of property.

Let’s get into it.

When considering the potential value of your proposed future townhouses, many variables need to be considered.

For this article, I’m going to share the specific metrics and places I look to begin building a storey behind how much I believe the future townhouses will be worth.

It is important to note that feasibilities are crucial to making good purchasing decisions, but they are only as valuable as the numbers that you input.

Calculate future value of property

Having a genuine understanding or applying some genuine metaphoric science around the sale figures will be critical to the value of your feasibility and, ultimately, the outcome you can expect at the end of your development project.

Here are the things that we at Little Fish consider when calculating the future value of a property we are looking to develop.

As a first step, before you can value the townhouses, you need to step back and get clarity around how many dwellings you will fit on the site.

calculate Calculate future value of property

You’ll need some clarity around the size of each and the proposed specifications. You must figure all of this out first to know what you are looking to forecast.

Leverage Relationships

Here at Little Fish, when we consider a site, we would send it to our trusted designers and town planners to ensure we are on the right track.

Not everyone has these relationships, which is fine because most of the information you need is freely available.

You’ll need to be prepared to roll the sleeves up and do the work.

You would start by looking at site coverage and what else has been done on similar lot sizes in the area.

Making a play at these townhouse sites is a high stakes game, so if you are getting close to pulling the trigger on a site, we recommend at very least speaking with your council to see if you can get further confidence that you’ll be able to achieve what you are hoping to.

get confidence from council

It is also good practice to reach out to and speak with a local designer to get further confidence and feedback.

So, let’s assume you’ve completed those steps I have just outlined, and we are trying to figure out the resale value on a side-by-side dual occupancy project we are considering.

Let’s also assume that each townhouse includes north-facing private open space. It has four bedrooms, three bathrooms, two living spaces, each has 27 squares of living and were built to what we would consider a medium specification.

  • Orientation: North facing POS
  • 4 bedrooms
  • 3 bathrooms
  • 2 living
  • 27 squares each
  • Medium specification

Now we have our proposed townhouses. I want to compare them to other townhouses in the area that have sold. Ultimately, we are looking to land on a price for ours.

When undertaking this process, the goal is to compare your specific metrics to relevant comparable sales in the area to determine if your townhouses are better.

For example, three-bed vs four-bed, medium specification versus high specification, are you near a train station etc.

All these specific metrics have played a part in achieving the sale price that the comparable sold for.

Search The Recently Sold

comparable sales data

The first step is to go to real estate dot com and domain and search the recently sold section in the suburb where your potential project resides.

Then filter the search to relevant metrics such as the number of bedrooms, bathrooms etc.

real estate dot com

It is good to keep in mind that you don’t want to just search four bedders. It is good to broaden your search somewhat to get some broader context of what is being sold in the area.

You also don’t want to be too specific with your comparable that you don’t end up with enough information.

It’s important to point out that you need to be mindful of the sale dates. It is no secret that the property market here in Melbourne doesn’t sit still, so you don’t want to be using comparable sales from too far back unless, of course, you have no other choice.

property market

That said, if you are spoilt for choice, you might tighten the search parameters depending on the location.

But if you are struggling to find a legitimate comparable, you will need to open the search parameters up.

If you are looking at old sales data, you need to consider which way the market has trended since then so you can value the sale accordingly.

You can only play the cards that you get dealt, and one way or another, you need to build a storey to make buying decisions with confidence.

Location Specific Parameters

Now let’s look at what location-specific parameters we would compare.

We are looking at schools, parks, nearby transport, shopping centres and villages we are also looking for medical facilities, dining and entertainment precincts and even sporting facilities.

  • Schools
  • Parks
  • Transport
  • Shopping centres
  • Villages
  • Medical facilities
  • Dining and entertainment precincts
  • Sporting facilities

When considering the local schools. We are looking at which specific schools are close by and are mindful of the relevant zones.

We are looking for greenland, are we closer to parks, if so, what kind of park is it.

Then we look at amenities such as transport options, shopping precincts, medical facilities, sporting facilities and even dining and entertainment precincts.

Do these exist in the area, and more specifically, are these more accessible and relevant to our project relative to the comparable.

It is this specific qualitative data that we use to understand how comparable that sale is.

Project Specific Parameters

But there is more. We also need to look at the project specifics when calculating the future value of property. We need to consider the orientation. The number of bedrooms, bathrooms, living areas. And we need to understand and compare living squares and the projects specification.

  • Orientation: North facing POS
  • 4 bedrooms
  • 2 living
  • 3 bathrooms
  • 27 squares each
  • Medium specification

Collectively this data tells the storey and helps us determine a potential sale price with confidence.

melbourne property data

As you can see, there are many variables that we consider. And I’m sure there are others site-specific that we haven’t even mentioned.

What is important is that you understand the level you need to go to get confidence around your numbers.

Here at Little Fish, our goal is to determine a range. We have found over many years that it is a fruitless game trying to land on a specific number.

It is pointless because it is bordering impossible to get it right. We know this from many years of experience.

The good news is it doesn’t need to be perfect. You don’t need to land on an exact number. You need to land on a range that you are comfortable with based on the qualitative data you have found.

We break our range up into pessimistic, realistic, and optimistic ultimately though it doesn’t matter how you do it.

For us, using our range set, if we can get a potential development site to stack up in the pessimistic range, that’s when we know we are on a winner.

calculate the future property value

Wrapping Up

Now, a quick side note. Running this course could uncover obvious opportunities. And potential changes you might want to make to the townhouses you are proposing.

For example. You might want to up the specifications to attract a premium buyer.

This type of research and due diligence when trying to understand how to calculate the future value of property will make you an expert in your area.

It is guaranteed to help you make decisions with confidence. And ultimately help you grow your wealth through residential townhouse property development.