Construction time – Part 3 of 3 part series

Property development can be daunting so I’ve put together some FAQs to help address some of the important questions that will arise as you start your development.

This has been broken down to a three part series;

1.       Getting Started

2.       Design, Planning and Approvals (as seen last Thursday)

3.       Construction Time

2. Construction Time 

 “Each of us is carving a stone, erecting a column, or cutting a piece of stained glass in the construction of something much bigger than ourselves,” Adrienne Clarkson.

Construction time is the best part of developing property…seeing that first sod turned and standing back as the excavator starts to form up your site is truly satisfying.  The groundbreaking, also known as cutting the site marks a massive milestone in your development project. 

There is so much work that needs to be completed before getting to this stage.  You’ve found a site, negotiated to purchase it, researched with council and other authorities, run your feasibility, got your designs done, had your building quotes completed, prepared documentation and lodged your DA, perhaps battled with council.  Then you’ve obtained your consent and engineering and construction certificate plans and the CC consent.  Once fully approved there are still more hoops to jump through and it’s off to your lender to get your finance organised and finally unconditional approval.  

The development process is like an iceberg.  Most of the work required in project managing your property development is done before you cut the site.  It’s all hidden below the surface. 

So by the time your project comes out of the ground, you have done most of the work.   Inexperienced developers won’t understand this but I know the sheer volume of hours required to get a project to the construction phase is phenomenal.

When can I start construction?

As soon as you have your DA – Development Application & CC – Construction Certificate consents and you have obtained an unconditional finance approval, your builder can start construction.

What is the first process?

Site clearing is required before you can start preparing your slab or footings. So ensure your builder has included vegetation and tree removal.  If you are demolishing an old house or building then ensure this is done before your builder is ready to start as you do not want to hold up the process.

How should I manage my builder?

It’s important to have open communication with your builder from the start. Explain to him that you want to be involved and depending on your experience and time available let him know if you will be project managing the development or engaging a project manager.

As project managers, we are in constant communication with our builder’s site or construction mangers. 

What does a project manager do and do I need one?

A project manager can help you to fast track your development. A good project manager will:

·         Save you money

·         Save you time

·         Minimize your risk

·         Teach you how to manage your development

·         Give you access to sites not on open market

·         Professionally manage, record and report the process for you

·         Share their local knowledge, experience, contacts, suppliers 

·         Allow you to keep your day job

·         You can learn the process then hopefully feel more confident to manage our next project.

You could use a project manager if you are inexperienced or time poor or both. It’s a good idea to use a project manager if you want to learn the process of developing, you can have your hand held through the development and will be amazed by what you will learn by being guided through the process.

Main steps in the construction phase include (for typical slab & brick construction):

-          Site preparation. This involves clearing of the site, pegging out of the site by the surveyor. Sometimes retaining walls will also be built at this stage if required.

-          Slab. The plumber will need to lay plumbing that will be located beneath the slab of the development. This needs to be done before the slab can be formed up.  The slab piering is then completed as per the engineer’s specifications and plans and then the slab can be poured.  It’s very exciting to see the slabs go down.  

-          Frames & roof trusses.  The frames are generally prepared before being delivered to site and can be erected very quickly with a day or so. It’s great to walk around the site once the frames are up and get a feel for each room.

-          Roof tiling of metal roofing.  Some builders prefer to complete the roof before starting the brickwork and other builders work the other way around. I’ve found predominately builders want to get the roof on as quickly as possible to protect the frames.

-          Brick work. This stage really gives the development true structure and you can feel the development making good progress when you see the brickwork completed.

-          Rough ins.  This involves the electrical and plumbing wiring and pipes to be installed before the internal linings to the frames.

-          Internal linings. After the rough in is complete, the insulation will be installed into the wall and ceilings and then the plaster will start on linging the walls and ceilings. You really get a good sense of space within the dwellings at this stage.

-          Waterproofing and tiling.  The wet areas will be water proofed in preparation for the tilers to start work, generally after or even during the timber mould out.

-          Timber mould out. This stage involves the carpenters installing the skirting boards, architraves, door jams and doors and kitchens.

-          Lock up is when all external doors including garage doors are on.

