8 Questions You Must Ask Before Investing In A Development Site
December 20, 2016 | News
Property Development can be very lucrative if you’re careful and strategic. Achieving a successful outcome begins with thorough homework and careful planning. The whole process can run smoothly with the right advice and good support.
Kara from Resicom Access advises “Begin by doing careful research in the suburbs you’re interested in. You need to choose an area with good fundamentals, an area that will be attractive to buyers and tenants, with potential for solid capital growth.”
Kara suggests that when doing your research, you ask these eight key questions:
1) Are there any major projects planned for the area?
This could be anything from a new shopping centre to a train station. Any project that is likely to add overall value to the area and make it a more attractive and convenient place to live. It may be a small, quiet suburb now but what’s it going to look like in 5 or 10 years’ time – could it be the next Subiaco?
2) What are the current transport links in the area and are there any future transport plans?
Is the area easy to get to by public transport? Is there a train station nearby or are there any plans to build a train line in the future? How far away is it from the freeway? Where do the buses run to and from? These are all important questions that potential buyers and tenants will have. If your investment property is located in a suburb that has great transport links then it will be a much easier sell.
3) Is the property conveniently located for shops, cafés, schools and parks?
The modern lifestyle is all about convenience, so an ideal location will be walking distance to great amenities. Shopping facilities are important, as well as cafés and restaurants. Being close to a park provides flexibility for enjoying the outdoors, keeping fit and walking the dog. For young families, local schools and their transport links are important. Can children walk or ride safely or catch a nearby bus? Look for properties situated nearby, but not immediately opposite any convenience that will attract traffic and produce noise. Accessibility is important, and so is peace and privacy.
4) What type of property best suits the demographic of the area?
Does the area currently attract young families, single professionals or pensioners? If you’re thinking about investing in a particular area, then you need to know who is moving into the area and what type of property they are buying so you can meet that demand. If the area you’re looking at is right by a train station and there is a high amount of professionals aged 20-30 living there, then investing in apartments or villas will be a much better option than building 4 x 2 houses.
5) What is the zoning of the property and are there any zoning changes planned for the future?
Zoning dictates what can and can’t legally be built on a piece of land. It is determined by the local council and each piece of land is given a code, formally known as an R-Code. These R-Codes tell you how many residences can go on 1-hectare (10,000 square metre) parcel of land. It is crucial that you understand the zoning of the area you’re considering investing in and also whether there are further zoning changes planned. This will tell you what type of development is being supported and how many dwellings you can build on a given piece of land.
6) What is the ratio of renters vs. owner-occupiers in the area?
This is important if you are planning to rent the property out in the future. An area that is full of tenants will mean more competition for your property when you advertise your vacancy. Suburbs that have a higher ratio of owner-occupiers to renters tend to receiver higher valuations which can translate to better capital growth. This is because the properties in these areas tend to be better maintained by the owner compared to those that are for investment purposes only.
7) Are there any restrictions or covenants imposed on the property or land?
If you’re planning to make any alterations to the property, now or in the future, you need to be aware about any restrictions or covenants that the property or land may have. Some properties have easements for water services which can’t be built on. Some subdivisions have very particular guidelines regarding what you can and cannot build. Any restriction or covenant could negatively impact you and restrict what you can do.
8) How many properties in the area are being sold at a ‘discounted rate’?
Discounting occurs when the property or land is sold for a price that is less than it was advertised for. This generally happens when supply outweighs demand and sellers drop their prices to secure a sale. Suburbs where properties sell quickly will have less discounting because demand outweighs supply. This is why it’s essential to have a clear understanding of how quickly properties are selling in the area and whether they are being discounted or not.
The suburbs you know and like to live in yourself, don’t necessarily offer the best development opportunities so it’s best to keep an open mind. One way to start is to consider your total financial investment in the project and then look for suburbs with a price point that aligns with what you can borrow. Once you’ve found a suburb that ticks all these boxes, the critical work of assessing development feasibility for a particular piece of land begins. This is where you calculate your costs, your sale price and the overall return on investment.
Property development can be very rewarding and profitable, if you go about it the right way. If you’re a complete beginner or simply don’t have time to dedicated research, consider appointing a project manager to do the work, present opportunities and take all the stress away.
Resicom Access can guide you through the process, from researching and presenting profitable development sites, to managing the entire project from start to finish. If you’d like to have a chat with an expert consultant (with no obligation) please call today on 1300 123 127.