Use this classified property development checklist you can trust as your guide for your next property development project. This checklist does not replace professional property development due diligence.
Assessing The Site
As a rule of thumb the first three things that you should look at are:
Zoning – is the site correctly zoned to accommodate your proposed development. This also covers an examination of restrictive overlays on the site. A working understanding of planning zones and overlays is required in order to determine the highest best possible use of the proposed development site.
Size – Is the size enough to accommodate four townhouses or three or 10.
Frontage – Is the frontage wide enough for your development.
Is the site flat? – A sloping site means adding retaining walls, which further translates into more construction costs. A site contour survey will help you determine that with ease.
Is the site affected by Floodingor does it fall under a Bush Fire zone? Will, that has an effect on the yield?
Highest Best Use – is your Local Authority supportive of what you can fit on the site?
What’s already being built in the neighbourhood?
Who are the builders already building it? Find out the costs they are building it at to get an idea of construction costs, as this would help you in your financial feasibility.
What is the design intent in the local area? This is determining what kind of townhouses or units are being designed in your area.
What is the demand for such designs in your area?
What would be the end value of townhouse?
What is the rent in the current market for a new townhouse & for an old property?
What are some comparable sales in the nearby area?
Whenever you sink some money into a plot of land, you will want the most out of it and maximise that investment. If you’re going to do this properly, however, you will need to follow a certain process and draw up a land development feasibility checklist to help you. What is this, and how should you proceed?
Often, it makes a lot more sense to subdivide a large part of land. This will ensure a much larger yield once you split the land into different sized blocks. There is an art, however, to this process. You will want to develop as many plots as you can and make the best possible use of the site.
This type of process will work wherever you are in the world. Obviously, you will need to find a site, first and foremost, and be sure that it has the necessary requirements and marketing appeal. To do this, you will need to bring in two key figures as consultants to help you make your decision. While their actual job title may vary from country to country, you will need a civil engineer and a land surveyor as part of your team. You may also want to consider a third expert, a geo-tech consultant, to help you test the soil as well. With this type of team, you ought to be able to determine the best possible use of the site, so that you can maximise your return on investment.
Land Development Concept
After this initial stage, you should have a conceptual design and something that you can take through a planning process. In Australia, you will typically get in touch with your local council or a zoning department and will need to adhere to their specific process.
Permitting For Land Development
After due consideration, the council or relevant department will give you the permit to build the chosen number of blocks on your site, but this is only the start of the process. You cannot market your project yet, as you will need to get the all-important services connected in each case.
You may need to deal with several service providers, and it’s crucial to ensure that they can all proceed without obstruction. You will need to talk to gas, water, and electricity utilities and will need to ensure that you can get rid of any waste as well. This means that you will need to bring in waste management companies to connect sewers and stormwater drains.
Typically, the council or county will own a public facility to handle sewer output and stormwater. You will need to apply for permission to connect to this facility, and your land surveyor or your civil engineer will help you to do this. They will draw up plans for easements and submit to the zoning department or permitting office for subsequent approval. You may need to do this for each individual block, and the detail can be quite involved.
The zoning plan will need to be approached in a certain way with certain overlays, and you may need to deal with restrictions relevant to the site. Once you’ve handled all this, however, you should be able to connect the existing infrastructure to the council facility so all the waste management and stormwater can be dealt with properly. You will also need to work with your water authority for incoming water, and this may be a separate process altogether. You may need to pay certain infrastructure charges or levies raised by the council or relevant authority before you can get your DA.
Signing Off / Plan Sealing
Once all the paperwork is in order and everything is connected, you will need to bring in the relevant department once again so that they can seal the plan and confirm that you have carried out the work in accordance with the original consent. Eventually, you will then get individual titles for each one of your blocks.
This authorisation will allow you to sell some of the blocks using an “off the plan” sale. This type of contract will not settle, however, until the whole titling process has finished. Look into this carefully depending on where you are in the world, as the process can differ from place to place.
Now that you are ready to go ahead, you have various options. You could sell all of the lots individually “as is,” or you could sell as a complete package, including the house and the land. You could work with a builder who will handle the construction for you and then you could package everything together into a contract of sale.
In summary, you may have to look at several different factors before you can determine feasibility. You will have to take into account certain costs, including acquisition, land value taxes, stamp duty percentage, and perhaps transfer taxes depending on your jurisdiction.
