Tips for Assessing Your Development’s Potential

3 September 2020
Business people celebrating investment

Property development can be lucrative if you develop the right property at the right time. But it’s important to do plenty of research first to assess property development feasibility and potential.

Below are some handy tips you can use as your property development guide.

Location demand

There’s an old saying that the three most important factors in real estate are ‘location, location and location’. It applies just as much to property development as it does to any other type of real estate investment. Ideally, you want to undertake a property development project in areas that have (or that will have) high demand.

High-demand locations tend to have the following characteristics:

  • a good public perception.
  • close to good schools and the CBD.
  • good shopping and public transport facilities.
  • near restaurants, cafes, entertainment venues, parks etc.

It’s important to do your research to locate high-demand areas and the type of properties that are selling well in them, or that have the potential to sell well in the future due to changed market conditions. For example, changes to zoning regulations.

Zoning information

Different property locations have different residential zoning and land subdivision regulations that can affect property development projects. These regulations specify the type and size of dwellings you’re allowed to build on different plots of land in different locations.

Zoning and subdivision regulations can change. You should contact your local council to find out about relevant regulations in your area as part of your property development feasibility study.

Your block of land

It’s important to be realistic about the block of land that you have in mind for your property development project. Doing a thorough cost budget of how you can improve and it maximise its development potential should be part of your feasibility study. For example, will you need to include the cost of demolishing one or more existing dwellings on the land as part of your development project? You need to factor in any potential additional costs like those in addition to your land purchase, council development approval and construction costs.

It’s not only important to do a thorough cost analysis of your potential property development project, you also need to do accurate revenue projections as well. For example, if you’re planning on developing and subdividing a large block of land into several residential lots:

  • what will each lot be worth?
  • how many pre-sales will you need to maintain your cash flow during the development phase?

All of this cost and revenue information will also help you to determine your potential return on investment (ROI). Your ROI must justify all the time and effort you will put into the project.

Your sales and marketing strategy

Consulting a specialist real estate agent during your feasibility study can provide you with very useful sales and marketing information to help with your decision-making. Real estate agents are across market trends, buyers’ preferences and a good real estate agent should be able to assess your development site’s sales potential.

A real estate agency that is experienced in selling and marketing development projects should also be able advise you on the most appropriate strategies for your project. For example, they should know whether your development will be suitable for:

  • being sold ‘off the plan’,
  • as land,
  • being sold on completion
  • as house and land packages,
  • as ‘turnkey’ homes, or
  • a combination of all the above strategies.

Knowing this information upfront can help you determine the feasibility of your property development project, saving you time and money in the long run. If your cost and revenue projections stack up and you decide to pursue your project, these sales and marketing strategies will also give you a clear road map to follow right from the start. The most successful property developers plan their projects every step of the way from beginning to end. There are no surprises.

The bottom line

It’s important to do thorough research and planning before you commit to a property development project. Too many property developers rush into doing projects without developing clear sales and marketing strategies upfront. That is a mistake that should be avoided at all costs.

How We Can Help

At Now Living Realty, we offer quality real estate services for Perth developers, builders, sellers, buyers and investors. As award-winning project sales and marketing experts, we are here to take care of your real estate development needs.

Contact us today to help you assess the potential of your property development project!