-          P.C.  fit out.  P.C. is a term for a Prime Cost Item and includes tapware, bath, mirror, vanities and other accessories which are installed at this stage.  

-          Practical Completion. This is the point in time when an inspection is conducted when builder is almost finished. You will walk through the development with the site manager and point out any items that still need attention. By this time it should only be touch ups and minor items requiring installation.

-          Handover.  This is when you are happy the construction has been completed to your satisfaction and to the plans and after paying the builder’s final invoice, keys will be handed over to you.

When can I lease out or sell my development?

Once handover is completed and you have received the Occupation Certificates from council or your private certifier, you can lease the dwellings out.  If you are building more than one dwelling then you may also be subdividing so you cannot sell the individual dwellings before you have subdivision approval. They may be sold subject to approval or registration of the subdivision. 

Seeing your development emerge from the dust and dirt and slowly take shape until it resembles exactly what you have planned is one of the most exciting and satisfying moments you could experience as a property developer.  

As I see Property Bloom projects come to completion, it really makes me feel like we’ve achieved an amazing thing for our clients; manufactured equity, provided education, created strong yields and most of all helped them fast track their portfolio and plan for their future.  It is such a wonderful feeling to step back and look at what’s been created and understand the needs that have been met for our clients and for the local communities we develop in. Seeing the dwellings tenanted or sold and lived in by families that will get to enjoy the fruits of your labour is what it’s all about.

http://propertybloom.com.au

Design, Planning and Approval – Part 2 of 3 Part Series

Property development can be daunting so I’ve put together some FAQs to help address some of the important questions that will arise as you start your development.

This has been broken down to a three part series;

1.       Getting Started (as seen last Thursday)

2.       Design, Planning and Approvals

3.       Construction Time

2. Design, Planning and Approvals 

Winston Churchill famously once said “He who fails to plan, plans to fail”.   

The design and planning phase of your property development will directly impact your end result.  So this is a very important stage.  Don’t rush it, take time to think about what you want to achieve and ensure you are happy with each milestone before proceeding on, as it can be costly to turn back and start again. 

Who do I need in my team for this phase of my project?

You’ll need a surveyor, architect or draftsperson, builder, town planning consultant (not always necessary), the local council, perhaps a private certifier and a development project manager such as Property Bloom if you are time poor or inexperienced. Also your accountant can play an important role in helping you run your feasibility studies.

Where do I start?

You must start with clear concept of what you want to achieve.  Here are some questions to ask yourself...

How many dwellings do you want to get onto the land? 

How much equity do I want to create by developing this land?

What does the DCP (development control plan) allow?

Design single or double story dwellings – what does the market want?

Are you building to hold or sell?

Who is the target market – tenants or owner occupiers?

If holding, what do tenants look for in rental properties? 

What is the demand for the number of bedrooms?

What do I need to do to differentiate my development in the market?

How much can you finance?  It’s extremely important to have a preapproval on your development finance so you know you can complete your project.

What is the best structure to purchase and develop in?  This is a good question for your accountant.

What do I do once I’ve found some land to develop?

The first thing you’ll need to do is to have a surveyor completed a contour and detailed survey. Contour and detail surveys give a true representation of the shape, features and services of a site. They normally include manmade improvements, trees and, if required, adjoining property information.  Once you have this survey, you can pass it onto your architect, draftsperson or builder.  They need this to start on the concept plan.

Another important investigation tool is a geotechnical report. This will classify the site, soil and wind affecting your site.  This information is important to consider when starting on the design and critical for the engineering plans.

Do I need to use an architect to design my project?

This will depend on your goal and the area you are developing in. Sometimes it’s not necessary to use an architect if you know what you’ll be building is fairly basic. But if you are looking to create something a little different or need some expert advice on a tricky site then engage an architect. Property Bloom has a great relationship with our builder and we use their in-house drafting service to save our clients money. We will use our architect for more high end developments.

Steps in the design phase include:

-          Concept plan. This will be the first concept of what can be achieved and you can make changes to this. You can use this plan to show the council town planner to ensure you are designing within their guidelines. It’s easier to make any changes now then after you’ve submitted the DA to council.