You also have to look at deal structure costs, especially if you are working in a joint venture with the landowner. For example, there may be legal costs associated with a JV agreement. You may have an option on the land that gives you a choice to buy the land in the future.
Don’t forget the soft costs. These include planning fees, surveys, and the soil report, for example. You have to engage your consultants and may need to work with your lender to determine a loan to cost ratio.
Sometimes, a lender may refuse to finance an infrastructure levy or contribution. If they do, then you may need to look at these as additional costs. Just bear in mind that you need to look at a “sources and uses” calculation and remember that any development costs have to be funded from somewhere, whether from debt or from your pocket.
You may have other costs to consider linked to pre-sales, where the relevant contract might cost a bit more than a normal contract of sale. You might need to look at listing costs or marketing materials, together with a sales agent commission.
From a financial point of view, a lender will have funding tables that will help to determine what they can advance. They will separate all the soft costs from hard costs, look at the loan to cost ratio, and determine the loan to value ratio to figure out what you can borrow.
If you’ve done your modelling correctly, construction finance will be taken care of, especially when it comes to the loan draw utilisation percentage. Just remember to have a target development margin in your feasibility study and build in a certain percentage to cover the risks that you’re making as part of the development.
Before you begin, you should know how much you should be paying for the land in terms of its value based on its development potential. For example, if you want to make 20% as a margin and you can only fit in a certain number of lots to the land, you will need to plug this into your calculations to help you determine the maximum price you should pay.
Making Your Decision
If you have any investors or limited partners involved, you will also need to know what type of return they expect. This will be another factor that goes into your feasibility. You also need to determine what will happen if costs go up or the timeline changes, known as a sensitivity analysis. Finally, determine what would happen if your sales go up or down by a specific value. Armed with all this data, you will know whether to go ahead with the project or not.
Property Development Checklist For Financial Feasibility
Property Development Feasibility Study Guide & Checklist
23 Property Development Consultants Every Property Developer Must Have In Their Team
Your Property Development team is essentially your army of property development consultants & property development companies that help you bring your development project to fruition. Property developers come from varied backgrounds in terms of education and industry. However, they all have one thing in common, they work with the right property development team. There have been property developers with no education at all who have done well. And there have been property developers with all the relevant degrees who have failed. What separates the failed property developers from the successful ones is right property development team for the right project.
How To Become A Property Developer?
In order to become a successful property developer you must have the following:
And a good property development team of professionals and consultants.
A Property Developer needs to understand all facets of the property development process. From conducting property development feasibility, determining the highest best possible use of the site to identify profitable opportunities. Understand the property market cycles, conduct market research & due diligence, to engaging the property development team and orchestrating & facilitating the entire development process from inception to delivery.
Before you enter into the realm of property development, I strongly recommend that you assemble a team of property experts and knowledgeable consultants.
Why You Need A Good Property Development Team?
The simple answer is that property development is complicated and covers multiple disciplines. You can’t possibly have all the knowledge yourself. Even after you have become an experienced property developer, you will still rely on the skills and knowledge of qualified and experienced property development consultants. I only work with property development consultants that I trust & they are part of my success in property development.
Over a period of time you will find that there will be a handful of property development companies that you work or consult with most of the time. These handful of property development consultants who know how you work and you know them, will then become your property development team. In this article, I extensively discuss the property development team you need in order to become a property developer.
Who Should Be Part Of My Property Development Team?
Whenever I consider a project, I assemble a team of consultants who help me establish the viability of my project and the initial project costs. If I commit to the project and proceed further, I bring on other experts as well. There are things like cost estimates, project yield, legal matters and all manner of side processes that are involved.
However, who you decide to hire and make part of your property development team will depend on your project. A rule of thumb that I follow is that the smaller your project is, the lesser number of property development consultants you will require in your property development team. For example, if we were to do a subdivision, our property development team should consist of a town planner, civil contractor along with a surveyor. On the other hand, a unit or townhouse development project would require a town planner with an architect.
Below, I explain in more detail who you will need to be on your Property Development Team and why you need them.
Property Development Team - MindMap
Here is a list of your Property Development Team
In my opinion, the first person that you should look for is a mentor from whom you can leverage experience. Your property development mentor will have a broad spectrum of knowledge on what steps you must take for your project. I remember how my mentor transformed the way I took decisions initially. In fact, your property development mentor will change the way you look at sites.
