Whether you are a seasoned or novice property developer, taking the right steps can make a difference between success and failure in multi-unit property development. Making the leap from single to multi-unit development is huge enough to have an acute knowledge of the steps. In this article, we highlight the key steps to successful property development with a focus on multi-unit development. It isn’t an exhaustive list, but it’ll set you thinking.
1. Project finance management
Multi-unit development can be a massive financial undertaking. It’s like moving from playing in a Sunday social league, whatever sport it may be, to the premier league. The expectations are much higher. From the quality of the opponents and the accompanying preparation for match days, it can be a ‘shock’ to some.
The runaway to finance a multi-unit develoment is pretty long. It’s not merely multiplying the cost of building more units. Bear in mind the requirements are different, not just more in contrast to a single-unit development. For example, the property developer must account for infrastructural development like access roads as well as re-landscaping of the surrounding area as required by the local government. These ‘extra’ building work costs may be overlooked by novice multi-unit property developers and underestimated by seasoned ones if the relevant survey work, another cost variable, is not undertaken.
Inevitably the risk factor surrounding multi-unit development is higher. As such, banks will exercise greater financial scrutiny of the application. While your experience will count, it doesn’t necessarily guarantee approval. In addition, approval may come with conditions to safeguard the bank’s interest. For example, the bank may finance just a part of the total cost of the project or may disburse the funds when all of the units have been sold.
From a financial perspective, moving from a single unit to multi-unit development is a big step. Without the right guidance, you are at risk of missteps. Speak to a team member from Costa Construction today to learn more.
2. Adopt a multi-stage approach
While timeliness is a critical success factor in property development, it’s best to approach multi-unit development plans conservatively. After all, it is a long-game. Unlike the stock market, buy-and-sell at the blink of an eye doesn’t really work in property development.
In your land acquisition activities, for example, you might opt to buy a house on a ‘coveted’ street one at a time, unless you have the financial muscle to acquire all in one single swoop. Even then, as we have mentioned above, the runway for multi-unit property development is long. You don’t want to burn your cash in one particular activity of the project.
Each house you acquire may cost differently. For example, a corner unit or one with a good frontage may cost more than the others. On this note, it’s important you understand the base cost of each of your proposed unit. This may vary according to the area of your proposed development. In regional areas, you can expect the cost to be lower than in suburbs in the metro area.
With regards to the area of your proposed development, it’s important to keep in mind the local council may impose restrictions on the number of units permissible. You may be required to set aside space for community amenities, for example, a park or greenery. This will inevitably reduce the number of units you can build.
3. Pragmatic timeline
A multi-unit development project takes time. From approval to commissioning the project are a series of hoops-and-loops. Most are there for valid reasons. Moreover, there may a number of parties you’d have to deal with. With each operating on different terms and timelines, you should not expect a linear progression. What does it mean to a developer?
The clock doesn’t stop despite the snags you may experience. There are on-going costs you’ll need to meet as you negotiate the bends and turns even before the first brick is laid. Hence, it is vital you have the financial reserves to see through the wait-and-see period of the project. Creating a pragmatic timeline will be the key to hold things together.
Now, the good news is your development site may increase in value, especially when you’ve accounted for other developments that may occur around it, for example, a transport hub or shopping mall. To learn more about effective project management in a multi-unit development, contact us today.
An experienced multi-unit property developer will avoid rushing into it. They tend to adopt a long-game strategy, unleashing the full might of their capability at the opportune time. This comes with experience. The pointers we’ve shared in this blog narrow that experience gap. By superimposing them with the right advice and guidance, you’ll be in a stronger position to make it a success. Contact us to learn more.