Property Development Due Diligence
When looking to invest in a property development, it’s important to know what is ahead of you, before you invest. This process is called due diligence.
Due diligence is doing research and being aware of the requirements / issues that impose restrictions or obligations on you as a property developer.
As an experienced multi-unit builder, our experience has allowed our design and construct team to develop a property development process over time. The process starts with identifying suitable suburbs, before even beginning the search for a block of land.
If you’ve identified suitable suburb/s, click here for information on choosing the perfect block of land for your multi unit property development.
Choosing a suburb
The following is true for multi-unit developments, but may also be useful when looking to build your perfect custom home.
Your due diligence should initially be focussed around:
- Market demand: is there evidence that a new property development will sell or rent out easily?
- Vacancy rates: is there a high percentage of vacancy in the area? This would indicate low demand.
- Regulations and precedents: is there anything that would prohibit the type of property development or home you’re looking at building?
- Benchmarking: If you’re looking to sell, are there other homes in the area that are similar to give you a benchmark sales price?
These questions should help narrow down your list of potential suburbs.
As a multi-unit builder in Melbourne, we come under the Victorian state requirements. In Victoria, Consumer Affairs requires that every property purchaser receive a copy of a Due Diligence Checklist. The link for this checklist is https://www.consumer.vic.gov.au/duediligencechecklist
The checklist above applies for any type of property purchase and is usually supplied by your real estate agent. This is a good place start. However, specific to property development, there is more involved to help ensure a profitable investment.
Once you have a potential suburb for your development project, you’ll want to look at the council requirements.
The specific things you’ll want to review are:
- Planning policy:
Does this align with the vision for your development? - Zoning:
Is the zoning type congruent with the type of development - Development lot size requirements:
What sized block of land will you need in order to complete a development project? - Open space ratios:
What percentage of the land are you allowed to build on, and how much must remain as ‘green space’? Does this allow you to build the development you’ve envisaged? - Car parking requirements:
Are the car parking requirements workable and in line with your vision? - Minimum street frontage requirements:
Are there properties available at the minimum size requirement? - Setback requirements:
Is there a setback requirement for new builds? Does this limit you when also considering the other requirements above? - Tree removal restrictions:
Are you allowed to remove flora if required? If not, this may impact your choices. - Demolition controls:
Are there any demolition requirements to consider? - Flood or bushfire overlays:
Are there any flood or bushfire overlays in the council area?
If so, this may affect the types of build materials and result in extra expenses. - Fees and levies:
Note the fees and levies relevant such as developing area fees, and fees associated with development and subdivision. - Other council specific issues:
Ask the council about any other issues or fees you should be aware of in relation to a property development.
The above list is comprehensive, but not necessarily exhaustive. Please do your research, and speak to a local expert (like a specialised design and construct team) to ensure you’ve covered all your bases.
Due diligence can be time consuming. It may also be difficult to find accurate information. You may not know where to look or what you’re looking at. Your local council, your lawyer or conveyancer and an experienced local builder are good places to start. And it’s vital you do. Without proper due diligence, you’re likely to find yourself wasting a lot of time and money in a less than ideal investment.
For assistance with property development in Melbourne, give our experienced team a call today. We’ve been involved in Melbourne property development for over a decade, and have perfected a systematic due diligence process. Our team will help point you in the right direction and avoid some of the common mistakes of newer developers.