Over the years, I have learned to look at a project, not in terms of whether or not I have the money but in terms of what is possible for this project. Apart from asking myself, do I have the money to do this project? I ask myself questions like,
Can I put this development project together?
Can I get favourable settlement terms?
What is it that I can offer to the vendor to swing them my way?
What is the maximum price I should be paying for land?
These are the questions that I asked myself whenever I am looking at a project for development. It’s sad, but most property development courses or investment courses do not and will not teach you how to think like a property developer.
Property Development Feasibility Expert
In property development, numbers are everything. It blows my mind when I see property guru's run around the construction site and their focus is on taps, tiles and appliances. As far as I am concerned, as a property developer my focus has always been on the bottom line. I track my property development feasibility study like a hawk using my Property Development Feasibility Suite. If you brush this off as not important or because you find yourself not very good at it, I can guarantee you sooner or later your project will have a blow out and will cost you more than you have ever anticipated.
Lead Developer Feasibility Suite
4 Powerful property development feasibility applications
The town planner / urban planner will ensure that the project is in accordance with your local authority’s residential codes and regulations. They will create a town planning report to support your application for approval to carry out the project.
The way I select the right people on my property development team is to understand the past projects they’ve been successfully involved in. I then narrow down the list to a team of experts who will suit my specific type of project.
What I’ve learned through experience is that property development is about managing both property development processes, and people. Their invaluable input is essential for successfully completing your property development project.
I have found that a good accountant is essential to ensure that I stay on top of the financial aspects of the project including record keeping and cash flow analysis. A good accountant with experience in property development is paramount to get the right advice on how to financially structure your deals.
A land surveyor is responsible for the preliminary assessment of land and reporting the necessary geographic information as well as to finalize the actual build on the plan of subdivision. Initially, the surveyor will prepare an identification survey as known in Queensland and also known as re-establishment survey in Victoria. They will also prepare a feature survey identifying significant trees, buildings as well as a contour (levels) survey. This allows the architect to commence working on the layout plan.
I always have a suitably experienced architect on hand as the building design is critical in helping you lay down the architectural plans. Your architect should ensure that the plans are in accordance with the building authority's regulations. Believe it or not, an architect can also help you manage the construction contract as well as monitor ongoing construction in order to ensure that it follows the approved plans.
Like the architect you use for your building design, a landscape architect will be another one of the professionals required in property development. They will be responsible for designing the outdoor areas & landscape of your project.
If your project is larger than 4-6 units, your lender will mandate a quantity surveyor to audit your construction cost estimates. The QS will also manage & report on costs to complete. In addition to that, a QS will also validate all progress claims, prepare a bill of quantities, and a depreciation schedule.
Builder / Construction Contractor
One of the most important professionals required in property development is the building contractor. Personally, I take extreme care in selecting the right contractor to make sure construction goes according to the contract and approved plans. The last thing you want during your project is for your builder to go bust. Although because your bank is involved, there is some assurance that it will step in and help you appoint the second one. Nonetheless, this is a long, arduous and costly process to go through.
Also called certifiers in different states, are primarily responsible for approving and certifying building plans. They also ensure that the building is built according to the maintained regulations and building codes. I pick my building surveyors based on the type of building I intend to construct as their experience may vary.
A lot of developers use buyers’ agents to help them source development sites so they can concentrate on running my projects. Some of the best buyers’ agents also have the basic property development knowledge and can be very helpful in locating potential sites for your project. However, I find using buyer’s agents the laziest approach in the book. I have personally never used one and will never use one in the future. Only because, I feel that I can find, negotiate and structure a better deal without having an agent in the middle, irrespective of whether they represent me or the vendor.
Development Finance Broker
Without money, projects simply don’t happen. This is why I make finding a good finance broker one of the most important members of my property development team. Your normal home loan broker and a development finance broker will possess very different skill sets. Usually, they tend to specialise in either or type of finance. A development finance broker will not only know the top banks but also the 2nd tier and private lenders who can fund either the full development or parts of it.
An acoustic engineer is required to test and make sure that the new development does not produce excessive noise. They are there to ensure that noise levels are kept within an acceptable range.
My property development team would almost always include a civil engineer who will be responsible for the design of drainage, sewer system, earthwork, roadwork and water reticulation. These designs must accompany a planning application. They need to make sure that the design is in accordance with the building permit.
I use electrical engineers to design the electrical and telecommunication plans of the building. However, for smaller projects, architects or the building designer can also help with the electrical plans for the building.
