Today I ask Jo Chivers of Property Bloom, who features in my Property Millionaire book when is the best time to develop property?
It’s important to understand the property cycle so you are aware of each stage and choose the right times to be buying. Obviously, you want to buy when the market is low, but the best thing about developing property is no matter what time in the cycle it is, you are creating your own equity and not relying on capital growth.
However, if you start a property development when the market is about to rise, it’s like a double whammy. By the time you have completed, you have created equity AND received some capital growth.
What are your three top tips for property development?
1. Select the right location
• Research, research, research
• Look for areas with a diverse economy and new jobs growth
• Land must be affordable with large lot sizes
• Look for suburbs with an undersupply of new housing, and a transforming or gentrifying market
• Ensure there is investment being made on local infrastructure
• Track the long term (10 year) growth trends
• There should be a good selection of builders to choose from
• Use local architects, surveyors, and a development manager if it is your first development so you can learn the process
• Investigate the local council and find out their processing timeframes
• Choose an area that is not too far for you to travel to
• Make sure there is a good level of comparable sales references so you can gauge end values.
2. Work out your development strategy
• Renovate an existing dwelling
• Build new house, villas, units, duplex
• Do both if you find a house on a large piece of land
• Hold: need strong rental demand, good depreciation benefits
• Sell: need strong resale market, check CGT and GST implications with your accountant
• Both: by holding some and selling some you can create a positively geared portfolio.
3. Who needs to be on your development team?
• Property Specialist Accountant
• Property Specialist Solicitor
• Finance Broker
• Consultants: engineers, planners, private certifiers
• Development Manager – will have all these contacts already established and should bring discounts to the project
• Quantity Surveyor for depreciation schedules.