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Reproduced with permission.
So, you want to be a property developer. This can be a great way to make money, if you know what you’re doing. The property development process can be a long and complex one. The more you’ve planned and thought about your project, the more likely you are to succeed. Remember the old saying, “A failure to plan is just a plan to fail”.
In part nine of the Property Development 101 series, I outline why and how local real estate agents and property managers can assist you.
Whether you’re going to sell or rent the properties, you’ll need to find a good local agent. I’ve underlined the words “good” and “local” because if you’re planning on spending hundreds of thousands of dollars or more on a development, you want to make sure you get reputable advice from an agent/manager who’s been working in the local area for a while and understands what people want.
Many people would look for an agent when the properties are nearing completion. I’d suggest you seek out your agent before you start. An experienced local agent who understands new properties should be able to answer many of your questions.
However, don’t take what the agent/manager says as gospel. You need to confirm what the agent/manager says through other forms of research. For example, if your research shows that all new dwellings recently sold for a top price are three bedrooms, the new homes for sale are all three bedrooms but your agent says you should build five bedrooms, find a new agent.
Questions to ask
You should ask your agent/manager many questions as their knowledge can assist you in a variety of areas and could save you lots of time and money. “Which questions should I ask?” I hear you say. I’m glad you asked!
Here’s a sample of 10 questions you should be asking and reasons why.
1.What’s the ideal size of the units? You need to know how you can maximise your profit as there’s no point building extra-large homes if no one will pay you extra for this. For example, a 150-square-metre dwelling may sell for $500,000 but a similar dwelling that’s 180 square metres also sells for $500,000. If $500,000 is the most anyone will pay for a dwelling, you don’t need to build anything bigger than 150 square metres.
2.Should the units be double- or single-storey? Mature aged buyers/renters would prefer not to climb stairs, so a double-storey property isn’t as appealing to them as a single-storey property.
3.If I build double-storey, should the main bedroom be downstairs? I’d say that in most cases the answer is “yes”. However, if your block of land is quite small, you may not have a choice and all the bedrooms have to be upstairs.
4.If I build double-storey, do I need to include a balcony? Balconies cost more to build but your buyers may be willing to pay extra for properties with balconies as it provides them with an extra outdoor living space.
5.How many bedrooms should I include? Two bedrooms plus a study or three bedrooms? Different demographics have different requirements. Singles or young couples generally go for smaller properties because that’s all most of them can afford.
6.Is just one, two-way bathroom sufficient or do I need to include two bathrooms? In some cheaper areas you can probably have just one bathroom, which can be accessed directly from the main bedroom and from the passageway. In other areas, buyers/renters may want a separate en-suite plus a main bathroom.
7.Do I need to include a bath in the bathroom? Young families would appreciate a bath and they may be prepared to pay more for the property.
8.Is a single garage okay or should I design a home with a double garage? I don’t know of any property where a double garage doesn’t add extra value. However, due to council restrictions and frontage, you may not be able to fit a double garage.
9.Do I need to include a walk-in robe or is a built-in robe sufficient? Walk-in robes take up extra space and if you’re building on a relatively small site, you need to maximise every square metre. Except for luxury properties, most buyers and renters are happy with built-in robes.
10.Do I need to include wardrobes in every bedroom or is a wardrobe just in the main bedroom sufficient? I find that tenants generally prefer wardrobes in every bedroom.
The 10 questions above are just a small sample of what you should be asking your good local real estate agent/manager. But remember to confirm everything they say with your own findings from other research.
Next month’s instalment will be the last in the Property Development 101 series. I’ll be outlining some tax considerations that apply to property developers. If you want to save some tax (and who doesn’t?), be sure to read next month’s article.
By Peter “The Property Professor” Koulizos