Besides being a national obsession and the source of many barbecue conversations, the property market is a complex and multifaceted series of 'markets within markets. There are several fundamental drivers of property in Australia and around the world. Population growth, employment, supply and demand, infrastructure investment, lifestyle factors and affordability all combine to create a 'property market' that is constantly in a state of change.
Employment - how many new jobs are being created and what is the profile of these jobs? Supply and demand - how many new dwellings are being constructed and how does this relate to the underlying demand? Infrastructure investment - are new roads, hospitals, transportation projects, schools or universities being built? Lifestyle factors - what impact do parks, beaches, shopping centres, nightlife and cafe precincts have on an area?
Affordability - what does it mean to be affordable and does this impact the demand for property in a particular area? Add unpredictable human behaviour and psychology into the mix and it's easy to understand why so many people can get this wrong! The 'property market' is also comprised of many different types of real estate including:. Commercial real estate, such as offices, retail, hotels and industrial property. Every one of these asset classes involves a sub-market that operates at its own pace that is governed by a different set of factors which combine to create one large and complex property market.
The property development process is best described as a lifecycle. Similar to a human lifecycle, the property development lifecycle is comprised of a series of stages that include:. Permits and approvals - attaining the necessary permissions required to develop the project.
Pre-sales and marketing - the process of selling the project prior to starting construction. Settlement - the process of finishing your project and settling the financial exchange with buyers. The development lifecycle is also characterised by important milestones, such as receiving a development approval or gaining practical completion.
The art of the property developer is to manage the competing forces of risk and return. These two forces are inextricably linked and best described as two opposite sides of a coin.
There's a very simple mantra which remains fundamentally true in property development: the greater the risk, the greater the return. The relationship between time, cost and quality is an equally important consideration in property development.
Every decision is influenced by the relationship between these three forces: time is speed ; cost is money ; quality is the product. You simply can't have it all, so every decision is considered through the prism of speed, money and product. The property development feasibility is the central point of focus for managing every financial element within project.
The project feasibility, usually in the form of a spreadsheet or software product, accounts for the revenue money in and the costs money out. The difference between the revenue and the costs is the profit: the ultimate objective of the project.
Project costs will typically include land, acquisition costs, professional fees, authority fees and charges, construction, marketing, legal and finance costs, land holding costs and taxes. The property developer's highest priority is to maximise the revenue while minimising the costs to deliver a quality outcome. If the project feasibility is your ying, then the development program is your yang. Similar to other principles in property development, the two are inextricably linked by virtue of the fact that the feasibility accounts for numbers, while the program accounts for time.
The development program is a daily, weekly and monthly schedule of the key activities required to undertake a project and is the 'holy gospel' of a successful outcome. Undertaking due diligence on property is an essential part of ensuring that project risks are known and mitigated. No project is ever risk free, so the objective of due diligence is to identify the risks and then develop ways of managing them.
Due diligence is undertaken prior to purchasing a property and usually consists of engaging a lawyer to identify any constraints or encumbrances on the property, such as mortgages, easements of planning controls. It involves a long list of consultants and professionals to provide expertise across a wide range of disciplines including design, engineering, sales and marketing, construction, finance and legal. As developer, it is your role to engage, inspire and manage your team to ensure the best possible outcome for the project.
From project conception to final completion, this half-day workshop will provide a practical learning experience by taking attendees through the comprehensive life cycle of property development.
Click below to register your interest or secure your ticket:. Attendees can expect to walk away with a holistic understanding of the property development process, along with a deeper knowledge of key milestones, project risks and opportunities, roles and responsibilities and project performance benchmarks. Thursday, January 13, Latest News. Top Stories. Editor's Pick. The best way to avoid this waiting game is to plan out what you want to do with the property before you actually purchase it.
This will allow you to make an informed decision either to commit to the zoning process or move on to another investment. Let me be clear: rezoned developments can be highly lucrative, as long as you account for the process beforehand. When it comes to land development projects, you must have a reliable, skilled set of professionals to help your project. This applies to anyone from construction workers to contractors to project managers.
Raw land development requires a big team, so make sure yours is as good as it can be. When it comes to raw land development, investors essentially combine multiple investment strategies into one: purchasing land, building new construction, and renting or selling the final product.
Do not let this intimidate you, as there are ways to systemize the process and make it easier to navigate. Investing hoping to prepare should research the following factors, so they know exactly what to look for and evaluate when developing raw land:. Permits: Permits are required for almost any type of construction, development or renovation. When developing raw land, it is crucial to research the permits required for these projects and the anticipated costs and timelines of obtaining said permits.
