We’re back for another instalment of our Property Development Guide, where we give out tips we’ve learned from our years with our property developer clients! If you haven’t checked out the first part, read on here.
Property development guide
Now on to approvals. I know, I know – not the best topic to start with, but it’s important so please bear with us!
Different councils have varying, often strict guidelines in terms of property development in their area, so it’s very important to understand the town planning and development code of your area. You should do your research before you buy land. Don’t just rely to your real estate agent as their primary job is to sell property, not to advise you whether the property is right for you or not!
Consult a proficient architect or town planner to know what you can and cannot do with a particular site. Looking at the developments in the area is not enough as they may have been approved under old regulations. What property can you put on this land and what is its best and highest use? How many units and how big will they be? Are there any restrictions, easements, overlays or title covenants that can restrict its development potential?
Investment property
For an investment property to be a success, it is critical to secure the right property. Ticking all the right boxes according to your long-term goals and investment strategy is very important. Know your market and understand the bigger economic picture as development projects can last a year to several years. You need to make an educated decision about where the market is likely heading over the coming years.
Prime located properties will lease and sell a lot better than secondary locations even during bad times but that would mean investing 15-20% more to receive greater profit. Look for the type of property use the demographic in the area want. Families would like more bedrooms or those close to schools while older people would prefer single-storey townhouses than double-storey dwellings.
Don’t forget to do a detailed feasibility study to determine the estimated profit you will make. Never buy with your emotions! Just like any new business, you want a business plan with all the pros and cons that crunch the numbers, so you know whether there will be a worthwhile profit or not.
What should your initial feasibility study look like? It should contain the purchase date, purchase price, and settlement. The project equity will determine the borrowing size required and interest payable as well, so it’s important to include this in your feasibility study. Other things you should add to it are conveyancing and legal costs, consultant’s costs, construction costs, rates and taxes, and income from rentals and sales.
Property development steps
Property development comes with a 7-step process: the pre-purchase stage, negotiations of contracts and purchasing, town planning and development approval, working drawing and documentation, pre-construction, construction, and completion. We’ll delve deeper into these stages on the next one, so stay tuned!
Property development accounting
In the meantime, if you have any questions about property, give us a buzz and we’ll do our best to provide you with all the answers!
Your Outside Team
Contact
Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
