Multi Unit Development Melbourne – 9 Tips to Prepare for Your Project
Are you interested in investing in a multi unit development Melbourne?
This can be a surefire way to guarantee yourself a tidy profit. If you get into the right area, with the right sort of dwellings and at the right price point.
You could walk away making some decent bank.
There is a lot to learn, and any mistakes can cost you some serious coin.
That’s why at Little Fish we like to partner with clients who may have the capital or the land to develop, but don’t have the know-how.
We provide the expertise and get people ready to embark on a project by themselves next time.
Or they may remain “armchair developers” – the choice is theirs.
In this useful article, we’re going to detail several tips to help you prepare for your project.
These are the things that you need to be across before you break soil or begin construction.
As always, we wholeheartedly encourage you to do your own research and learn for yourself. Knowledge is both power and money in this game.
If there’s one tip above all that we could share, before we get into the nitty-gritty, it is to not rush in unprepared.
This is a recipe for absolute disaster. You could end up bankrupt – no joke.
But, if you’re prepared to learn everything you can and arm yourself with knowledge, you can become a legitimate real estate developer and make a decent profit.
Ready to learn more? Let’s go!
A Word About Risk
Undertaking a multi uni development Melbourne is an investment venture. Like all investment ventures, there is a certain level of risk.
The thing about property development is that it is a high-risk, high-reward game.
But, as we mentioned above, if you are armed with the right knowledge, you can mitigate the risks.
For example, there are financial risks, such as interest rate fluctuations.
This means higher loan repayments and more holding costs, which can impact your profit margins and working capital.
Always have a decent financial buffer when doing a residential development project.
Another risk is construction expenses – these can blow out.
An example of this is during excavation, when there may be hidden surprises that cost you money.
Also, a builder will try to throw in as many variations to your build as they can. This is because they can charge a pretty penny for each one.
Mitigate this risk by having bulletproof documentation and plans that leave no room for variations.
Also, don’t change your mind halfway through a project, because this will result in a variation that will cost you money.
Yet another risk is the variable property market. House prices go up and down based on various factors.
At Little Fish, we like to operate under the premise that we can make money in any market.
A savvy property developer knows this. The net result may vary, but the aim is to have profit coming in no matter what the market is doing.
Site Identification and Feasibilities
The first building block on the road to your success is to identify a prime location, or site, for your multi unit development Melbourne.
There are lots of blocks of land and existing properties out there, but they’re not all equal.
You need to find a site with the right site orientation (more on this later), free of significant encumbrances, with dimensions suitable to subdivision and in a suburb that will see a reasonable asking price.
Our takeaway tip here is not to get emotionally attached to any site.
For example, that old corner house that you walked past as a kid and wanted to play in every day.
Let’s say it comes up for sale. You may be tempted to let nostalgia take hold and convince yourself that you need to develop it.
If you get all misty-eyed about a site, you lose sight of what matters – is it feasible?
Don’t let your emotions cloud your judgement. Be removed from your feelings and concentrate on what matters – facts.
Now feasibilities are like your development plans. They need to be airtight. You need to account for contingencies and hiccups and be sure about them.
A lender won’t loan you money for development without seeing your feasibilities and judging them worthy of their money.
They want to ensure their money, and their interest will come back.
Feasibilities are like jigsaw puzzles. Just one missing piece and the whole picture is incomplete. Don’t approach this step at a half-step.
This means the direction the site faces. The position of the sun is ultra-important to site orientation. For example, south-facing sites.
This means they are covered in the shade for most of the day (see below).
People want to live in light-filled homes because it’s pleasant, but it also saves money on lighting, heating and cooling.
No one wants to spend their days in darkness.
Pick a site that faces north instead.
Some types of multi unit development Melbourne will be supported in residential zoned areas. Some won’t be. For example, why would you buy a commercially zoned site for a townhouse development?
Rezoning is a significant headache. Buy a lot in a zone that makes sense for your project.
Each municipality will have different methods of controlling its zoning. They will also have different ways of reading planning documents.
Know the suburb you want to build in and pay attention to the types of projects that are getting approval and those that aren’t.
All this information is available for you to view.
Again, knowledge is power. Use it to your advantage here.
Unless you have some serious working capital, you’re going to need to obtain finance for your project.
A development loan works differently from an owner-occupier loan or even an investment property loan.
Do your research and know the difference.
Also, don’t lock yourself into the traditional sources of finance.
Sure, the big banks may be worth a shot, but there are other lenders out there (see below), which might be useful for various reasons.
You won’t get all the money in one go, either. A lender will dish it out as your progress through the stages of your project.
Be prepared for a higher interest rate than you may imagine, as there is more risk in this venture.
You may wish to approach a broker but pick carefully. You want a broker who has proven experience in development finance.
Finally, a development loan won’t cover all your expenses. Let’s dig into this below.
Other Costs and Fees
There are other costs and fees involved in a multi unit development Melbourne.
And you won’t be able to rely on a lender for these unless you borrow money privately from a friend or family member.
You’ll need to have some money spare to pay for this upfront.
If everything goes according to plan, you’ll make this back and then some during settlement.
How to Pick an Architect
You’re going to need to employ an architect to design your multi unit development Melbourne.
There are plenty out there, and all of them will say they can get the job done for you.
But you don’t want to rush into a decision here. Remember, staying calm and detached is the name of the game.
Take your time and do your research. Hit up Google and read reviews. Ask your friends, family and colleagues for recommendations.
Make a shortlist and then begin a ring-around. See who you match with and gel with during this process.
Make sure that your architect is willing to negotiate and align with your vision for the developments.
Creatives can be stubborn and want their way, but remember they’re working for you.
Also, be prepared once you do pick someone, and come to the table with your vision.
Mood boards, Pinterest and a scrapbook can help here. You want to give them as much to work with as possible.
Interior Design Will Help You Sell
At some point during the planning phase, you’re going to want to approach an interior designer.
This is because down the line when you’re getting ready to market your units; you’ll want watertight inclusion documentation.
This is so your sales agent can use it as a selling tool.
At Little Fish, we contract a professional interior designer to choose all fittings, fixtures and finishes for our homes.
We ask them to develop a co-branded “design intent” brochure or pamphlet that goes to the sales agent (see below).
A great interior designer will make this pop, and this helps to sell your units, which means you’ll see your money sooner.
This is especially important if you’re selling off the plan because, without a physical product, buyers can inspect and feel themselves living in.
You need to create an emotional response for them to consider pulling the trigger.
Consider the designers fees an investment working towards your ultimate return upon project completion.
Picking a Builder
Our final tip here is about how to pick the right builder for your project.
Townhouse builders are a dime a dozen, and each and everyone is going to say whatever they think you want to hear to get the job.
Again, research and research till you’re blue in the face. Read reviews, ask around. Never rush into this decision and never go with the cheapest option.
Do some drive-bys of their finished sites. You may even wish to inspect a build or bring along an impartial building inspector if you aren’t confident to ensure their work is up to scratch.
Which Sort of Builder?
You have two options, generally when picking a builder. You can opt for the larger, volume builders.
Your other option is with a smaller, independent builder like Virgon Constructions.
To save you some time here, we’ve already written a useful guide on how to pick a builder which outlines the differences between the two.
Each has its pros and cons.
We hope this article has proved useful for you when preparing for a multi unit development Melbourne.
Again, you can never be too prepared in this game.
Research, learn, ask questions and build your knowledge. Avoid the temptation to rush in and make snap decisions.
This is not a quick venture. You need next-level patience and discipline.
If you’d like to have a chat with us about how we can help you with a development project, we’re all ears.