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Thank you Michael,

You are very helpful.
Yes, we do intend to draw a plans and go to the council and talk to them first before we do more detailed plans. We know the regulations and the Res Code. Usually the Res Code is not that strict that’s why some people after they have knock back from council go to tribunal and very often they win.
We have done this twice before using builders this time around we will manage the project as we have the knowledge we need and my husband is capable to do a lot of things on the project. We have not been able to do that with builders, as they usually want to do the whole project.
We are both draftsman, ironically we don’t have enough time to actually sit down and do it, and we still keep our jobs from 8 to 5 sometimes I wonder why[]

Michael, my understanding is that you don’t subcontract the work yourself but hire a builder to do it for you. What sorts of builders do you us?
Big establish ones (very often they don’t do subdivisions) or small once?

Kind regards
Maggie

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Maggie

Invloving the council early in the development process early is a sensible step. But don’t give in too easily to their requests. To get a profitable development one often tends to need to “push the envelope” a little.

I would also get a private townplanner involved early in the piece to help you work your way through council.

With regard sto builders:=

We have our own construction company, but that is for our own developments. We don’t usually use it for client’s projects as there is a potential conflict of interest if we are project managers supervising our own company.

We use a number of builders who know they will get 3 or 4 projects a year from us so they quote very competitavely – better than the big builders and they are much more flexible.

Michael Yardney
Metropole Properties
http://www.metropole.com.au

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Michael,

I have checked out the web site.
Impressive, it looks like you have built a lot of projects.

Can you tell if all of them are subdivisions or you do both (single homes one on block and subdivisions)

Do you work only with investors’ money or the company has projects that are finance by the company and at the end sell them to investors?

Thank you

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Maggie

We did single homes when I first started developing in the early 80’s. That’s what sold well then. For the last 15 years we have only done medium density developments (2- 20 townhouses) as well as commercial and industrial developments.

Do we work with investors money? – NO not really. Our clients own their own proeprties and use our services as development managers to become property developers and buy their properties wholesale.

We are still developers in our own right and keep most of our projects, but I still sell 1 or 2 a year to the retail market.

Most of the 50 projects we are involved in at present are for clients. Either they own the properties or we find the sites for them and we draw up the plans, get development approval and then organise builders to construct the project. We run the project for our clients from beginning to end

Michael Yardney
Metropole Properties
http://www.metropole.com.au

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Michael,

Great post – thank you for the terrific rundown on the development process. Just today I was trying to find out all of that info because I was evaluating a 1000 sqm block with an old 50’s house on one end, corner block running nicely east-west on it’s longest side. I rang a local surveyor who was terribly kind and helpful and gave me the abridged vesion of the process you have outlined.

Can I pose a question? I could get 3 x 300 sqm lots from this block (and all the time and cost of the development process say 2 years) but would I make more profit (and sooner) from simply splitting it in 2 x 500 sqm lots via a straight subdivision (12 mths) and letting the buyer design and choose their own house design, and at a reasonable block size?

It’s just a bog standard Melbourne suburb on the fringe. All 70’s bdr brown brick veneers.

Thanks
skippygirl []

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Skippygirl
Thanks for the comment about the post. You were in luck. I was just writing an article for our monthly newsletter http://www.metropole.com.au/html/Subscribe.htm

when I saw this thread and thought I would post the information here in advance.

With regards to your question:-

I know what you are trying to achieve as we are currently undertaking a number of similar developments on 1000sq m blocks.

It depends upon which council you are in as to the minimum size block, but it no council in Melbourne will let you subdivide into 300 sq m lots -too small. Most won’t let you subdivide into 500 sq mt lots either.
This is because if you have subdivided the lots and then only build one dwelling on each lot, you don’t need a permit and the council has no control over what you are building.

This doesn’t mean you can’t get developemnt approval for 3 x townhouses and then subdivide the lots, but you have to sell them with an agreement to build those particular dwellings.