When I want to build on a site, I want to make sure that I can safely put the buildings there. I engage a geotechnical engineer to report on the soil composition and anything which may be an issue for construction.
I engage a hydraulic engineer where I need advice & design for roof water drainage, sewer & water reticulation relating to the building. Their drawings are usually accompanied with engineers drawings at the building permit or building approval stage, but can also be required to support a planning application.
One of the key professionals required in property development is a mechanical engineer. I work closely with them in considering air conditioning systems, ventilation, elevators, and other aspects of the project that involve mechanical devices.
A structural engineer is required to design foundations and framework of the building. It is your job to make sure that there is communication between your structural engineer and architect. The structural engineer will supply design and sizing details such as tie downs, bracing and steel or timber sizes that must be incorporated in working (detailed) drawings. The structural engineer will periodically supervise the construction & ensure conformity to engineering requirements in the design.
A traffic engineer is responsible for assessing the impact of future traffic flows and make sure that appropriate design measures are built in to deal with traffic flows. When undertaking a project where potential traffic issues exist a traffic report will be a mandatory requirement of the development permit application. Traffic issues can arise from your development being on a busy road or where the number of vehicles entering or exiting from a site has significantly increased.
As developers, our approach should be to reduce risk at every opportunity. Good lawyers help us do so through good advice and preparing documents that protect our position when there is a lot a stake. I would like to CAUTION novice property developers and investors to be careful of using templates obtained from property seminars and other courses. I know this because when I started off in this industry, I was lured by property seminars who promised to give their past agreements and contracts so we didn’t need to spend money on them. Please DO NOT USE someone else's agreements and contracts, because they are not worth the paper they are written on. The main reason being the fact that every project is different, every deal is different, the terms and conditions of each project are different and so are the stipulations pertaining to that specific development. DO NOT BE PENNY WISE AND POUND FOOLISH.
I always do whatever I can to maintain a good working relationship with an experienced lender or the funder of the project. They help provide the necessary funding for the project. Without their input, my project would otherwise remain an idea.
An appraiser aka a commercial valuer is responsible for calculating the Project Related Site Value & the residual value of land for the development site and the completed project for development finance purposes. Unfortunately, your choice, in this case, is limited to the commercial values available on your lender's preferred panel. A project related site value is particularly important in Australia as it removes any GST implications from costs and GRV’s i.e. the gross realization value of your project.
In my recent 12 townhouse development, I, in fact, challenged one of the valuation firms on their commercial valuation and got them to revise their number. This is something that is seldom taught in property boot camps and or property seminars. However, if you wish to become a good property developer, you must understand or at least have your own property development feasibility study that accounts for this. Both my property development feasibility add-ons, Smart Feasibility Calculator as well as the Advance Property Development Feasibility include calculations for the residual value of land as well as the Project Related Site Value.
Real Estate Agent / Project Marketer
In my experience, a good real estate agent that helps you in selling your development quickly can save you a lot of anxiety and money. What you should be looking for in your real estate agent or project marketer is whether or not they are pro-active. Anyone can throw a line out and wait for the fish to bite. However, a good agent will have an extensive network as well as would know the market like the back of his/her hand.
Property Development Process are a series of steps that property developers taken in order to find, stack and execute a property development project. An effective Property development process would include detailed steps that take you from the very first task of finding a development sites, conduction due diligence and financial feasibility on the project, and all the way to completing your property development project.
Let’s look at the complete property development process and all the steps that should be part of a property development course for beginners. Let me show you the complete property development process, that I teach in detail in my property development course I have packaged into a process driven Property Development System.
Conventional Property Development Process Vs "Process-Driven" Property Development System
Conventional property development process dictates that there are only 5 stages in property development process. However, from my own experience I have found that a complete property development process has lot more steps that are required to be completed in order to deliver a profitable property development project on time and under budget. A developer must have a clear understanding of all the steps involved in the property development process. There are over 10 phases in a "process-driven" Property Development System.
5 Stages Of Conventional Property Development Process:
The above are the 5 stages of property development process, as taught by most property gurus. I know this because that's what I was taught as well. However, when I actually got into doing property development, I figured that there are so many different moving parts between these 5 stages of property development.
"Considering only these 5 stages will be like talking about WHAT TO DO, rather than HOW TO DO property development".
