Hi guys! A little help and advice to get stared would be much appreciated! Basically I have found a large block of land (exact size not specified)that contains a 4 bedroom house and has been zoned for unit development …..”with multiple residential zoning for 3 storey dwelling. A six unit site”. Literally opposite a university and minutes from the cbd, the idea i have in mind would be to build these units and target them for students to rent out. i realise id probably have to sell some of these at the end to service my debts. the existing house is in good nick and at the front of the lot so it too could be rented out (at approx $230 per week…or i would rather let each room out”…now 4 1 million questions! [wacko]
1. zoned doesnt mean the building permits are in place as yet right? so i this the 1st step i would have to take in the development process? is this done thru the council? Or/and who would be best to consult in the beginning stages?
2.when buying the property (with the view to develop) what terms should be included in the offer?
3. would it be better to leave the existing building in place while the others are being constructed? i guess what i mean here i would have some sort of cashflow happening during the development whereas without it there wouldnt be one? is this viable?obviously a lot of redevelopments consist of removing the old dwelling to make way for the new……im just a little confused as to where the cash to service the whole development process is coming from if the property itself is not as yet generating cashlow….ie do u have to lay out $ out of your pocket to service anything at this time?
4. in what order would i calculate this idea as being feasible? ie would i get consultants after i put in an offer or after i purchase? LOL i really dont know! [ohno2]
i guess my biggest concern is how does the whole process get funded? i know the builders get paid in installments as the construction takes place….but how does it all work from purchasing the property to the construction stage? and how is this type of finance obtained? ie how do investors do this with little or no $ down???
Obviously i have never done this b4 and a rough step by step guide would be wonderful! it seems like a good deal the property is roughly 300k……its also interstate to where i live….so any tips on doing things like this interstate wud be fab!
If I was you, I would get the DA approved and sell the site to a developer with some sort of deal in place where you can take ownership of the units you wanted to keep. You need to walk before you can run and this is too hard for a beginner. Try something smaller, team up with someone experienced or walk away.
Robert Bou-Hamdan
Mortgage AdviserDA? I gather you mean get a building permit after purchase? in either case whether I do it now or further down the track I have to learn somehow…
You can purchase a property subject to DA (Development Approval) in case it is never forthcoming. This allows you to walk away.
Robert Bou-Hamdan
Mortgage AdviserRobert
To buy subject to DA, do you need to actually apply for a DA in the council or just get their verbal advice whether or not the area in question and the block in particular is likely to be approved for a DA?Padma
You sign a contract subject to DA with the vendor. Anyone can apply for a DA on any property whether they own it or not as long as the owner (vendor) signs the application. It would follow that the vendor will sign if they want you to buy the property so you submit the DA application to Council to get a written response. Verbal advice is not worth anything as it does not ensure approval by Council.
Robert Bou-Hamdan
Mortgage AdviserHi Anna,
the first step would be to speak to a townplanner and architect to see what is feasible.
preferably without them charging you at this stage.
The second step if you are VERY confident would be to frame your offer subject to present owner’s giving consent to all the documentation being lodged with Council.
I think you are tackling something a bit complex for the first deal and I have done a lot of them.
The funding for these deals intially comes from your pocket.
It would be very difficult on a site such as this to do it yourself unless you have someone assistance along the way.
Consultants always want money upfront unless you are a regular client and even then they need money for ongoing services.
Also have you done your homework as to the construction costs and work backwards to either the sale of some of the units or the rental factor.
Lenders on construction like to have some fall back in the way of strong security for construction, ability to service the loans and experience with this type of development.
IT seems you do not live locally to the deal which wouldd make it cash flow intensive and difficult to supervise in all details.
My suggestion is to first do the numbers,speak to agents about likely rent returns, vacancy factors etc and then look at your return on investment.
My feeling would be that unless you could get a joint venture partner (after doing all your sums) and then that might not be so easy, at this stage of your development you are taking on a venture that could suck you dry.
Cheers,
Byron SamByron Sam
check out http://www.metropole.com.au for a group that project manages these sorts of things for you.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Anna,
Zoning refers to what the land may be used for eg resedential, comercial, industrial etc. The meaning of the quote that you read was most probably “It is zoned resedential and is large enough to fit 6 units acording to the planning scheme”
This does not guarentee that you will get permission to put 6 units on the site, its also not necessarily correct as real estate agents are not town planners.
If you have to go through the planning process, be aware that it takes time and costs money, and also there are no guarentees that you will succeed. Having said this, you can create significant value by going through the planning process, just be careful and get good advice.
Regards
AlistairI saw an interesting example of how zoning did not help a delevoper a few years ago. They were interested in a particular site and submitted their plans within zoning guidelines. Many complaints came in from surrounding residents but one particular complaint saw the development become economically unviable. It involved the casting of shadows across adjoining properties. The Council requested the developers change the development to avoid this shadow problem. They scrapped the plan.
