Last issue I showed you how to go about finding a development site so hopefully you have taken some time to look for some possibilities. But how do you know if they are anything more than possibilities? Well as I said, Property Development is a matter of applying seven simple steps. So now you know how to go about Step 1 – Finding a Development Site, it is time to learn how to do Step 2 - Site Analysis.

Quick Calculation
Once you have found a site you need to be able to do a quick calculation so that you can assess whether or not it is worth spending more time on. You will need to know your basic costs in order to do a rough calculation such as land purchase cost, building costs, retail value once built, consultant costs. These costs are relatively easy to approximate and at this stage you are only jotting down estimates to see if is something worth pursuing. For example if saw a development site with approval for 6 Townhouse you would do a quick calculation to see if it may be profitable:

6 Townhouses

Income = $3,000,000
Land costs = $900,000
Building costs = $1,200,000
Consultant costs = $50,000
Stamp duty = $16,000
Selling fee’s = $90,000

Profit = $744,000

Check out the local council
Once you have done a rough costing and you know that there is profit potential in the development then it is time to take other matters into consideration such as council guidelines and zoning. The local council is a great source of information. If the site is already DA approved then a lot of the work has been done already. The architect and engineer who did the approved plans may be able to provide valuable information.

Another area that you will need to research is any environmental factors that may have an impact on the success of the development such as access to water, sewerage, telecommunications and power. These can be costly if not already provided. This is the stage where you will have to take a look at the actual site by visiting it so that you get to see anything that may not be visible on aerial maps or drawings such as power lines that may run through the site. You will need to look for such things as are there any heritage issues in the area, is the site liable to flooding, are there any easements on the land, is it going to be easy to drill into the ground or is it made of rock.

* Water
* Sewerage
* Telecommunications
* Power
* Flood issues
* Easements
* Caveats
* Soil type
* Rates or taxes owning
* Heritage issues

Demographics of an area are really important
Demographics of the area will also have a huge impact on the development. You will need to know who will buy in the area, what type of housing is needed, is there a shortage of certain types of dwellings, is the area predominantly single people or couples, families or elderly people? These answers will all have an impact on what you build, how many bedrooms you will need, what size houses are most likely to sell, and therefore have a huge impact on your profits as you need to be selling something that the area requires.

What is happening in the area?
Whilst it is important to check the current market it is also important to check out anything that may affect it in the future such as planned infrastructure. This will give you a better idea of what to build. By finding out the demographics and the future planned infrastructure you are then able to build properties that you will have no problem selling and as this is where your profit lies. Doing a site analysis is one of the most important steps in property development. You want to make sure that you project suits local requirements and therefore targeted at the right market. Continued market research will allow you to see what areas are experiencing a growth and which area is experiencing a decline so that you are not developing in an area that it is going to be difficult to sell. By checking out the local real estate market, you will be able to see how long it is taking properties to sell in the area you are looking to develop in. This will give you a good indication on how quickly you will be able to sell and again, how quickly you will make your profits. But I will focus more on selling at step 7 – selling.

What are my choices?
The main two types of sites are DA approved or Raw. A raw site has no planning approved and based on local council zoning guides, is up to you to research and decide what you can put on the site. A DA approved site has a lot of the work done already and with plans approved, there is a lot less that you need to do as architect and engineer plans will have already been drawn up. If you wish to make a slight variation to the DA then this is possible and may be accomplished by applying to the local council.

This is the stage where you fully analyse and get acquainted with the site. You will also need to look for anything that may be owing on the site such as rates or taxes. Council will have a big impact on what you can build so you will need to familiarize yourself with the terminology. Jump on their website and browse around the different planning maps and zoning guidelines for the area. You will be able to find out from council, information such as the minimum size per site, any street frontage requirements, any specific building materials that must be used, and the development plan for the area. Once you have determined through a quick calculation that the development is worth looking into further and you have done your market research on the area and researched the site, then the next step is to run a detailed feasibility with actual cost of everything involved to see what your profits will be. Negotiating is a key and a major influence on the profitability of any development but I will be telling you more about Step 3 – Financial Feasibility, in the next issue.
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Property development can be broken down into seven basic stages. If you can grasp each stage and understand the basics then you can avail yourself of this fantastic wealth creation strategy that is property development.