Let me explain in the Property Development Process video below:
Property Development Process: Vision
You have a vision, you develop a concept of what you’re going to develop in your development, you hire the right property development team, you get the right property professionals, you get the right reports and then you contract out the construction to a builder to construct the development for you. Once your development project is complete you either sell the ones that you’ve developed or you hold them for long-term investment.
That’s all fine but for someone new getting into property development and thinking that it’s as easy as this, 1, 2, 3, 4, 5, I think that would be unfair to the beginners entering the property development industry. However, if you can see the complete picture before you actually get in the project or get into property development it would be a lot better. All I’m trying to do in the video above is to show you that complete property development process looks like in its entirety.
I have put together many courses in property development in various bite sizes, which I collectively call my Property Development System. I have developed these property development courses, over the last few years of doing developments, reading books, going to seminars and of course documenting each & every step over the course of all my property development projects that I’ve done personally with my own money.
I can easily pinpoint exactly how the property development vision becomes a reality, what are the steps involved and what are the things that you have to do, or the due diligence checklist that you have to go through in order to be able to develop that vision in the first place, so that it can be conceptualised and all the consultants can come in and start shaping your vision.
The Complete Property Development Process
Here is the complete property development process that I know and teach in detail in course. The image below shows a break down of conventional process into further details stages or phases of property development. Without these extra stages your property development process is incomplete.
Property Development Mindset
The One Thing You Need Before Understanding Property Development Process
Before I actually get into where do you begin and due diligence and feasibility, which is part of vision and concept. I’ve actually broken it down into further steps that you can take as you go along. I think the most important thing for any property developer is to be able to main the right mindset and if you haven’t got the right mindset, you’ll quit half way through and you end up wasting your money, wasting your time and I don’t want you to do that. You must have the right mindset to be able to go through The Complete Property Development Process. The reason I say complete is because, if you skip the property development phases or stages, you will get caught out.
Winners Vs Losers
There’re people who are winners and there’re people who are losers, but there are also people who haven’t actually learned how to win yet. You can’t categorise them into winners and losers, as black and white. There’re people who have that greatness within themselves and all they need is the right system, all they need is the right education, all they need is somebody holding their hand and telling them what needs to be done and they’ll go out and do it. You’ve got to make sure that you identify yourself with what kind of person you are. If you are that person who wants to learn and get ahead, then your must invest your time in learning property development the right way.
There is a saying,
Circumstances don’t make a man, they only reveal him to himself.
Certainty and Uncertainty in Property Development
This quote is appropriate for property development, because once you get into a development project, that project will reveal you to yourself. There are so many decisions that you’ll have to make. There could be times where you won’t be 100% clear as to what’s going to happen or what’s not going to happen. What I mean here is compared to a 9 to 5 job, where you go to a job from 9 to 5 and no matter what you do there, you know that, you will get the same pay cheque in your bank account next month. There’s a degree of certainty.
In property development, there’s a fair bit of uncertainty. I actually embrace it because that keeps me on my toes and keeps me sharp and keeps me from slacking off. A lot of people don’t like that.
If you are one of those people who craves certainty, so you know what’s going to happen next month, then property development is not going to be a good fit for you. In fact, any kind of business will not be suitable for you, because at the end of the day, property development is a business.
However, if you can embrace a bit of uncertainty, you can pull your socks up and say, "I’m going to do this no matter what happens" - then you can do extremely well in property development. If you are willing to spend the extra time required so that you get educated property development, get a really good understanding of property development, then there is nothing that will stop you frombecoming a property developer.
It’s up to you but make your mind and ask yourself how do you see yourself. If you don’t have the confidence in your knowledge about property development, then you’re going to struggle in this industry, because there’s a lot of things that you have to assume and allow for before you actually get into a property project. When you’re in a job, yes there is a lot of uncertainty that you deal with. However, that uncertainty or the consequences for that uncertainty are actually borne by the company and not by you. In other words, if things go wrong, they don’t hit your back pocket they actually hit the back pocket of the company you work for.
If you’re that kind of person who doesn’t like to take that responsibility or do that, I would not worry about watching the rest of the videos in this article. You will need to find something that suits your personality. On the other hand, if you are willing to take action, if you are the kind of person who can take on challenges, if you’re the kind of person who can troubleshoot, if you’re the kind of person who is resourceful, I would say property development can be the most lucrative field for you as compared to any other field. Make sure you’ve got that right mindset.
