How to: choose a develoepment sit
What exactly is a property developer?
I quite like this description found on Wikipedia;
“Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end”
I especially like the words ‘create, imagine and orchestrate’ as this is exactly what we do. When I find a development site, I stand on it and spend some time visualising what can work on the land, then I dissect this down by considering several factors including:
- The local market demand – what do people want to buy or rent in this are?
- Local economics – what is the income of the people living in this area, where do they work, what can they afford? What infrastructure spend is going on right now or planned for the area?
- Population growth – what is the growth right now and what is it forecast to grow to?
- Budget –how much have we to spend on the development process
- Market growth rates – what historically has this suburb been growing at and what are you expecting it to grow at?
- End values – what are similar dwellings selling or renting for now?
Choosing the right area in which to develop is crucial. It requires research, research and more research. Most first-time developers can’t afford to develop property in areas such as capital cities where everything – including land, building costs and professional services is more expensive. Instead, I suggest you cut your teeth on an affordable area within a three-hour radius of a capital city.
Look for areas that:
- offer promise; perhaps going through a gentrification phase
- going through a growth phase; median prices are historically performing well
- where the population is expanding;
- where diverse industries support employment;
- where private enterprises, such as large retailers or mines for example have announced expansion plans.
All these factors result in strong rental and sales demand. Once you’ve settle on a location, search the area for land in close proximity to schools shops and public transport which will attract buyers or renters.
Below are tools to add to your research in finding the perfect location for your development.
These include: websites, local papers, property data sources, budget reports, planning information.
Most first-time developers can’t afford to develop property in capital cities where everything is more expensive
Once you’ve found the area you want to develop in, it then comes down to good site selection. To get ready to assess a site, you will need to:
- have narrowed down your area or suburb where you want to develop;
- completed extensive due diligence on the economic and social factors of the area;
- know whether the suburb has a high rental demand;
- know what the vacancy rate is and what the median sales price is;
- understand council’s Local Environment Plan (LEP) and Development Control Plans (DCPs) so you
- know what the council will and won’t allow in your area.
You need all this information to determine if the land you are assessing has good development potential… or not. The next step is to find the right property within your chosen suburb. This is called site selection.
The site selection criteria is based on a number of factors including:
- What’s on top of the land?
- What’s underneath the land?
Location of your development site is obviously important, we all know that being close to community amenities is top priority whether you are planning to keep your new dwellings or sell them, being close to schools and universities, shops, transport and medical facilities is very important.
You should check out the neighbours on all sides of the land to make sure there are no dog breeding kennels, chicken coups, car workshops or noisy businesses that may make the location undesirable for tenants. Ask the locals about crime rates and take a drive around the streets to get a ‘feel’ for the area.
Trust your gut feel or intuition; we often get an instant negative feeling if something is not quite right.
Aspect is the direction the land faces; north, south, east or west. It’s important to have the living areas of your development as close to facing north as possible to maximise natural light. Aspect is also very important for the energy rating of your development.
The slope of the block is important. Most people think a dead flat block may be good for developing, whilst it may be better than a steeply sloping site but you may need to build up the site with fill and retain it to meet drainage issues.
So the ideal block will slope or fall slightly to the street which will assist with natural stormwater runoff and drainage.
A wider frontage or width of the block is usually desirable particularly if you are looking at a medium density development as you will be losing some of the width to a driveway to access the rear dwellings.
Some councils have a calculation as to how wide the driveway needs to be based on the number of dwellings. So make sure you have taken this into consideration and have a wide enough block.
Depth is important and will determine how many dwellings you may get onto the land. Be careful with very deep blocks as the deeper the block, the longer the driveway. A long driveway can add thousands to your costs.
You may also need to run services such as sewer, water, gas and electricity from the front of the block to the back, depending on where the connection points for these services are located.
What’s on top of the land? For a quick assessment, take a look around to see how many large trees may need to be cleared, a mature gum tree can cost up to $5,000 to remove, so if there are a few of these, you will need to allow more for you site clearing costs. Also look out for asbestos sheds on concrete slabs which are expensive to remove.
If there is an existing house that you plan to keep, check there is good access to the back of the block for the large site clearing machinery that may be required.
What’s underneath the land? In some regional areas, you should check for old mines. If you know it’s a mining area, then you can apply to the local mine board for a subsidence report. You can still build over an old mine, but it adds considerable costs to correctly under pier the project for stability.
Is there a natural water course running under the land? The soil type is also important. In most cases, you won’t know unless you commission a geotechnical report which is advisable to have done if after all your research you are sure this is the correct site. It may cost around $800 but worth every cent if it means you can more easily assess projects viability.
Trust your gut feel or intuition; we often get an instant negative feeling if something is not quite right
You’ll also need to know the location of the sewer line, sewer junctions and sewer manholes as some of these may be built over but one of them most certainly cannot. You can request the sewer diagram from the agent or the local water authority. A detailed survey will show other important things so again, if you are serious about the site, get a detail/contour survey done as you will need this to have a builder or architect work on a design for your project.
There are many more things to consider for your site selection, so it’s important you study what is required. Or engage other professionals to do this important work for you. A development project manager will be able to assist you with every stage of the process.