What You Need To Know Before Investing In Property Development In Melbourne
Melbourne property development investment
Property investing offers a wealth of benefits for future-conscious Melbournians.
Not only does a Melbourne property development provide impressive tax incentives if it’s a tenanted property development, but the mortgage can also pay for itself. With a different strategy – if you plan to build and sell, the benefits of a well-planned development can include significant lump sum profit.
No matter your strategy, every development should start the same way. Before you start designing your first Melbourne townhouse with a multi-unit builder, the first thing you need to know is: Is it feasible?
Building and designing a property development is a long process. The town planning process alone can take 6 – 12 months, so it’s vital that you know what your ROI will be before you begin.
Here is how you can figure out your property development ROI today.
How much does it cost to build a property development in Melbourne?
Your multi-unit builder will be able to assess the potential of your wealth-generating development with a free feasibility assessment. To conduct your own, we’ve outlined the steps involved below.
Start your feasibility assessment by answering these questions:
1. What is the land capacity?
What you can build on your block of land is determined by the local council and is based on a host of factors.
2. What is the income potential?
This part involves conducting lots of research into the Melbourne suburb you want to invest in, such as Fitzroy or Yarraville. Research the asking prices for similar properties in your desired location, as well as the possible sale prices for each dwelling.
3. What is the breakdown of every cost involved?
To help you figure this out, here is a property development total cost checklist.
INITIAL COSTS
- Acquisition costs
- Land deposit amount
- Stamp duty and legal 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 PRELIMINARY COSTS
- Project Potential Review
- Town Planning (all documents, applications and permits)
- Preliminaries (such as working drawings and engineering)
- Construction (building contract and project specification)
CONSTRUCTION COSTS
- The complete cost for each dwelling
- GST
OTHER COSTS
- Council Public Open Space contribution (if applicable)
- Subdivision fees
- Real Estate Agent fees
- Taxes
The average desired profit margin on a property development is 10-20%. Therefore, once you have completed your feasibility assessment, you will be able to determine whether it is feasible, depending on whether your investment sits between 10-20%. For more information about feasibility assessments, see our post here.
Looking at the list of costs to consider may be overwhelming, but an experienced design and construct team can help you navigate the entire process. delcon design and construct offer a free feasibility service for property developments in Melbourne before the investment commences. This process enables you to determine whether a multi-unit property development is worthwhile.
A quality Melbourne builder will also be able to point out the potential risks involved in property development, as well as the factors that may impact your ROI. Working with an experienced multi-unit builder in Melbourne who allows for a contingency plan for the potential challenges of your project will better ensure you see the generous profit you’re counting on at the end of the project.
Factors that impact your Melbourne property development ROI
Land factors that impact the cost of your multi-unit development:
- Location
- Size
- Shape
- Frontage
- Slope
- Orientation of the land
- Neighbouring properties
- Easements and verge items
- Overlays
Location factors that impact the cost of your multi-unit development:
- Access to large employment hubs – CBD, Airport, Hospitals
- Wages and wage growth are well above average
- Access to public transport
- Lifestyle and convenience
If you’re going to involve a specialist design and construct team, you’ll want to get them involved as early in the planning process as possible. A quality team will ask the questions you may have forgotten about and will advise you of the risks, so you’re fully informed every step of the way.
Are you ready to begin your property development journey?
If you’re new to property development and want to dive right into a multi-unit project, turn-key service is probably your best option. With a turn-key service, your design and construct team manage the entire process for you. From the initial phone call to handing over the keys, all the council applications, building design, and engineering, permits and construction are taken care of.
By employing a specialist design and construct a team with a turn-key service, first-time developers can rely on the knowledge and experience of seasoned professionals to help boost their own.
Call delcon today on 1800 335 266 to discuss starting your multi-unit development project.
Melbourne property development investment