This issue we are going to start right at the beginning with stage one and look at how do we actually find a site that is worth developing.

Stage 1: Finding a Site

It can sometimes be difficult to know where to start when first trying to get into Property Development and where to start looking for sites that may be profitable. There are many bargains to be taken advantage of in today’s economic climate, you just need to know where to look and start looking.

Where can you find sites? I have really learnt that great development sites can come from just about anywhere, so the bigger your network the better. To start building a network and finding sites you can look on the Internet, in your local paper as well as your State newspaper and also your local real estate agents. These will generally show you all the properties that are on the market. However there is another way to look for properties that are actually “off market”. You see a lot of development sites are actually sold before they ever officially become “on the market”. To find these sites you need to get yourself hooked up with a development agent, similar to a real estate agent but they generally only deal in properties where you can add value by developing in some way. If you look under the business section of the paper, under commercial and investment properties then you will find sites that are suitable for developing but you will also find the contacts of development agents, call these agents and ask to be on their contact list. They will then email you periodically with their potential development sites that are not available to the open market!

Another great way to find potential deals, is by driving through an area and looking for abandoned development sites. These present great bargains as usually construction will have come to a halt due to lack of funding and the vendor will be looking for a quick sale. The vendor or developer may need to sell at below current market value and there’s a high chance that there will be an option to get creative when doing a deal as the vendor will be prepared to take extra measures due to their situation. You can often negotiate something that is win-win for you both and might even mean you don’t have to invest any of your own money! (But more of that in Stage 4, when I’ll tell you about no money down deals). There are also many opportunities to create business partnerships in these situations. When getting involved in properties that have already started construction, be careful to do your research in regards to what has been done, what hasn’t been done and why construction halted. This will save you time and money in the long run.

When looking for a site, research is very important. You really need to know the area that you are looking at developing in extremely well as you will need to pick an area that allows for the type of development you wish to do. Go onto the local council website and you will be able to find a lot of information by browsing through it and familiarizing yourself with the content. If there is something you don’t understand you can call the council and talk to someone, usually the town planner, as they are generally very happy to help and advise. What the council wants to see in the area is a key factor and it is advisable to build up a good rapport with the local council.

While you are browsing through the council website, if you come across words that you do not understand look them up or ask the council what they mean specifically. This is quite important because if you do not understand the content you will start to feel lost and you will not be able to make sense of what you are reading/looking at. Familiarise yourself with the council and city maps such as the Zoning Maps and the Land Environmental Plans (LEPs). Understanding the terminology, not just with the council, but also in other areas of property development in general, is also a key factor to being able to succeed.

Research not only involves knowing your area well, it also involves educating yourself on the property market. Factors such as supply and demand of housing, what suburbs have a rising trend and which have had a drop in prices in recent years, whether you should be making offers above or below the current market price etc, will all affect your end result. Local real estate agents, various property websites and RP Data can all give you a lot of information on these trends.

Networking is also a great way to find sites! You can start networking and building your contacts such as builders, site managers, project managers, architects, town planners and other investors involved in the property development game.

You should network with anybody and everybody, friends, family, local shop owners, local real estate agents, neighbours, mortgage brokers, council, long term residents, plumbers, financial planners – let them all know what you are interested in. You want to get other people on the lookout for you too, doing the legwork and research for you where possible. Alert local real estate agents and development agents of what your criteria is such as the area you want, size of development, profit margin you are looking for, style of dwellings you wish to construct, your price range etc. You may also find that you may be able to help them too.

With the right tools and knowledge at your fingertips you will start to find yourself coming across more and more sites that may have potential for a lot of profit.

If you would like to do a practical exercise, jump onto your local council website and go to the development section, click onto the zoning map for your local area and check it out. This will show you the development potential of every property in your area. A great way to research and confirm potential development site and something I have been using since I first got started in property development.

Next issue we will move onto Stage 2: Site Analysis which is all about doing the right research on a property once you find it. In the meantime, happy property hunting!