As linear as it might seem, the process of property development is anything but simple. Anyone who aims at starting this business needs to focus on each individual stage it encompasses while simultaneously keeping a bigger picture.
Although many developers identify only five stages that should be considered when starting off, each of them involves additional aspects which are pivotal in their own right.
It all starts with…
Having a vision
The ability to estimate the potential of a property is one of the skills that have to be mastered. If you want to acquire a property, financial aspect comes later. It is important to judge whether it will turn out to be lucrative in the first place.
While this may be a gift someone is born with, the majority of people acquire this skill over time. This is why you should read, observe and learn in order to determine what is at stake and what properties are worth the effort.
Knowing how to recognize a property’s potential
The most frequent mistake beginner developers make is investing in properties which have low market value. Although they can be acquired for reasonable sums of money, their return rate depends on factors such as:
- Proximity to amenities (schools, sports centers, transport links)
- Proneness to disaster (determines the degree of the site’s risk factors)
- Demographics (is the area becoming increasingly popular with residents?)
- Topography (sites on flat surfaces tend to be more desirable and easier to construct)
- Assembling a team of professionals
This will save you a ton of nerves. An architect, a planning consultant, a project manager, contractors, accountants, and solicitors will provide you with the necessary paperwork and input. While some developers undertake at least some of these roles onto themselves, the scope of this business can be overwhelming for one person alone.
Whereas town planners work closely with architects to safeguard the development, land surveyors and engineers make sure that the structure and the boundaries of the site are in accord with the building regulations.
There are top Australian property developers with teams that already incorporate a party of highly coordinated individuals whose aim is to take property development to the next level.
Not a single business ever succeeded without a sound business plan. Not only will you be able to obtain development finance but you will also know each individual stage essential to get things going.
A business plan serves the purpose of setting your goals and targets. It usually contains:
- A development strategy (includes targets, purchase price limits, timeframes)
- Funding strategy (joint ventures, mortgages, agreement developments)
- Acquisition (“buy and hold”, “buy and sell”, “buy and develop”)
- Feasibility (highlighting potential problems and risks)
There are pros and cons to every site. The question is whether those cons can actually impede the purchase thus making you give up on the potential property altogether.
Due diligence is all about managing the risks in advance. Although you cannot make an effort to resolve all difficulties until the work begins, there has to be a strategy to deal with them should they come up. Resolving the issues in a timely manner implicates:
- Legal issues. Having a solicitor prepare a legal report for you is highly important. While sites may vary in their legal complexity, any surprises in this aspect can cost a lot of time and money.
- Utility constraints. Due diligence implies that you check electrical infrastructure, capacity, drains infrastructure, telecommunications and all the other parameters which make the site’s suitability speculative.
- Site survey. It’s rather self-explanatory. Various surveys on contamination, historic use, underground structures, ecology and topography along with all the other factors which may impede the site’s development have to be checked beforehand.
- Planning. Accessibility, design, functionality, security or the site’s general sustainability are investigated at this stage.
Attaining the permits
There are two essential permits to obtain at the start of every development project.
- Development Approval (DA) is a planning permit which allows you to build on a piece of land. Local council issues a statement which authorizes further actions on the site. Sites which already have the right zoning and overlay usually get this permission fairly quickly.
- Building Approval (BA) is a statement which guarantees that a project complies with building laws and regulations and this includes the Building Law of Australia too. It is usually issued after the Development Approval.
Though the very process of property development may differ from one project to another, they all cluster toward a sound portfolio. It is this portfolio that opens many doors into the world of real-estate development and gives you an opportunity to climb the ladder even higher.
The most important thing is to take all the necessary steps and leave very little room for mistakes.
About the Author:
Faith is a writer, seeking beauty everywhere she goes and finding it in art, nature, family, work and home. Passionate about just living life to the fullest, she’s into home decor and healthy lifestyle, trying to be the best version of herself and make her surroundings match.