Another one was down South many years ago when an area was zoned 2B residential. Greenpeace spotted some endangered wildflowers growing in the area (where no-one currently lives or visits) and any development was stopped. That was 15 years ago and those who bought (including myself) have been sitting on pieces of land worth nothing for ever.
Robert Bou-Hamdan
Mortgage Adviserok so say I put an offer in for this property subject to DA…..in rough point form what would be the order of steps i would need to take beginning from purchase through to say the process being successfully approved? could u please include in this which professionals/consultants i should be consulting(by this i dont mean specific people….rather ie town planner/architect/builder)….? thanx heaps for the responses already posted
Anna,
Which State is the property in. If it is in Victoria I would be happy to describe the process to you.
Regards
AlistairIts in Queensland however I would be so fgreatful if you gave me a brief rundown even on how to do it in VIC (Im from VIC too) [cap]
Anna
I provide a development advisory service to assist investors investigate and qualify the viability of the development.
This is done by engaging professional consultants that will provide a fully costed report on all the development costs asociated with such a development. We will also research the market for the most suitable dwelling for the location and have it costed as well.
Once you have viewed this report you can then decide if you want to go ahead with the purchase of the site.
Please feel free to contact me if you wish to find out more.
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
Hi Anna,
The process goes basically like this. You need to get a survey of the site done, which gives details of the size and elevation of the site, as well as the positioning of surrounding buildings (especially windows) and private open space, trees etc. This info is then used by your draftsperson/architect to come up with a concept design, which is compatible with the regulations in the planning scheme and sympathetic with the surrounds.
You then take the concept to the local council for a pre-application meeting, to ascertain their thoughts on the design. Council may ask for changes or may not. They may also say that they will not support the development under any circumstances, but if the design is sensible this is not likely. Depending on feedback from the council you may choose to alter the design.
Once you have either made the council officer happy, or bent as far as you are prepared to go, you order town planning drawings to be produced and an application to be drawn up.
Once these are submitted to council, they may ask for further information. Once this is provided they will order advertising of the proposal, which includes the large yellow signs you see around the place and probably letters to surrounding residents informing them of the proposed development.
If there are objections council may order a mediation meeting, you can then try to satisfy these people by making concessions or ignore them, your choice.
The planning department will produce a report with a recommendation as to whether council should support the proposal. In some cases this constitutes the decision, but most of the time the proposal then goes to a council meeting. At the meeting there is an opportunity for the developer and any objectors to make a statement(s). Council then makes a decision. In most cases the councillors follow the recommendation of their officers, but not always.
If you are knocked back, or there are conditions placed on your permit that you don’t like, you can then appeal to VCAT. If the decision is favourable to you, objectors are also able to appeal and take the case to VCAT.
I f you would like some more detail PM me you email address and I will send you a power point presentation that we have produced to explain the process.
Regards
AlistairAnnaB
As you may be aware the Brisbane city council covers a very large area. The counter staff while being very helpful unfortunately will not be able to provide you with detailed information that you would require prior to purchase. Therefore purchaseing a property on the word of an inexperienced counter staff could be risky.
All the senior townplanners are busy and all they will say is…put in your proposal and we will look at it. the application alone will cost you a few thousand dollars…therefore IMHO taking the easy route could cost you a lot of money and if your report lacks detail then the delays will cost you a lot of money as well.
Your contract should be mage subject to due diligence… generally 21 days is acceptable. You don’t want to go unconditional until you have all the answers. Unfortunately a unit or town house development is not code assessed…it is impact assessable and the council may get objections to your proposal. Unfortunately, this is the risk you take when you want to do such a large development.
You can minimise your risk by addressing all the possible objections you may get to your development but you cant stop people from objecting.
To be successful you have to put in a lot of effort up front in finding the right site and assessing the most suitable dwelling appropriate to the area. Then, you need to undertake extensive due diligence on all the possible scenarios that may effect your development and have these costed. There have been a lot of small developers that have lost money in property development because they have been negligent in this critical part of the development phase.
Remember with property development, your profits are made at the time of purchase.
Once a development is under way it is important to keep up to date with all the paperwork and processes as you go through the various stages. Things happen very slowly when it comes to dealing with council however there are critical steps that you need to take in order to keep the project moving. Delays are one of the biggest reasons for failure as interest is a significant cost factor.
For the risk you will be taking you would want a return that is greater than 20%. However you will find that this will be impossible to achieve in today’s market.
This is why for most investors we recommend simple code assessable developments where your outcomes are known prior to purchase
Sailesh Channan
http://www.developersedge.com.au
“Helping you select,develop and profit from property”
thanks for all the help guys….much appreciated [biggrin]
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