The short answer is that it’s the property developer’s job to manage the architect, builder, real estate agent, and other third parties and make sure that they’re all working together to design, obtain approval for, build, and sell the new properties.
To put it concisely, property development is a complicated process. Even the simplest of developments involves thousands of man hours across a variety of specialised areas of expertise. And as if that wasn’t enough, there’s also miles of red tape due to national, state, and local government legislation and regulations to contend with along the way. And let’s not forget the millions of dollars involved.
So it’s understandable that there are people who are interested in using property development as a way to generate wealth, but don’t even know where to start. That’s why we created this property development guide. The purpose of this book is to provide as much information as we can about how we complete our property developments and collate it into a single resource for you.
There are two audiences in mind for this book:
It is purposefully long to provide detail for those who desire it. If you are looking for concise explanations, those resources are available elsewhere on our website. If we’ve done the job we set out to do with this book, by the end you should know everything you could want to know about how our property developments work, and even more besides.
We can’t tell you everything, of course, because it’s unfeasible to put multiple lifetimes of lessons and experiences (as well as multiple degrees) down as words on a page. And running a business inevitably involves private agreements that aren’t intended for the general public. But we’re as open as we can be, and considerably more transparent than almost any other company out there.
We’re willing to tell you what our metaphorical eleven secret herbs and spices are, because as you’ll learn from reading this book, property development is a lot harder than frying chicken. There’s an important difference between theoretically knowing how to do something and having the skill and determination to actually pull it off.
And if you decide that you want to take the knowledge you’ve gleaned from this book and do your own development without us, then we wish you the best of luck. It’s not going to pay our bills, but there’s more to life and success than just money; knowing that we’ve been able to indirectly help you is its own reward.
As a company and as individual people, we value honesty and transparency. These two traits are the foundation of healthy relationships. We build properties, sure, but what we really build is relationships – relationships with clients, investors, partners, other businesses, and within our own team. You don’t get very far without other people, and people won’t want to work with you if they don’t trust you. Other than health, trust is the most valuable thing you can have.
That’s the mindset that led to the creation of this property development guide. We believe you will find it of value, in one way or another.
Here’s to your success.
Before we can set out to explain the process of undertaking a property development, we must first clarify what a property development is, and just as importantly, what it isn’t.
Property development, also known as real estate development, is a business strategy that encompasses a variety of practices designed to increase the value of a property so that it can be resold for a profit. On a smaller scale, this may include activities such as the renovation and resale of pre-existing properties (colloquially known as ‘flipping houses’). On a larger scale, this includes activities such as converting an established dwelling into multiple smaller dwellings or building on unused land.
A property developer is not a builder. Property developers are the people who oversee and coordinate all of the tasks and contractors required to complete the property development. This includes construction, but also includes other tasks such as site acquisition, design, permits, and much more. We list these tasks in more detail later in this book when we outline our process.
It’s also important to understand how a property developer makes money. Many people are familiar with the traditional property buy-and-hold strategy and assume that property developments make money the same way. This is true, but it doesn’t fully cover it.
With a buy-and-hold strategy, the asset does not change, but its perceived value does. What you own is identical to when you bought it, but market factors have changed the demand for the asset, and thus the price is different. This is like buying stocks in a company. If you buy 100 shares in a company, the value of each share may change, but you still only have 100 shares.
The benefit of property development is that the developer can directly adjust the value of the asset themselves, rather than being dependent on market forces.
In the case of property development, the asset does change. As an example, if you start with a single detached home and develop it into six townhouses, you have fundamentally changed the asset. You have changed one thing into another thing, and the new thing’s value is separate from the old thing’s value. This is like transforming 100 shares in one company into 150 shares of another company.
The benefit of property development over a buy-and-hold strategy is that the developer is able to directly adjust the value of the asset themselves rather than being entirely dependent on market forces to make a profit. While a strong market certainly helps and will result in more profit, a property development can still be profitable even in a declining market. There are a variety of factors other than final sales price that also influence how much profit a particular development will generate, such as the purchase price of the land, contingency in the budget, construction costs, and loan interest.