-          DA plans. Once you’ve approved the concept plan, then you’ll move to the full Development Application plans which are more detailed and may include other documents such as Statement of Environmental Effects and Basix reports that need to be submitted to council with the DA plans.

-          CC plans.  Construction Certificate plans are require after your DA has been approved. They will include engineer’s stormwater and slab design.

How long will my DA take in council?

What a great question and one that has many different answers. It will depend on the complexity of your project and your council.  A single dwelling will be processed quicker than a medium density project for instance.  You may be doing a Complying Development and not even need to lodge with council.  Speak to your council to get an idea of their processing times so you can plan this into your timeline.

Should I use a private certifier?

Property Bloom always uses a private certifier once we’ve received our DA consent. We find it is much quicker to obtain the Construction Certificate consent and the inspection process during the build phase is usually also speeded up when using a private certifier. To us this is well worth the small additional cost as time is money.

What is a Project Schedule?

At Property Bloom we prepare an initial project schedule that shows our clients the estimated timeline for the project. We use this tool to cross check each phase and gauge how we are progressing.  Each project is different and will take different amounts of times over each phase, but our job is to keep the project moving forward as efficiently as possible. so using the services of a project manager can really assist especially if it’s your fist project as you’ll learn so much from being guided through the often complex process of property developing.

How do I complete a Feasibility Study?

It’s important you undertake a detailed feasibility analysis before you decide to proceed with your development.  There are various software around you can use, but you’ll need to know what estimates to include, that’s the tricky bit.  At Property Bloom we base our analysis on recent and similar projects we have completed. As we’ve project managed over 50 developments in the Hunter Region of NSW, we have a very good idea on the costs involved and are able to make quite accurate estimates.  From your analysis, you need to calculate the expected cost of the project and likely profit or equity that you can create from it and gross yields if you are planning to hold.  Once you’ve completed your feaso, keep updating it with the actual costs as you proceed through the project to keep track of the viability your development.

 “Planning is bringing the future into the present so that you can do something about it now” Alan Lakein.  That’s what I love about property development....bringing the future into the present.  You really can’t spend too much time on the design and planning phase of your development, but try not to get overwhelmed by all the detail.   Whilst, this is the most time consuming phase, remember to step back and visualise the ‘big picture’ to ensure you keep moving forward towards your end goal. 

Property Development FAQs Getting Started – Part 1 of 3 Part Series

Property development can be daunting so I’ve put together some FAQs to help address some of the important questions that will arise as you start your development.

This has been broken down to a three part series;

1.       Getting Started

2.       Design, Planning and Approvals

3.       Construction Time

1. Getting Started

What is a developer?

I quite like this description...

“Developers buy land, finance real estate deals, build or have builders build projects, create, imagine, control and orchestrate the process of development from the beginning to end” Wikipedia

I especially like the words ‘create, imagine and orchestrate’ as this is exactly what we do at Property Bloom.  When we find a development site, I will stand on it and spend some time visualising what can work on the land.

What’s my development strategy?

Only you can answer this one.  It’s important to determine your development strategy and your investing criteria prior to looking for a development site. 

Your strategy may include:

-          Land Subdivision

-          Renovate and add value to an existing dwelling

-          Dual occupancy or low density development

-          Renovate an existing dwelling and build new villas/units also on the land

-          Medium density development

How much money will I need?

Well that’s like putting the chicken before the egg. You should set a budget before you find your site. Your budget will help to determine your development strategy.  A simple land subdivision will be less costly (but not necessarily quicker) than a larger villa/unit development for instance.

How much profit should I be making?

Profit can come in many forms; long term capital growth, rental yield, depreciation or tax returns and equity, even self fulfilment!   As part of your strategy, you will need to determine your financial and personal objectives.   Do you want to sell immediately?  Are you planning to hold and refinance to draw out the equity you’ve created?  Are you developing to hold, rent and build your portfolio? 

Each decision will mean different outcomes and you need to seek the advice of professionals on this, start with your accountant to ensure you understand the GST, CGT and other tax implications of your plans.

What’s the one thing you need before you put an offer in?