Finding Your First Development Project
There are a few things that come before having a vision for your site. And that is actually finding the right site for your first development project. What is more important is to be able to get an understanding of the complete property development process.
Listening For Property Market Signals
Understanding of property market signals that give you the pulse of the market is very important. There are a lot of things that you can do when you hear these signals in the media, and this is what will seperate you from other property developers. Because understanding these signals about the property cycle helps you make better decisions when selecting your first site for your first development.
For you to be able to get to your vision and concept stage, you got to do full scale due diligence on a property. Which is basically determining highest based possible use, which is your vision. What it does is it gives you the ability to determine how many townhouses that you can put on a block of land or how many apartments you can put on a block of land and so on.
Site Selection / Analysis
How do you actually select the site? This stage, deals with understanding town planning zonings and overlays. The next step is collect data and analyse all this data about your site so that you can make an informed decision.
Spatial Analysis is basically you looking at your suburb from a birds eye view and understanding how it sits with respect to all the other properties that surround it.
In my property development course, I teach you how to plot all your sales data on maps so you can see what they look like and also determine the end value of your townhouses, apartments or units that you are going to develop. It’s very similar to what the property or real estate valuers do. I follow the same system, I get all relevant sales data and I plot it all there and I look for evidence that helps me support my decision of whether I’ll be able to sell my townhouses for say, 600K once they are complete.
My decision is based on actual facts, things like finding evidence that tells me yes, because 2 blocks from my target site, there were townhouses which were 3 bedroom, 2 bathroom that sold for 600K. That’s only about 700 meters from my development site. Then I figure out, whether or not this is achievable. Exercises like these, help me solidifying my assumptions and having a visual view of what it looks like, gives a totally different perspective.
When you’re a developer you don’t go out and keep doing a full scale financial feasibility on every residential property development project that comes on your table. It’s counter productive. You want to have mechanisms in place where you can quickly conduct a 2 minute feasibility on a project to be able to determine whether or not it is worth your while to proceed from this point on. Things like reading architectural drawings. I got this module in the course because when I started, I couldn’t read the drawings and I had to look at them and scratch my head?
Over a period of time, you get an understanding of the different architectural symbols that are used on drawings.
This is all part of due diligence which unless you go through al the previous steps about actually finding the site for your development project & due diligence you won’t be able to develop your vision and concept, because these 2 Stages will actually answer all your questions so you can develop the vision and concept for your development.
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Financial feasibility is the corner stone of property development. very important. Before a project starts, I do 2 sorts of financial feasibilities. I’ve designed a Smart Feasibility Calculator I use 90% of the time to vet a project in under two minutes. And I have an advanced Property Development Feasibility Study - Software, I use to do a full-scale feasibility on a project. The Smart Feasibility Calculator gives me an overview of the property development profit with 80% accuracy - giving me enough information to make an informed decision. Vetting a project quickly to determine the property development profit quickly, is an important step towards completing the VISION STAGE of property development process.
Watch the 2nd video explaining the property development process
The next stage in the conventional property development process is consultants i.e. your property development team or property professionals who help you with all sorts of building and construction permits, reports and drawings. But hang on, there's a lot of stuff involved with understanding finance and being able to purchase development site.
So, let me explain you a few things before you even get to the consultants. You've got to first be able to sort your finances. As part of sorting out your finances, it is important that you do a financial feasibility analysis. Conducting a feasibility will help you answer two crucial questions:
How much money can you borrow? and
How much do you need to do your first development? aka Developer's Equity Contributions.
If you've done your feasibility right, you should know exactly how much money will you need to chip in from your own pocket, to complete your first property development project.
Development finance also works in different stages. There are different kinds of loans, and there are so many lenders in the market. So it is imperative that you have a good understanding of what are these lenders looking for? The kind of loan that you can get and the serviceability requirements.
Land Finance to settle on the block of land or development site that you wish to develop. This usually occurs, either after you have signed a contract of sale or have already purchased or settled on the land. Now is the time, that you engage your property development team to being the planning process.
Development Finance: Stage 2
Construction loan is usually a commercial loan & is not dependent up on your serviceability alone.
Development Finance: Stage 3
Finalise stage of development finance is, the post completion finance required after the construction is complete. Post completion, you can refinance and hold a couple of apartments or a townhouse that you've just developed and acquired at cost. Maybe you've sold four of them and you've held two, and all that has to be refinanced back into a retail loan.
