Property Development Mistakes Part 2:
So last time we spoke about property development, we left you with 5 really important questions to ask yourself before heading into undertaking a project. 
This week we discuss 6 other crucial questions that you need to know the answers to – to ensure that you don’t lose your shirt.
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What makes this area tick?
Knowing the local area is critical, before you even put in an offer on a plot of land.
If you are looking to invest in a certain area – get out and meet the locals. ‘Hit the pavement’ – talk to a range of local agents, valuers, even the local residents in the pub.
Ask whether there is a stigma about the area? Is anyone else developing here yet? If not – why?
Are there any negative rumours going around town?
I had a meeting with a developer once that asked why I thought his site was in a secondary site. He was proposing to develop residential units on this land. I asked him to drive to his site – park his car and then walk to get a loaf of bread, or walk to a local cafe. He quickly learnt that the site he had purchased was a long way from any shops, cafes and services. He also learnt quickly that there were no footpaths to provide easy access to the CBD. The developer also witnessed the negative impacts that some of the surrounding development had – he had to walk past a noisy pub that attracted some unsavoury characters.
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What is the external driver for the market that I want to develop in?
Understand what is driving your local economy. Is it a one trick pony, like a mining town or a township that is reliant on one industry like manufacturing? Or is it a well diversified area, that has predictable and steady growth that is sustainable?
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What do buyers of the ‘end/developed’ product want?
You really need to know your buyers preferences. Does proximity to transport infrastructure (i.e. road, rail, bus) matter to the buyer of the product? As ‘connectivity’ to infrastructure for consumers of one bedroom units can be significantly different to that of rural residential home sites in fringe city locations.
Develop for the taste of the market – not your personal preferences.
What size blocks of land do buyers want? Is this trend changing? Is what the town plan stipulates – in-line with buyers preferences? We have seen the example in many markets, where local Councils are chasing higher densities – but buyers still want large blocks of land, for sheds, pools etc.
What might buyers want in 2 years time?
Most developments take longer than we all anticipate. If your project is delayed – will the product that you are building/ developing still be contemporary in 2/ 3 years time? Will it still be appealing to the market?
Realistically you might be trying to still sell some of your product in 3 years time (we have seen this countless times) – so what are the trends in the market?
Give consideration as to whether the demand for a particular product will stand the ‘test of time,’ or if it is driven primarily by a short term project in the region. Developing ‘bedsitter’ units may help alleviate demand for short term accommodation catering to construction workers; however will these be saleable in the 2 – 3 years when these workers have left the region?
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What is everyone else doing?
Know what your competition are up to!
Research the market and talk to local agents, property advisers and town planners about the demand and supply characteristics in the area. Try to target an ‘end product’ which may be under supplied. Always give consideration to the amount of development in the ‘pipeline’ which may compete directly with your product over the development period.
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How much is this going to cost me?
This is the most important part of the process and will determine if the initial purchase of the land the proposed development is worth proceeding with. Depending on the type of development, there can be a significant number of inputs for a feasibility analysis.
An experienced property advisor can help provide you with some clarity around whether your proposed project is viable.
Even numbers on the back of an envelope is a good starting point!
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What is my exit strategy/ safety ramp?
You need to have a good exit and/or holding strategy from the start of the process. Never be too quick to demolish existing improvements on the site, which could provide income that can contribute to holding costs and planning costs.
Remember that even after securing a site the finalisation of an idea (the development), town planning and architecture/engineering drawings can take an extended period, during which the site can lay dormant.
Discuss exit/holding strategies with a financier if the market deteriorates and sales rates and/or values decline.
Even stopping and taking the time to answer these questions on the back of an envelope could help to save yourself a lot of time and money.
The team at We Speak Property can help you to answer some of these questions. Please give us a call and we can help solve your property headaches.