A conditional loan approval.  Knowing that you have a preapproval to a certain amount is a valuable negotiation tool.  Ensure you tell the agent that you have your finance approved as you make your offer so they understand that you are serious and can follow through on your offer.

What are the four crucial pre-purchase checks needed?

-          pest & building report – if there is an existing house you are going to keep/upgrade

-          Ident survey – this will show the dimensions, description of the property, any Covenants easements and/or encroachments to the land.

-          Review the Sales Contract – use the professional services of a conveyance or solicitor, but you can easily check the 149 Planning Certificate to ensure it is recent. This document will tell you the zoning and if the property in a flood, bushfire, mine subsidence area and many other

-          Confirm with council what can and can’t be done with the land, you should have a good understanding of council’s Development Control Plans.

Two important steps to make once you exchange or secure the site:

Order a Contour or Detailed survey – this is needed to supply to your architect or draftsperson and your builder so they can start work on your plans.

Order a Geotechnical report – this will determine the site and soil classification and altimately have a bearing on then engineering for your slab or footing design.  If you think the site could be risky for example if you think it may be undermined or have a water course near or below it, have a geotech report done before you exchange or secure the site.

Who do I need on my Development Team?

-          Property Specialist Accountant & Solicitor

-          Finance Broker or personal banker

-          Surveyor

-          Architect/draftsperson

-          Builder and other tradesmen; plumber, electrician, carpenter

-          Consultants such as an engineer and private certifier

-          Quantity Surveyor

-          Development Project Manager  – to guide you through the entire process

Getting started can often be the hardest step. Once you’ve found your site, completed your due diligence, worked out just what you are going to be doing with it and managed to secure it, then the best parts are yet to come.  Let the creative process process begin.

Look out for Part Two next Thursday....

Waiting can be...well weighty

Today I drew inspiration from a lovely young man I had coffee with today. His name is Matt and he’s one of our clients.  Matt’s a switched on guy, maybe about 30 or so, has a Psych degree, owns three investment properties, all high yielding (I’m talking 9 – 15%!), runs his own importing business, has been to a property seminar or two and he and his wife are expecting their second child in a couple of weeks. Oh and he’s also very polite.

We’ve just finished a development project for Matt and now we had the actual end figures confirmed, we caught up to reflect on how his first project went with Property Bloom and what he could be doing to plan for his next. 

That’s what I like about Matt. He’s a planner, a big picture guy yet he still keeps track of all the fine details. Here he is, two weeks out from having his second child and we’re sitting discussing property development options (we did also touch on the benefits of epidurals!).

We chatted about current economics...the estate of affairs here in Australia with our political uncertainty, the constant barrage of whether Julia is a worthy Prime Minister...the lousy situation in Europe...is Spain going down and when?  How will Greece pull through? The Queen’s Silver Jubilee and how cool Kylie Minogue’s outfit was (ok, that was my comment; I don’t think Matt had an opinion on that one). 

We covered off the ‘two speed economy’ of Australia, the state of China and how much coal do they actually need (a lot thought Matt as he visits China regularly for business and has seen for himself the massive changes taking place).

We both agreed that the current state of affairs was actually the perfect property investment environment for those who could block out the noise and focus on what was happening right under our noses.

We’d concluded that we didn’t actually care about what’s happening in the global arena (apart from seeing our Superannuation cut in half over the past year).  Whilst we weren’t being irresponsible, we just both decided that it didn’t really impact on our big picture.

This comment from Matt said it all...

”Jo, I’m not going to wait around for the world to determine my future.”

There it was...his words really resonated with me.  His statement so bold but yet so matter of fact... making perfect sense.

There’ll always be something to ‘wait for’...  Let’s wait til after the new baby comes. Let’s wait for the next election. Let’s wait to see what happens in Europe. Let’s wait to see what the stock market does. Let’s wait to see if the RBA cuts rates....Let’s wait, let’s wait, let’s wait!

Before you know it, you’ll be 65 asking “Why did we wait???...If only we invested in property back in 2012 when rates were low, yields were high and it was a buyer’s market.  What were we waiting for?”

For my client Matt, I’ve got a great next development project coming his way because he’s not going to hang around waiting.  So by the time his new baby turns one, he’ll have another great project under his belt.

So what are you waiting for?