How do developers look for blocks to build on?

Good questions @wylie

Yes fairly easy!

work out end value of project
Minus
Build cost
Soft cost
Holding cost
other cost

and you will get the value for your block.

Best to you use local REA, who has run on the board for selling DA approved site!

Local developers have good rapport with REA as they buy and sell thru them.

Good development sites get sold before it pops up on main stream marketing platforms. (depends on market conditions)

It is probably more work then mentioned here. yes i hate paying selling commission too. other side of the coin is that i dont have to deal with low ball offer, time wasters etc. REAs have extensive network of property developers.

if you are still in doubt, and it is a small development, Best to Auction the site. ( you may get amateur/first time property/volume Developers paying premium price)

Generally speaking, Developers have sound knowledge of price to pay for land component. i.e $100k per townhouse site, $80K per apartment site + they factor in any unusual building difficulties + imposed council conditions, etc.

Yes ( feel free to check our recent post on Commercial zone in vic thread)

That is a good situation to be in.

Depends on your strategy and ACTUAL Profit margin, it may be worthwhile building it!

 

Contact Graham Millar of Millarslist.com - he specifically sells development sites.

I have an acquaintance who has just sold his lot in inner west Sydney his intermediary got paid $400k (1%) for the deal/introduction to the developer but also achieved 25% more than was previously on the table.

You can't begrudge him the commission.

 

+ what @Be Developer said

If you do decide to build need to also consider values today may be a very different story on completion of project. I guess this is the risk developers wear, we are at the mercy of market so we need plenty of fat if we go down this road

MTR

 

There are a few buyers agents in your area that look for development sites for their clients. As they are paid by the purchaser it could be a way to sell for a good price without paying comms.

I'm sure there'd be a few of us interested on here too.

 

Understand your planning codes.
Backwards.
Inside out.
Reverse face.

Then you can see the gems in the market with current offerings and align them with what you know sells in the area.

 

What suburb? Email a few developers in the hood doing something similar (use pdonline for almost completed projects nearby) on a tender basis to see what interest you get. Alternatively approach builders do the work and have them quote on it and see if you can raise the moolah.

Very interested in the spreadsheet if it is available as I may be doing something similar in the Yeronga area in the next year or three.

 

The best lesson I have learned when deciding on whether to sell a DA approved site or not is, If I had this project completed today, who will be the typical buyer who will buy it (ie: Investor, people that want to live in it or foreign investor's preference) and whether that target market will still be there in 12 months time.

It is all nice and fine to do the numbers today because there are people in the market today who will pay those prices but will they still be in the market? Look at what APRA has done to the investors, last year this time you could borrow up to your neck, right now people are losing their deposit because bank wont approve finance. Employment market is not doing too well either. I get contacted every day by people from Brisbane and WA looking for a job in Sydney. Food for thought.

 

Good suggestion, this can work @beachgurl but as BA's we must work for our clients only. I get approached but a lot of developers but when I explain I need to see value or a discount for my client to be interested they usually leave. Most developers would rather pay the agent, and get the inflated purchase price as it will effect the rest of their resales to offer much of a discount early on.

I guess if someone was a bit borderline distressed financially or planning on holding the rest of the stock it would be attractive to sell with BA and no fees but in practice I have had difficulty making the fit work often.

For example I have a recent deal where developer got approval for reno and extra units in yard, completely refitted and renovated the front home first, then we purchased at a very competitive price (my client wanted nicer new investment for tax plus possible ppor one day) it hasn't settled yet but is priced well under similar (renovated not new) stock selling in the immediate area. Problem is the linen plan and final approval timeframe blew out with council so settlement has been pushed back and client (and I) frustrated trying to hold the deal together with changing financial environment. Client still wins by settling and can afford but i wouldn't rush out and do a lot of these due to potential frustrations and the associated risk of buying pseudo OTP stock.

 

How much should I pay for the development site is a question on many developers mind who may be doing a small three unit subdivision or a dual occupancy where the existing house is retained.

The first step is to work out how many units can be built or get Council approval and the size of each unit. {mods: removed solicitation}

Then let's take a hypothetical 850 sqm Property in a local Council where the land is burdened by a schedule to the zone which requires very large open spaces and an overlay which requires vegetation to be preserved as well as 2 new canopy trees to be planted.

The property has several native trees over 5m in height which must be retained and new buildings to encroach a maximum 10% into the TPZ of these trees which requires an arborist's input. These council requirements “eat” into the developable portion of the land.

The 15.5m front boundary faces north which is not ideal.

The develop's objective is to demolish the existing house, which is in poor order and see how many units can be built.

Experience shows three units will be the maximum number which will garner this council's support for this wedge shaped land in a court bowl.

Each unit will be around 150sqm containing 3 bedrooms. {mods: removed solicitation}

Recent sales in area show 3 bedroom units sold for $510,000. We are cautious so do our feasibility on a $480,000 selling price for each unit even though the front unit might command a slightly higher price.

Gross Income from sale of 3 units

$ 1,440,000

Development cost

20% developer'smargin $180,000

Selling/legal fees say $45,000

Building and soft cost $630,000

Subdivision cost $45,000

Others costs, say $30,000


Total development costs $930,000


Cost of property with a potential 3 lot subdivision is then $510,000 ($1,440,000 less $930,000)

We have not taken into consideration any contributionto be paid to council and holding costs.

Using this same formula you can work out how much is a dual occupancy site worth where you retain the existing house and build one new dual occupancy home in the backyard. Of course make sure you are allowed to subdivide the land into two lots as some Victorian Councils are or have put in place minimum lot sizes!

Allow for some renovations, contribution may not apply for two lot subdivisions and you may be satisfied with a smaller development margin.

This is a hypothetical example.