First Time Developers
Advice for first time Property Developers
Developing for the first time is exciting but can also seem a little daunting. Here are some tips before you embark on your first new property development project.
1. Determine the goals of your property development project.
The first thing to consider is the goal of your new build project. Are you developing land intending to build new homes for resale, to tenant, to live in yourself, or a combination? The planned end use of the dwellings will have an impact on many of the decisions you’ll make along the way, so being clear from the very start, will enable the project to run smoother and more successfully.
2. Understanding timelines
While Property Development can be an extremely rewarding process, it’s not usually associated with fast or definitive turn-around times! Typical turnaround times for multi-unit build projects, from planning to final construction can be 14 -18 months. The process of initial investigations, resource and building consent approvals, and site preparation can all take time.
Many different suppliers and advisors are usually involved in these initial phases of your project. These partners will work to their own timelines, juggling many different client projects along with yours. For this reason, it’s difficult for any building company to be provide you with firm project completion dates or timelines, from the very outset.
However, once the consents are granted and the siteworks are complete, the remaining construction works will usually fall totally within the builder’s management and it’s at this point that reliable completion dates can be provided.
3. The suitability of land for development.
Some people spend a long time looking for the perfect land for their new build project and this can significantly delay their start. More and more developers now purchase land with existing homes; replacing these with new housing – you can often replace one home with three or more new homes to truly maximise your property returns. And it’s often a faster method of securing a site.
Understanding the true build potential of your site will enable you to assess the development options and profit scenarios. Typical factors that can affect a site’s potential include zoning, site contours, overlays and access to utilities.
Ashcroft’s team of experienced Property Development Consultants will be happy to review your site, evaluating its build potential and discussing the various property development options that the site offers.
4. Your Build Project
With a clear idea of the intent of your build project and the potential your site offers, you’ll now be able to finalise the scope of your build project. You can determine the number of dwellings, select plans and finalise budgets to discuss with your finance partner. Having a good understanding of property valuations in your area, will enable you to consider your different property development options in terms of both costs and returns.
5. Financing your project
Financing a development project is a little different to financing a residential new home build. While traditional banking institutions typically offer the lowest finance rates, their criteria for lending is often the strictest. For this reason, many developers choose to finance through Non Bank Lenders.
A mortgage broker can be a good starting point, assisting you with your initial equity and income calculations and providing recommendations for where you’ll most likely obtain finance for your project. There are a number of considerations beyond simply the interest rate that’s being offered. For example, a bank’s interest rate may be a few percent lower than a Non Bank Lender, but the bank may require that you pre-sell a number of your units before the development starts.
Pre-selling can add significant delays to your project which may end up causing you greater expenses. In addition, units that are pre-sold often achieve a lower sales price than those that are sold on completion, impacting your overall project returns. Combined these factors can quickly outweigh the benefits of a seemingly lower interest rate.
6. Selecting the right partner
With a solid understanding of your goals and your site, and with finance approved, it’s now time to appoint your Build Partner! Considerations for selecting your Property Development Partner include understanding their pricing, their contract, their workmanship and their guarantees. Hearing from customers who have built with them before will also provide you with great insights into whether this is the right partner for you.
Communication is key to any successful project so be sure you’ve felt ‘heard’ in your journey with the partner so far, and you have a good rapport with them.