If this isn’t clear or you want further info you can email me personally.
Michael Yardney
Meropole Properties
[email protected]
http://www.metropole.com.au

As an experienced property developer and a development project manager involved in 50 projects around Melbourne at present I am seeing many investors showing an interest in property development.

While there are some potentially large profits, most begining developers I see make a loss as they don’t understand the development process.

As there is very little written about it and it is not often discussed on this forum, I have copied an article below from our free monthly newsletter that may help you better understand the development process which can be broken down into the following stages:-
1. Pre Purchase Here you look for a block of land with potential. Either to renovate the property and sell or to get a development approval / permit to construct multiple dwellings
At this stage you should already have your finance in place so that you can know your limits. You should also have a team of consultants who can advise you as to the projects viability. These should include a development manager who can coordinate the whole process or individually -a solicitor, an architect, a surveyor a town planner and estate agent (to advise honestly on end values and marketability)
2. Concept stage
Once you find a potential site you must come up with a concept for it. What can you put on it? How man units? How big? What restrictions are there?
To find out what can be built on the block I would next assess the local council’s policy towards development and see how many new units/townhouses can be put on the block. We tend to have these documents in the office but they are generally available over the internet at the local council’s web site, or in hard copy form from their front desks. You must understand the local council’s requirements for minimum lot sizes for a development and their regulations regarding setbacks from the front, for private open spaces and for car parking.
I would also do a detailed analysis of the neighborhood character as an important consideration of town planning is keeping the neighborhood character
It is important to assess what the market wants in that area and what would sell or lease well. It is important to design and build something that is marketable.
We then put pen to paper and do some sketches allowing for setbacks, driveways, private open space (as required by council and ResCode). Ideally private open spaces should be north facing and these areas have other restrictions on them regarding configuration. We place garages and parking spaces and leave room for turning circles to drive out in a forward motion as required by council. The amount of land that is left over after all of this will determine how many dwellings and of what size can fit on the block.
We would also take into account potential objections from neighbours.
Next comes some number crunching in our feasibility program. We include time scales, all costs including consultants and construction costs. We include likely end sale values and the profit margin we want and work out what the land is worth to us.o:
If it is a viable development we would consider putting an offer in for the land.
3. Purchase
We now buy the land at a price that would allow us a commercial profit using the figures in our feasibility study. I am currently finding most properties on the market with development potential too expensive.
4. Town planning Our architect draws up plans that comply with ResCode and the council’s development guidelines. We also involve a surveyor and town planner at this stage due to the increasing complexity of the development process. This stage of the development process can take up to 12 months before you achieve development approval.
5. Working Drawing and documentation. Once the permit has been achieved the architect and our engineers document the working drawings to allow us to get a building permit (interstate called a Construction Certificate (CC). This stage takes 3 – 4 months.
6 Pre Construction At this stage we obtain quotes from builders and bank approval for the development loan.
7 Construction Finally we get on site to build our project, paying the builder progressively at the completion of each stage using draw downs from our bank loan. This stage can last 6 – 12 months depending on the size of the project.
8. Completion The project is leased or sold.

Michael Yardney
Metropole Properties
http://www.metropole.com.au

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Thanks everyone. This has helped alot. Getting back to the original reason for this post, one of the PM’s I contacted charges 9% letting fee of rent every time they renew the lease. EVEN IF IT’S THE SAME TENANT!!

I.E. Lease renewal for 6 months works out to the following. 26 weeks times $200 rent times 9% equals $468.00!!

Needless to say, I have since found better deals than that around.

Regards,
Steve.

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While the letting fee for new tenants tends to be a percentage and in Melbourne it tends to be 4% of the annual rental, most agents in Melbourne charge a FLAT FEE for lease renewals usually $100 or so.
Remember….
All PM fees are negotiable.

Michael Yardney
Metropole Properties

Steveod
A good property manager does a lot more than collect rents and therefore should pay their way.

By maximising your rental, keeping vacancies to a minimum, handling arrears and advising on refurbishments or repairs that will maximise your rent a good property manager is worth their weight in gold.

