Developing residential real estate for profit is a risky business. The rewards make it worth it, but it is not a task to undertake lightly.
Those that fly by the seat of their pants are often prone to failure. And failure in this game can break the bank.
Those that spend time to learn the methods, apply their knowledge and learn from their mistakes end out on top.
Here at Little Fish, we like to make our clients wealthy.
We also like to publish helpful articles to help our readers generate their wealth too.
So we’ve put together this list of 12 property development tips to up your development management game.
1. Understand Site Orientation
Site orientation can often get overlooked. Yet it plays a huge part in maximising your outcomes.
Buyers are becoming savvier about orientation. If you get this wrong you can lose big, if your house points the wrong way.
A quick example – if your open living space is south-facing, it will be shaded for most of the day. This impacts your build, but it is also unappealing for buyers.
Who would want to live under a shadow?
2. Master Site Identification
You’ll need to develop a checklist of what makes a perfect site. And each development needs to be matched with a perfect site.
You need to remove all emotion from the decision. Who cares what the house looks like? The garden – forget about it! You’ll be knocking it down for your project anyway.
You want to rely on numbers, and facts. For each project we undertake on behalf of a client, we reject a dozen potential sites before finding the perfect one.
Check out this video on how to identify the perfect Melbourne dual occupancy site and this one on selecting the perfect suburb. And here is some information on buying land with plans and permits which will be worth checking out.
3. Learn all There is to Know About Development Finance
There is a range of property development finance options, from banks to third party private lenders, to brokers.
Each has its pros and cons, so research each type thoroughly. Never rely solely on third party advice. You need to understand and challenge every piece of advice you get.
In this game, the stakes are high. You can’t afford to assume that all advice is good even if it comes from a finance professional.
There are many things you need to consider then borrowing for your property development.
4. Consider a Professional Project Manager
While it is possible to develop residential real estate by yourself, the stakes are high as we said before.
A property development tip is to consider using a professional project manager. A company like Little Fish develops land for a living, it’s our bread and butter.
A development project manager knows each step, and what to do between each step. Do things yourself and make a misstep and you could go bust.
A professional management company is more experienced. They can also leverage their relationships with their network of townhouse builders, town planners, surveyors and all the other players that make a project work.
If you are thinking of engaging a development project manager then check out these 21 questions you should ask them.
It is vital to know the area you’re building in. You need to understand what sort of projects are getting through and which ones aren’t.
Certain types of developments are supported in certain residential zones. Others are not.
Different local governments control zoning in differing ways. And each one may even differ from plan to plan when interpreting them.
Have your finger on the pulse in your planned suburb.
6. Block dimensions
The dimensions of your block will impact any project you attempt. By block dimensions, we mean frontage and depth (length by width).
These measurements will directly impact what you can achieve on your block.
They could be the difference between a fat profit and breaking even, or a loss.
Check out this video on block dimensions for side by side dual occupancy designs in Melbourne.
Let’s get onto more property development tips.
Encumbrance is a tough word to spell, and tough to work around in a residential development project.
Overhanging trees on development sites can be encumbrances, even power poles or easements. Anything that can come between a build running smoothly.
In some cases, an encumbrance can halt development in its tracks. If you miss one, you’re looking at huge costs due to delays as you work out a way around or forward.
Put the time in upfront and spot these first thing off the bat.
8. Block Gradient Matters
Like encumbrances, block gradient is another environmental factor you need to consider as part of your strategy. The slope or fall of the land impacts all sorts of things.
For example, the amount of earthworks required and the need for retaining walls, the type of concrete slab. You may even need to install a pump system to remove stormwater to a legal point of discharge if a natural fall can’t occur.
Let’s read some more property development tips.
9 Consider Essential Services
You can’t build a home without essentials. The clue in what is an “essential” service is in the name.
Before you begin, consider the location of your services and how to get them connected. Sewerage, power and water are the top three.
If you are dealing with awkward logistics, you need to be prepared. Skip this step and you are looking at tens of thousands in costs.
We see this all the time. If the sewer is on the other side of the street and hasn’t been accounted for, you lose bucks off your bottom line. And the bottom line is everything in developing property.
10. A Word About Property for Sale With “Plans and Permits”
Unless you’re mad, brave or a genius (or all three) avoid at all costs buying land that comes with “plans and permits”. It is nigh impossible to find out why someone sells a site like this.
When developers sell sites with plans and permits, they are aiming for a profit. This is because they believe they’ve added value to the site and want you to pay for that value.
There’s another reason to avoid these sites. Mostly all the large decisions have been made, and if they haven’t been made correctly, you’re bound to follow them.
Not fun, and no fun to try and change things afterwards.
Keep looking for that perfect site.
Do you need some clarity around the difference between planning and building permits? Go here.
11. Stay Cool
When talking about property development tips, emotion needs to be mentioned. Emotions and developing residential property don’t mix well. You need to be like Robocop. All that matters is the numbers and the projections.
If you get your feasibilities wrong because you just loved that old house on the corner, your project is already behind.
Now, passion is fine. Passion is what keeps your burning the midnight oil on that project. But draw the line between passion and sentimentality.
It will save you a headache, and money, in the long run.
12. Crunch the Numbers
In your feasibility, you need to consider all the relevant costs. Fees, sales agents commissions, conveyancing costs, building costs, the cost of your money, the list goes on.
You want to begin to build up a consistent and accurate list of costs associated with a project. If you do this right, the only variable should be the cost of the build and the sales price.
One final tip is to ensure you partner with the right builder for your project. Builders aren’t one and the same, it’s not that simple.
If you are doing a dual occupancy development, then you need an experienced dual occupancy builder – one that has genuine experience in the type and size development you are looking to complete.
And a bonus property development tip, if you’ve made some profits, then you’ll want to understand capital gains tax with regard to residential property development projects. And you might want to get a good understanding of real estate development agreements.
Wrapping it All Up
We hope that these 12 property development tips have been super helpful.
Here are some bonus tips for managing your council.
There are heaps more to know though, so feel free to browse through our previous articles. Also, keep an eye out for future blogs.
An article definitely worth checking out is on tender negotiation techniques.
If you’re interested in how to become a property developer or having a professional manage a development project for you.
Call Little Fish on 1300 799 277 for a friendly chat.