How to Invest in Property: Understanding the Development Process

| February 6, 2018 | 0 Comments

clip_image002

If you’re looking to take your investment portfolio to the next level, property development is a fantastic place to start. Developing a block of land, whether it be small or large scale, isn’t a recipe for fast easy money. Although property development may seem like the quickest way to build wealth through real estate, it takes a lot of pre-planning and work to make it a success. And a big part of this is understanding the stages of the property development process and ensuring your plans tick all the boxes.

From the basics of location targeting, to budgeting, approval and construction, the development process entails a lot to be aware of. Before committing to the purchase and throwing your hard-earned money into a deal, it’s vital you have a solid plan of attack – even for the savvy property investors.

Real estate development is a multi-step process that can be lengthy, complicated and risky. And regardless of whether you’re a first-time developer or a long-time property investor, there’s bound to be some obstacles along the way. But with the right knowledge and a lot of research, you can be on your way to building wealth through a successful project. Ready to take the challenge? Here are the stages of the development process to consider:

Pre-Development Stages

Possibly one of the most important stages, pre-development is all about the site analysis, acquisition and research. You’ve found the right location for property development, taking into consideration rental demand, resale values and social demographics and now you’re ready to define the property development strategies.

You want to make sure your chosen site is not only developable, but profitable too. You should be aware of any council restrictions and engage with a town planner to determine what’s possible with the land and what isn’t. Throughout the pre-development stages, you’ll also need to engage with a Civil Engineer to get the essentials sorted, like water, stormwater and sewage. Land surveyors will help map out the area too, giving you a comprehensive idea on how your land and survey needs can be met during the pre-development. Development approval will need to be obtained by these parties, as well as the builder, landscape designer and architect to put a likely timeline for your project in place.

Concept Stage

The early stages of the concept phase can be seen in pre-development and determine what you’re going to do with your potential site. How many units can be built? What type of dwelling does the market and location want to see constructed on this particular site?

Permits are generally obtained throughout the concept stage, as well as the rezoning process and a concept design planned on how the site is going to be used. A detailed analysis will be drawn up which will include sketches of your proposed development. These sketches must allow for any setbacks and restrictions, as well as show where driveways, garages and parking spaces will be constructed too. Allowing room for all these considerations, as well as turning circles for residents, will help gauge how many units can fit on the land and what space is left to work with.

Crunching Numbers

Before you purchase your land and start building, you need to work out your budget and costs. This will include all consultant and construction expenses, project timeline, likely end sale values and the profit margin required. Make sure you always add a bit extra for unexpected costs. Once these numbers are crunched into a feasibility program, the residual land value can be calculated, which is the most you can afford to pay for the land to make it a viable development project, based on your budget and figures.

Once the numbers are crunched and permits and approval has been obtained (including financial approval), you’re ready for the purchase. To guarantee the best investment opportunity, the land must be purchased at a price that allows you to make a commercial profit. This is what the crunching numbers stage will help to determine.

Design and Construction

The land has been purchased, designs have been drawn up by the architect and you’re ready for the design and construction stages! Construction time is the best and most exciting part of developing property because you can finally see your investment take place. As soon as you have approval and the development application and construction certificate consents, your builder can start the construction stages.

Site clearing and Scope of Works (SoW) are the first steps. Construction generally lasts between 6-12 months, depending on the size of the project. Payments are made to the builder after the completion of each stage within construction and subdivision approval from the local council may also need to be obtained.

During the design and construction stages, pay close attention to the quality of fixtures and fittings, carpets, tiling and flooring, kitchen and cabinetry, landscaping, fences, tapware and bathroom finishes and foundations. All these aspects can make a big difference when it comes to profit making and renting the dwellings out.

Final Stages: Completion

During the final stages of the development process, you’ll be focused on finding a buyer (if this hasn’t been achieved earlier), marketing and leasing and ramping up the property management side of things. Once the subdivision has been completed and the project is refinanced, you have the option to lease and hold in the long term, which is usually the preferred option for property investment, or sold.

Although the completion of the development process is the final stage, it’s a smart idea to have your exit strategy in mind throughout the entire process. With the end game clearly defined, you have the best chance of constructing the development that’s suitable to your investment needs.

To successfully build your wealth and investment portfolio over time, it’s vital to understand all stages of the development process. We’re all tempted by the idea of buying land, building a house and renting it out or selling it for a huge profit. But the process isn’t always as easy as it sounds. With a clear plan and budget in mind and the right resources, you could be on your way to a fruitful property portfolio.

Author Bio:

This article is written by Jayde Ferguson, who writes for Veris – national surveying professionals that specialise in land surveying and town planning.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

Tags: , ,

Category: Australia, Property

About the Author ()

Property man writes articles related to property , stock market and finance. if you like what you see do bookmark the blog and leave me a comment

Leave a Reply

Social Widgets powered by AB-WebLog.com.