Are you a would-be real estate developer looking to undertake due diligence on potential real estate development sites?
Well, stick around because, in this article, I will share all the factors that I consider when determining the viability of a potential dual occupancy development site.
If you need to find a development site and are after some tips – go here.
You’ve heard me say this many times.
Real estate development is a high-stakes game; it’s high risk and high reward.
Possibly the most significant risk of all is purchasing a site to find out that you can do what you were planning to with it.
Undertaking detailed due diligence is the critical first step when considering a site.
It’s about getting ready for your development.
If you get it wrong, it can have grave consequences, so you need to know what you are doing to have the confidence you need to ensure your decision is the right one.
Planning Zone and Suburbs Median House Price
As a real estate developer, I first check the planning zone and if any overlays are affecting the property. If these are good, I then look at the location, so what suburb it is in and its median house price.
I then look at the suburb’s medium house price, and how that compare to what I want to sell my completed townhouses for.
Ultimately it needs to make sense. Ideally, you want to be close to the medium house price because you want the buyers searching your selected suburb to be able to afford your townhouses.
If you are needed to break a suburb record or sell significantly above the suburb’s median house price, you are appealing to a tiny part of the market.
It’s not what you want to do if you have a choice. Ideally, you want to appeal to the fat side of the market, which is going to be around that median house price.
Site Dimension and Site Orientation
From there, I am thinking about what the size of each townhouse will be.
The difference between 2-3-4 bedrooms makes a big difference to the potential feasibility of a site.
After the dimensions I look at the site orientation, which way is the site facing and how is that going to affect what I am looking to build, are there any shadowing concerns.
I look at what else is getting developed in the area. Is the council encouraging this kind of development?
Once I tick the relevant boxes up until this point, I then start to ask myself a whole host of questions:
All the Questions I Ask Myself
- What do the setbacks look like?
- What’s the frontage like?
- Do I need another crossover?
- If so, are there any obstacles?
- What’s the street like?
- Is it a busy road? A tree-lined? Is it wide?
- Does it have big nature strips?
- Is there a slop on the block, if so, how will that affect what I want to build?
- Are there any significant trees that may be an issue?
- Are there good amenities close? Schools, parks, train, shops, cafes etc.
Find Comparable Sales
If all of these tick the right boxes I then start to look at comparable sales in the area relative to the product I’m looking to build.
The more information I can find on the property, the better.
The Final Check
Once I have done all of this if I haven’t put it on the scrap heap, then I move to my final check.
I send the site to my draftsman/architect and town planner for some feedback.
I may be the real estate developer but the more set of eyes you can get over it, the better.
If the feedback from these guys is positive, I then move into the numbers.
Remember the due-diligence stage is figuring out if a site can be developed. But just because it can, it doesn’t mean it should be.
After the due diligence, if it passes, then you need to do a detailed feasibility to figure out if the site is in-fact feasible and should be developed.
By running this process periodically and consistently you’ll begin to become a local real estate expert.
Are you looking for professional help?
Why not reach out to our development management team here at Little Fish, we would love to hear from you 1300 799 277.
Thinking about a dual occupancy development in Brighton East? Check this article out.