Many investors underestimate the amount of time permitting can take and should be careful to account for it when searching for and financing raw land developments. Zoning: Depending on where the land is located, it will likely be in a designated zone, whether that is commercial or residential. Land can be rezoned in some cases, but it is important to add that into your potential timeline for a given deal. It is also important to note whether any potential land investments are located within a protected wildlife zone, flood plain, an area with building restrictions, etc.
Building Department: There are certain building requirements to take into consideration when planning any new construction project. These are often regulated by the city or locality in which the area is located and could impact plans for the building. Do not simply rely on others such as your builders and contractors to abide by building codes; familiarize yourself with them as well to be sure any project is planned properly.
Water: Water and sanitation are two of the most important aspects when planning a raw land development. Investors should determine if there are existing hookups or water and sewage lines on the property and go from there. You must research local requirements during this part of the process, as there are several regulations around installing and operating water lines for a property.
Electrical: Last but not least, investors need to consider power not only for the future building but for the construction process as well.
If there are not existing power lines to the land, you will need to contact local utility companies to start the process. Additionally, do not forget to consider cable, phone, and internet lines as these are also crucial aspects of land development.
Learn how to get started in real estate investing by attending our FREE online real estate class. There are several factors that investors will need to consider every time they evaluate a piece of land. While it may seem intimidating now, these elements will become second nature over time. Until then — review the following things to consider before developing raw land:. Engineering: A crucial aspect of the raw land development process, particularly early on, is to have any plans reviewed by an engineer.
Some real estate investors may have a background in this field, but it is important to find a qualified engineer to work with. These skilled professionals will integrate all portions of a property development plan and determine its feasibility. This means considering earthwork, utility hookups, infrastructure, and other amenities. In some cases, the master engineer can even find areas to reduce costs in the overall development. Understanding The Land: Anytime you are considering purchasing or developing a piece of raw land, it is important to visit the site.
Like traditional investment properties, a walkthrough can reveal aspects of the land you may not have noticed. Walking the area could uncover hidden amenities, unique landscaping, accessibility issues, or even existing power hookups.
These surprises could impact the purchase price, development process, and viability of the land. It is always a good idea to walk around the area to ensure you find any surprises, both good and bad, that can come with purchasing raw land.
Spatial Awareness: One of the most important pillars of successful raw land developments is spatial awareness. When purchasing raw land, you need to understand how to maximize its use and profitability. This often comes down to understanding the best ways to utilize the plot, whether residential or commercial. Keep layout, storm management, and transportation in mind as you map out development plans — these will help you optimize for livability and usage. Investors should expect to work with several other professionals throughout the development process.
Take time to find the right people for your project, communication style, and business goals. Outline and divide responsibilities as necessary — proper management will help you keep your project on budget and on time. Start From The Outside: When it comes to new developments, investors should quite literally plan from the outside in.
This means designating lots and structures before planning the specifics of the buildings. By doing this, you can focus on reducing the amount of earthwork and grading required and even take advantage of the natural layout of the area. This is because developers typically need to focus on maximizing land usage and livability specifically in residential developments first.
Ideal street and road locations will likely arise as you plan the rest of the development — so try to avoid focusing on this task first. Topography: If there is anything to take away from the land development process, let it be this: pay attention to the features of the land. Topography is crucial for understanding the characteristics of the land and strategizing its usability. There are great resources out there to map out property developments and work around the geographic elements of an area.
Make use of those available to you and your team to ensure you fully consider the topography of an area before purchasing land for development. Be Creative: Raw land development can be a great strategy for investors who love full creative freedom on a project.
With developments, you are truly starting from scratch on a property. While there can be obvious constraints due to budget, timing, or land availability, there is a lot of room to get creative when planning a new build.
Selling vs. Renting: Traditionalland developers often decide to buy raw land, build property on it, and then sell immediately after construction is completed. This strategy allows developers to make a fast profit from their project that covers the cost of construction. However, developers can also choose to hold onto their new construction and rent out their land. This allows for a long-term stream of income. Although it may take developers a long time to earn back the money spent on construction, they may end up with a larger profit in the long term.
If you are looking for a profitable real estate investment strategy, it may be time to consider raw land development. Investing in land is a great low-cost way to expand your real estate portfolio. Follow the steps outlined above if you hope to achieve success with raw land development. Remember to rely heavily on research as you venture into this investment strategy. Always consider how the area could change and develop your investment accordingly. Separate yourself from the competition today and add a raw land investment to your portfolio.
Key Takeaways What is raw land development? Real Estate Investing Strategies. See All. By Paul Esajian. Join FortuneBuilders Blog! By continuing to use our site, you consent to the placement of our cookies on your browser. Learn More. Manage consent. Close Privacy Overview This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website.
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