On or off market?

For most novice developers the first place they will be able to source a site is on the market. This means sites which are advertised and out in the public domain.

Andersen says beginner developers would generally go to a real estate agent, or private sales.

"If you're going on market and using a real estate agent you need to find one who specialises in redevelopment sites," he says.

To get to know which ones specialise, you can look at advertisements for development sites in newspapers or on the internet.

Another way is to get a buyers agent to look for you. The drawback is that they will charge you a fee to source a site. But Andersen says you can factor that into the cost of acquiring a development site. If you add the fee to the cost of the land, usually about 3 per cent, you can determine whether it is still feasible.

He says the advantage of using a buyers agent is they can take a lot of the legwork out of finding a site. But you have to ensure they understand development and are not just experienced in finding investment properties.

The other avenue is private sales, usually advertised in newspapers. Andersen says the advantage of private sales is that you're dealing directly with the landowner and have less competition from other people looking for sites.

Off-market sites are generally a bit harder for the novice to find. But you can advertise that you are looking for a development site.

"You'll get calls from agents who have sites and from private owners," Andersen says.

Town planners and surveyors are another useful resource in locating a development site. They may be preparing a development site where the owner wants to sell it and not proceed with the project.

Andersen says you can do direct research by approaching landowners that have sites suitable for redevelopment.

He says you can access free information from local councils about development applications.

"You can go through those and pick out ones with say three townhouses that have a development permit," he says. "It will have the address and the name of the applicant. This is a classic off-market deal. If you contact the applicant they may want to sell for a number of reasons – changed circumstances for example. You might be able to negotiate a better price and you'll have no agents fees."

There are also what Andersen terms "site flickers". These are people who purchase sites with development potential and then proceed to get the necessary approvals before selling the site. He says many people do this as a full-time job and are not interesting in going on with the development.

"They can be a good source of finding a site with development approval," he says. "It can also save money, because you don't have the cost and time of getting the approvals in place. You can get in and build it and get your money back quicker. You may pay a little bit more but at least you're going in with your eyes wide open because you know it has been approved and what the development conditions are."

Where to look

Yardney says you should watch for suburbs in transition: older, rundown suburbs that are being gentrified.

Andersen agrees, saying you should also make sure the area you've chosen has good services, and is close to the city and areas where there's a café culture being developed.

Yardney says look at areas where young people are moving in and renovating older properties and bringing new life to a tired suburb.

Get all the information you can about the area you're interested in. Often real estate agents publish newsletters and industry analysts put out market reports.

Much of this information is freely available on the internet.

Some good sources include: the Australian Bureau of Statistics (www.abs.gov.au), which puts out regular releases of statistical information; property bulletins from valuation firms and banks; the Master Builders Association (www.masterbuilders.com.au) and the Housing Industry Association (hia.com.au), which interpret and analyse housing statistics; and fee-charging services from forecasting groups such as Residex (www.residex.com.au), Matusik (www.matusik.com.au), Midwood (www.midwoodaustralia.com) and BIS Shrapnel (www.bis.com.au).

Yardney says another great resource is RP Data (www.rpdata.net.au), a subscription-based service with maps, aerial photographs and listings of individual properties recording past sales. Although RP Data is not cheap, Andersen says it's a valuable tool for serious developers.

Of course you can always use API magazine as a great resource, with its monthly publications of Australian Property Monitors data on house and unit prices and rental statistics.

Reed Construction Data (www.reedconstructiondata.com.au) outlines development approvals and building approval applications in an area as well as detailing what stage those applications are at in the approval process.

Yardney says you should keep in touch with professionals who work at the local councils.

"They have an overview of any planning changes coming up in their area," he says. "It also pays to keep an eye on the local newspapers and watch for any changes to the planning schemes."

If you're planning on retaining the property or properties, it's important to find out what rents similar developments are achieving.

The best way of doing that, says Andersen, is by talking to managing agents.

"Even when it comes to finance, the banks will want to know what the units will rent for," he says.

 

This article was first published in Australian Property Investor Magazine and is copyright and reproduced with their permission.

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