Outside of undertaking your own property development, you can also choose to invest in someone else’s property development and make a profit that way. This is Lion Property Group’s business model: we allow other parties to invest their capital into our projects and we undertake the developments on their behalf.
Whether you choose to undertake your own property development, or invest in a property development project via a mutual funding structure, property development is capable of delivering exceptionally high returns when properly planned and efficiently managed.
The operative phrase of that last sentence is ‘when properly planned and efficiently managed.’ Like all investments, property developments have an element of risk. And like all business ventures, property developments can fall victim to mismanagement. The remainder of this book is dedicated to explaining how to plan a development project and the strategies that can be implemented to work as efficiently as possible and generate the highest returns.
Property development is a complex process. And like all complex processes, it can be written down or mapped out in a variety of different ways.
In this guide, we have opted to break down the property development process into distinct ‘milestones’. Each milestone represents something that is mandatory to obtain—without it, the project will eventually become bottlenecked. A specific example of this is a building permit—it will eventually be impossible to proceed without one. This helps simplify the process into a ‘checklist’ of sorts which lists all of the mandatory items which must be obtained.
Because property development isn’t a strictly linear process, we have intentionally avoided numbering each milestone. Yes, some milestones are dependent on previous ones, but there are also situations where you can work on multiple milestones at the same time. In some jurisdictions or on some projects, it may make sense to work on Milestone C before Milestone B.
Because property planning regulations are handled at the local government and state government levels, while building regulations are country-wide, it’s difficult to provide a strict set of steps to follow, because they will be different depending on where you are undertaking your project. Most processes are broadly the same, but will have different names. For example, in Victoria it’s called a ‘building permit’ but in Queensland it’s called a ‘building approval’. When using this guide, you may need to translate the terms and processes into whatever the equivalent is in your jurisdiction.
The first step is, naturally, locating the development site. For this, we undertake a comprehensive site evaluation process. Choosing a site is arguably the most important step of the process – if you pick a bad site, the project will be doomed from the start. So it’s essential to spend the time and conduct a thorough due diligence on each possible site.
First, you must identify the city or region that you want to develop in. For an individual developer, it’s essentially a given that you will choose a site in the region you live in. For businesses, it’s more feasible to undertake developments in regions that you aren’t based in.
Here are some of the indicators we look for when identifying a promising city:
These factors influence which locations are desirable, and thus which locations are likely to grow in price and yield a high profit when developed. Based on our research, we currently develop property in three cities: Melbourne, Brisbane, and the Gold Coast.
Desirable locations are more likely to grow in price and yield a high profit when developed.
Once we have a region in mind, we repeat the process, zooming in further each time, looking at individual suburbs, then even individual streets. As we zoom in, the factors get more specific. At the top-level, we’re looking for things like large-scale infrastructure projects or a city’s net migration. By the end, key factors might be the walking distance to the nearest train station or that a nearby intersection is being upgraded. This process allows us to build a shortlist of areas that are likely to grow in price.
Next, we keep an eye out for properties up for sale within those shortlisted suburbs. When we locate a potential development site, some of the things we look at are:
We also engage with third parties to search for potential sites on our behalf, and pay them a commission as a ‘finder’s fee’ if we decide to pursue the project.
We use this information to create a preliminary plan exploring how the land might be used. Some sites are suitable for thin but tall townhouses, others must be low and wide and so are suitable for house and land packages. Some sites, such as our Epoch and Zenith developments, involve the use of pre-existing properties. We create several mock-up plans to determine the layout that best utilises the site to deliver the highest sale price.
We calculate the cost of purchasing the development site plus the costs required to build, and compare it against the anticipated profit. By evaluating the historical sales prices of similar properties in the area and taking into consideration the growth rate of the area (we typically gather this information from research firm CoreLogic), we can predict a range of what the properties should sell for by the time they are complete.
We then enter all of this data into a piece of software called Feastudy which generates a comprehensive feasibility report. If the feasibility study indicates that the development site will yield an acceptable profit margin, we pursue the project. If the project is too risky or the margins are too small, we pass on the development site and keep searching.