This understanding is required prior to getting into your development project. So that know what's going to happen when you reach the construction stage and what's going to happen when you reach completion, specially, if you're planning to hold the development that you're developing.
When it comes to valuations, you also need to understand why getting a favourable valuation is important? The different types of valuations, how to get a favourable valuation, understanding the various valuation methods and what does the valuer look for? You can also get desktop valuations from various free and paid sources.
With Site Acquisitions, comes a requirement to understand the best structures that you need for your development. Get the right advice from your accountant before you make a decision on the type of structure you will use for the development, often referred to as the development entity. Make sure that you get a good understanding of what's involved based on your long term plan after the development is complete. If you don't know what your long term plan is after the development is complete, you might end up with a structure that will not help you to save tax or help you with asset protection. I would suggest that you go and talk to your accountant and make sure that you've got asset protection built into it and you have an appropriate structure that can help you minimise tax legally.
Negotiate for Advantage
Negotiations are a very big part when you're purchasing the site. It could be negotiating the price, it could be negotiating the terms, it could be negotiating the time that you require for settlement which is basically part of the terms and special terms and conditions that become part of your contract of sale. So you have to prepare for these negotiations. You've got to develop your responses to all different scenarios. You must understand how to negotiate in a hot market as well as how to negotiate in a down market.
Consultants - which is stage 3, as per the conventional property development process, get activated now, after you have secured the development land or site that you are going to develop. You need to leverage off your property development team to obtain permits & all sorts of approvals from government bodies, councils and or industry watch dogs. Construction is a complicated industry with lots of rules, regulations and compliance. Leveraging off of specialised consultants is the only way you will be able to complete your development.
Design and Product Fit
These days, almost all living / working spaces get designed keeping in mind the environmental sustainability cost effective design. Your property development team will be able to guide you through this process. There are certain minimum standards that must achieved for by your development team in order to comply with various regulations.
Before we proceed, here is the 3rd Video that continues to explain the complete Property Development Process
Marketing And Sales
Marketing is very important specially post GFC, the rules of property development have changed. These days lenders and banks want to transfer all the risk to the borrower and or make sure that their worst case scenario is never a loss situation. To achieve this, lenders will often force pre sales upfront. Marketing can commence after you've got your planning permit or development approval. It has to kick in early, because banks will not fund the construction loan, unless a certain percentage of their debt is covered by pre-sales i.e. actual signed contracts.
You don't have to be construction contractor or a builder to be property developer. All you need to have a thorough understanding of the types of contracts, how to select different contractors, the tender process, what should be included & or excluded from the building contract, your obligations before construction commencement, during construction and post construction.
Things You Need To Do During Construction?
You need to understand, how to file progress claims, deal with retention clauses, builders and defects liability period, insurances required by you etc. There are so many different things involved here because when the construction kicks in and there are progress claims, you will need to deal with a Quantity Surveyor appointed by your lender.
The other thing that's very important while the construction is still going and it's not complete yet is to be able to get your title ready in time because ideally, you want your titles to be ready. Say for example you are building nine apartments and your construction is expected to complete in three months time. You've got to get in touch with your land surveyor or certifier or an authority that is in-charge of issuing titles on new developments. You will need to have this processes initiated in time so that as soon as your development is complete, your titles for the newly developed units are ready to allow your pre sales to settle ASAP.
You need to stay on top of this process, mainly because at the end of construction, you've drawn down 100% of your construction loan, which in our example of 9 apartments, is a big amount and your daily interest can range from $400 to $600, to $1,000 a day, depending upon the size of your development. So you need to make sure that your pre-sales can settle as early as possible to minimise interest costs and pay down the debt.
Property Development System
This is where the conventional property development process ends. However, I found that for property investors, there are some extra steps that are required. From my own experience, I have found that these in between steps are not just important, they are CRUCIAL to get an understanding of the property development process.
Here's the final video explaining the extra phases in Property Development Process over and above the conventional development process.
What's Your Property Investment Strategy?
Before You Can Think About Your Property Investment Strategy, Let Me Explain My Thumb Rules For Property Investment:
Never buy an investment property at retail price. If you are a developer, you have the skills and knowledge required to get your investment properties at cost i.e. not paying for someone else profit margin.
For me to hold a property or a townhouse or an apartment after I've developed it, it must be either neutral or positive. I don't believe in carrying on unnecessary debt, specially for investment stock. Your investment property should not cost you anything out of your pocket to hold it.
