Before you embark on investing your hard money on a property development project, you’ll want to know that it’s feasible. The risk, time, and effort has to be worth it, and you want to know that the development will make a healthy profit. Generally, a successful property investment gets a return of 10-20%. This is subjective and the right number for you may be higher or lower.
Whatever your desired outcome/return, do your research before you commit to the project.
The first step in ensuring your project is going to deliver your desired outcome is undertaking a feasibility study. .A feasibility assessment takes into account the land costs, planning expenses, bank payments, and fees, and construction costs. The costs are held up against the current property market prices (likely sale costs) to find out your potential return on investment (ROI). Experience plays a big part in being able to accurately determine the costs and likely return on investment (ROI).
For clients, Jubilee Home Builders offer a free, no-obligation feasibility assessment. We work with a group of trusted investment and development professionals, we help you through every step of your development project, With years of experience in multi-unit property development in Perth, we understand the different markets and where the largest profit potential exists.
To conduct your own feasibility assessment, we’ve detailed the steps involved below.
1. Land capacity
Before you can start your feasibility assessment, you’ll need to know the capacity of your land. That is, what you’ll be able to build on it. This is determined by the council based on a host of factors.
2. Income potential
Based on your initial findings, do your research on the asking prices for similar properties in your area. Note the potential sale prices for each dwelling. This is the fun part!
3. Consider your costs
The main costs to consider in your feasibility assessment are as follows:
• Acquisition costs
• Land deposit amount
• Stamp duty and legals applicable
• Lenders Mortgage Insurance (LMI) if applicable
• Loan interest rate
• Loan to value ratio
• Anticipated loan interest (based on a typical overall timeline of 12-24 months)
• Construction deposit
• Construction loan amount
• Anticipated construction interest (based on a typical build schedule of 6-12 months)
PLANNING AND PRELIMINARIES
• Project Potential Review
• Town Planning (all documents, applications, and permits)
• Preliminaries (working drawings, engineering, etc.)
• Construction (building contract and project specification)
• Complete cost for each dwelling
• Council Public Open Space contribution (if applicable)
• Subdivision fees
• Real Estate Agent fees
Here at Jubilee Home Builders, your design and construct team, we will handle the entire process for you, and provide a complete project management service from start to finish. This means that everything from initial design to handover is in the scope of the construction fee. You won’t have to allow for the ‘Planning and preliminaries’ costs above, as this will be included in the overall project price.
Note: make sure you check this with your builder and are very clear on the inclusion and exclusions of the building contract.
If you’re considering a multi-unit development, give Jubilee a call on (08) 9571 3512 for your FREE feasibility assessment.