Thinking of developing, don't know where to start

[Jazza]

Hi all

I have no experience at all in the area of developing and I thought I would ask you experts on the steps you take in the procurement of a property for the purpose of developing.

For example, I just found this on Realenz to use as an example, a property in New Lynn for $419,000 has a 1920’s bungalow on a 1275 square meter section.

1) Obviously you can’t put an offer in subject to council approval of subdividing the section, so how do you determine before you put the offer in that it is in fact sub-divdable?
2) Is there a typical cost of sub-dividing a section, or will it always be different for every section?
3) What specifically do you look for in a section/property when looking for something to develop?
4) Do most developers have specific house plans that they can use for a certain sized section or do you usually create a new plan based on the land that you have available?

Thanks in advance.

[essence]

Subdivision Costs

1) Why can't you make the A S & P conditional upon Council agreeing subd? Its no good buying a property for this express purpose, and then finding out it can't be done. If its your first subd, this may be the way to go.

2) (Very) generally speaking, there are the same base fees for all subd's. All Council's charge a percentage of the section value, as a Reserve Fee/Financial Fee/Financial Contribution (Whatever the **** they want to call it) ie. $75,000 x 7.5% = $5,625. You do not see anything for this. Also on top of this, there are Council water/sewer/stormwater fees. The site may need soil testing, new piles (if steep). It will definitely need to be surveyed by registered surveyors ($5K-$8K) and then there are the LINZ fees ($800 for hard copy or $250 for e-copy lodgement). Allow anywhere between $25K-$40K.

3) What to look for? This is different for each developer. I think (IMHO) the most obvious is, flat section with easy access.

4) Again, this depends on the site. There are some very good kitset house plans available. If you know of someone who will do plans for cheap, even better.

[whitt]

1) Obviously you can’t put an offer in subject to council approval of subdividing the section, so how do you determine before you put the offer in that it is in fact sub-divdable?

Tricky without spending alot of money with surveyor or having personell knowledge on subject. People have purchased before because an agent has said "May be subdividable" and found out later down process coucil say NO! It is up to the purchaser to determine if it is.

2) Is there a typical cost of sub-dividing a section, or will it always be different for every section?

Different depending on council , drainage etc..Maybe $10K-50K or maybe not allowed.

3) What specifically do you look for in a section/property when looking for something to develop?

Drainage, services, overland flow path, site history, shape, contours , location, council zoning, Lim, Pim, Dim sims.

4) Do most developers have specific house plans that they can use for a certain sized section or do you usually create a new plan based on the land that you have available?

They have own plans and know exact costs before they buy a site

[Dean@Massiveaction]

Jazza find someone who is doing developments and learn from them. There's a lot to know and it can be very risky.
Email kerry at [email protected] and se if you can pick his brains. Tell him you were referred by Dean at Property Talk. Kerry is a professional developer, very clued up.

[mac]

You could put in a due diligence clause, then go to the council and ask over the counter, they would tell you if there are any obvious reasons why it could not be subdivided. The first things to look for would be access and drains, if there's no stormwater drain is the section above the road.
I'm currently looking to do one in Waitakere and the will be close to $50,000.
Mac

[Jazza]

Thanks essence, whitt and poomba

1) Why can't you make the A S & P conditional upon Council agreeing subd? Its no good buying a property for this express purpose, and then finding out it can't be done. If its your first subd, this may be the way to go.

You're definitely right, I wouldn't want to buy a property to find it can't be subdivided, but considering how long it can take for the council to do anything, would many vendors even consider and S&P agreement with this as a clause?

They have own plans and know exact costs before they buy a site

Are there companies out there that provide this sort of service for other parties, ie: given a site they can survey/evaluate it and provide an estimate of how much it would cost to subdivide/build on it?

Jazza find someone who is doing developments and learn from them. There's a lot to know and it can be very risky.
Email kerry at [email protected] and se if you can pick his brains. Tell him you were referred by Dean at Property Talk. Kerry is a professional developer, very clued up.

I think I've read about How2 in one of the property magazines. Do they or any other companies like this offer consulting/mentoring on this type of thing? I wouldn't be adverse to taking a course, but having one on ones with someone would be great.

[Jazza]

Thanks Mac. I'm based in west Auckland, so I'll no doubt be looking out west for something in this line as well. Is your $50,000 an avg, or are there special circumstances involved which have resulted in this cost? Not that it matters as every situation is different, but just curious since you are actually in the process.

[captaincrab]

For the best advice you really need to see a Surveyor or a Consulting Engineering company. There are plenty around. This is not the sort of thing you try to get cheap information on. It is very easy to stuff it up and lose a lot of money so it is worthwhile you spend the money up front determining what can be done. Remember that sometimes developers will assess lots of sites before they find the right one. It is an expensive business especially if you factor in holding costs while you wait for Resource Consent. Some consents now take a couple of years... Most of the Councils are woefully underresourced in this area.

[Kerry Christian]

Be careful essense!

Developing is profitable but not easy

I would suggest you talk to someone you are recommended to first. Before you go to a consultant /engineering professional there are a few things you can do yourself to ensure that the project will fit your plans.

And that is part of the key - What are you trying to do? - if the answer is "Make as much as possible for the least amount of work" - do not start. Like all things if you really want to make the "Big Bucks" - you need to go back to school and learn

If you are new to developing - see my next artical in next months KPI - there is some info for you

If you want more info call me 0274-800-232 or email me at [email protected]

Kerry
How2

[Jazza]

Thanks for the replies Captain Crab/Kerry. I was going to email you Kerry after Dean's recommendation, but you've beaten me to it.

And that is part of the key - What are you trying to do? - if the answer is "Make as much as possible for the least amount of work" - do not start. Like all things if you really want to make the "Big Bucks" - you need to go back to school and learn

If you are new to developing - see my next artical in next months KPI - there is some info for you

I am a newbie to developing, so I will be watching out for your next article in KPI. At this stage I'm just trying to gauge if this is a direction that I would like to take, and if so how to proceed. I’m in the “I don’t know what I don’t know” category at this stage, and it’s only through reading that I’m going to able to learn anything - I’m not in a position to gain this knowledge through experience, and it's not something that I’m prepared to use the “she’ll be right mate” approach on, because there is so much that I don’t know about so inevitably “she won’t be right”.
I'm not looking at getting something for nothing, so putting the hard yards in is what I expect to do, but it’s figuring out where those hard yards start that’s got me.
This is where having someone’s ear that has this experience helps. Someone who has been there done that and I can learn from their mistakes ;-)

[mac]

I'm just working through the numbers on a subdivision, after talking to the surveyor and the council it's looking like $50,000, it's a fairly simple subdivide, most of the cost goes in council fees.
Mac

[Jazza]

Cheers for the info Mac. It's good to at least have a ballpark figure in mind of what it costs.