As a property developer you can roll your profit as equity, hold it, get the property refinance, or get a line of credit on it, and so on. So that you can use equity again for another project and then you can come back and repeat the process all over again. So, this is what strategy is and this is what I cover in my course in the Property Development System.
Three reasons you need a Project Report for your Development
It serves as a checklist for me to make sure that I have a business case for my property development project. While putting it together as a business case, I am forced to back all my assumptions with facts and figures.
The report tells me lender that I am thorough with my research and business case, giving them the confidence that I know and understand the complete property development process.
It helps to attract property investors who are looking to invest in property development projects.
This is all part of doing no money down deals or creative deal making. In my No-Money Down property development course, I explain how I started as a property developer doing no money down deals. In fact, the five deals that I've done in the past, I've only had one project where I actually put my own money, and all the projects were in some way, shape or form we no money down deals for me.
In my No Money Down Property Development Course, I talk about how you can acquire the skills, resources and the education so that you become that go-to person with whom everybody wants to make a deal with. Everybody wants them to work on the project because they know that they have the skills and the ability to deliver the development project. There are no clever strategies because all the different kinds of strategies that used to work in the past don't anymore.
All strategies that I teach about doing no money down deals is about you becoming that person and having that knowledge and access to the resources and the skills and the tools so that your investors know what you're talking about and they want your to develop with them or for them.
Watch the video on Handling Objections in Property Development
Handling Objections in Property Development
I just wanted to address the question regarding handling objections when you get them. Usually, when you’ve got an objection or if it’s just one objection it is always better that you try and handle it at your end and approach the objector directly. I’ll tell you the reason why. Yes, everything is good unless the council says, alright you need to provide shadow diagrams or you need to provide some screens to tackle privacy or whatever changes that the council would ask you to make so that that objection can be handled. That’s fine.
Dealing With Council
If the council decides to brush them off, they can brush them off, no problem. In Victoria, the council will issue you with what is called a notice of decision or NOD.
Everything is fine so far, but don’t forget that even when you’ve got the NOD or the notice of decision there is a 21-day cooling off period before your notice of decision actually becomes a permit. In those 21 days if that one objector is nasty they can go and lodge a claim with VCAT and delay your permit until a VCAT hearing. That is, it will not become a permit after the cooling off period.
Dealing With VCAT (Civil Tribunal)
You will have a VCAT hearing if you’re from Victoria. Just be wary of that. Even if the council decides to brush it off, I would … If I was doing this development, make contact with the objector and try and appease them and try and handle their objection. If I have to do shadow diagrams and spend a little bit extra to do the shadow diagrams and go and show them that there are no shadows affecting their property – I would do that.
What I am really trying to do is show them, that their concern won’t be a big enough reason for them to take you to VCAT. They are perhaps doing this because, they can. Once you go to VCAT, there’s a three month wait before you’ll get a hearing and when you get a hearing it will of course come in your favour, but what will end up happening is that it will delay your development. It will increase your holding costs and it will cause all sorts of grief to you as a developer. If I was that person and there was one objection I would have a meeting with that objector to appease him.
Dealing With Objectors
If the objector says look, show me the shadow diagrams, that’s when I’ll go and get the shadow diagrams to try and appease him so that he knows or she knows that even if they did go to VCAT, it will cost them money and they won’t win anyway. That way, it will save you those three months.
Be careful with these objections and I’m saying this from my own experience because I’ve just gone through it recently. I’ve gone through the same experience with my 16 apartment development when we were getting the permit. We had 18 objections. So this is how you handle objections in property development.
We had a council consult meetings and in those meetings we tried to address all those objections as much as we could. We had the shadow diagrams done. We had everything that we could do to appease them. There were some issues about noise because we were going to put car stackers. We got a noise report so that we could show them that the noise wasn’t anymore than what a normal air conditioner would make. Those are the things that I would suggest anybody, if you’ve got one or two objections it’s always better to go and see those objectors before you’ve got that permit because they’ve got 21 days to lodge an objection, again, in VCAT and take you to VCAT.
Property Development Feasibility Study Guide & Checklist
It doesn’t matter whether they win or they lose. Even if you know and your consultants tell you that everything is fine. You’ll win and come out on top. The problem is that you will lose three, four months and everything will get delayed. In those three, four months you may start your working drawings. You may not start your working drawings. All these things will get delayed but you certainly won’t be able to start marketing them because you haven’t got a permit yet.