The difficulty is finding a good one. I have been investing in property for 30 years now and I have seen some good PM’s and lots of terrible ones. If you don’t think you are getting value for money look elsewhere.

In the balance of this long post I am going to going to offer some suggestions on how to find a good PM but before I do I must first make a disclosure. Pam my wife is the best property manager in Melbourne because she is an investor and understands what is needed and also becuas eshe cares.

OK I am biased, so here is my list of what to look for:-

To chose a good property manager you need to ask the right questions. Here are some to consider:-
1.Does the agency have a dedicated rental department and how many staff will be looking after your property?
Many agencies see property management as a “poor sister” to the more glamorous sales department and some even leave the management of client’s assets to the front desk staff and receptionists. Ensure that your agent has a dedicated property management department. It would be preferable that this department is staffed by a number of experts so that there is continuity of management in the event of one property manager being ill or leaving.

2.Is a director / owner of the agency involved in the day to day management of the property management department?
Most agencies have a sales department and a rental department. Generally speaking the business owner has a sales background and not a rental background and looks after the sales department and leaves the management of their rental department to a property manager.

This is because the sales department has a higher turnover and high income and the rental department has a lower income and is more intensive and difficult to manage.

3.How many years has the property manager looking after your property been working in real estate?
Note that I said property manager and not the agency! Don’t go to an agency just because they have a brand name…. it doesn’t mean their service is going to be any better.

Many people start their career in real estate as receptionists and then move up to the property management department and some of the top performers move into sales. Yet some individuals chose property management as a career – this is the type of person that should be looking after your property and they should preferably have had 4 years industry experience.

4.How many years has the property manager been with the agency?
You should look for stability in your property mamanger. You want someone who will learn your property inside and out. You want to pick up the phone and talk to that person today, and in six months time you want to be able to talk to that same person. Due to the stresses involved in property management the staff turnover tends to be quite high. This is another reason why you should look for an estate agent who has chosen property management as a career.

5.Does the property manager give you a written proposal?
Some property managers just go out and look at your property and say “OK we’ll put it on our books”
Look for someone who has put in the time and effort to present a professional image to you and give you a written proposal. If they make the effort to present their services professionally to you it is likely they will look after your property professionally also.

6. Does the Property Manager just hands out keys or do they attend property inspections with prospective tenants.
If they just hand out he keys and let the tenant inspect the property on their own, move on to another agency. I’ve seen to many things go wrong with this approach, including one extreme case where a prospective tenant made a copy of the key and returned the key to the agent, got back his driver’s licence or whatever he gave for security and then used the copy key that he made to move in and squat in the premises without paying rent! It took weeks to get him out.
Also walking around the property with prospective tenant’s means that the agent has a chance to promote the property as well as an opportunity get to know the tenant a little better. It is amazing what will come up in general chat that would never be written on an application form!

7. How many properties the manager looks after?
If a property manager looks after too many properties they won’t have time to devote the attention your property deserves. Many busy agencies have up to 200 properties per property manager and in general this is far too many to give your property individual attention. At some boutique agencies each property manager looks after about 100 properties. While these agencies may charge a little more for their property management services landlords find this extra expense translates to a trouble free investment that often produces a higher return.

Michael Yardney
Metropole Properties
http://www.metropole.com.au

I was investing in property in the middle 80’s when the labour govt abolished negative gearing.

At that stage I was pretty heavily negatively geared.

What happened then was that you could continue negatively gearing properties that you have bought prior to the change in legislation, but you could not write off property losses from new purchases against other income. You could carry forward the losses and eventually use them against profit from properties in future years – so you did not really loose the full benefit. It was just a timing issue.

The effect of this was a disincentive to buy invetment property and provide housing for tenants. There were fewer rental properties available, rents shot up and in general property investors who were already in the market were happy.

The legislation backfired, because the aussie battler, who the labour party were meant to represent, had to pay more rent and the govt withdrew the legislation and allowed negative gearing again within about 18 months.

Michael Yardney
Metropole Properties

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