We use capital from investors to fund the acquisition of our development sites, which means that site acquisition and capital raising are inherently linked in our methodology. This will differ if the development is funded in another way.
We create a legal entity which is responsible for the purchase and development of the land, which is called a Special Purpose Vehicle (SPV). The SPV is a proprietary limited company which is incorporated for the purpose of undertaking and completing the specific project. The SPV also functions as a legal entity which collectively represents all of the investors in a given project. Investors have voting rights in the SPV, which can be exercised should the management agreement require major changes, for example.
The development site will be purchased by the SPV using investor capital (more on the purchase process later). As the investors are shareholders, they are entitled to the assets of the Company to recoup their investment in the unlikely event of an insolvency or other failure. This means that investor capital is secured against the value of the development site itself. If the worst-case happens, investors can sell the site to get their capital back, or take another course of action, depending on what the shareholders vote to do.
While the land is collectively owned by the investors, they don’t want to be doing the work of actually undertaking the development. Which is why the SPV appoints Lion Property Group as the Development Manager via the management agreement. This agreement also outlines the plan and overall intended process for the development, including the type and number of properties to be constructed.
As the Development Manager, Lion Property Group is responsible for completing the development on behalf of the Company and the investors. This involves, but is not limited to:
This investment structure is utilised because it ensures that investors are protected, but grants us the ability to undertake the development in a timely and efficient manner in line with investor expectations.
When the time comes to actually purchase the site, we make sure the purchase is subject to a due diligence clause, which gives us some time to begin working on later milestones in our process with the safety net of being able to back out of the purchase without sacrificing the deposit, if we need to. The exact duration of the due diligence phase will vary as per the settlement period in the contract of sale.
How much time we have until we have to settle on the property (meaning: pay the remainder of the purchase price) varies greatly. Settlement periods are typically thirty to ninety days, but in the case of larger purchases, the settlement period can be longer than twelve months. Since the majority of the funds that we raise from investors are used for the purposes of settling the property, that means that our capital raising deadline is linked to the settlement duration. If we have 90 days to settle on the purchase of the development site then we have 90 days to raise capital from investors.
It is possible to extend the settlement period by negotiating with the vendor, but a positive outcome is not guaranteed. The vendor may grant an extension to avoid having to locate another buyer, or they may take the deposit and look elsewhere. So it’s crucial to negotiate the purchase contract with a settlement period that provides enough time to gather the required funds, however you choose to raise the capital.
As a property developer, our goal is to make the best possible use of the land to achieve the highest combined sales price upon completion, which results in the highest possible profit for our investors as well as ourselves.
In order to formulate a development plan, we need to obtain a land survey which will provide us with essential information such as the exact boundaries of the site and elevation changes which will need to be considered when creating a design.
Determining the best use of the land is a balancing act between several factors: the number of total properties, the quality of each property, and local Council requirements. Generally speaking, as a developer you want to try and fit as many properties onto the site as possible. 600,000 dollars multiplied by six is a bigger number than 600,000 multiplied by five, so more properties is the easiest way to increase the profitability of the property development. That said, development design is more complicated than just tetris-ing as many properties onto the site as possible. You must also ensure that each property is desirable and suitable for market—if it can’t be sold, it’s worth nothing. Zero dollars multiplied by six is still zero.
There are also Council requirements which must be complied with in order to obtain mandatory permits and approvals. To ensure that developers and landowners are building quality homes in their area, and that surrounding homes aren’t being adversely affected, Councils will only grant permits to developments that meet their criteria.
To achieve the most efficient and profitable use of the land, we seek out an architect, and depending on the scale of the development site, a town planner, to assist us with the development design. We believe that engaging with specialists who have experience with the type of development we are undertaking as well as the region we are developing in is a must. Their expertise allows us to quickly create an optimised site plan that will comply with Council requirements and save us time and money later in the project.
Once we’ve selected an architect and town planner, we’ll work with them to create several drafts until we reach a design that we’re happy with. The more specialised design drawings will require consultants to work on them: Geotechnical Engineers, Civil Engineers, Water Supply, Electricity Supply, to name a few. All necessary documents need to be distributed to these consultants so they can begin their work.
We believe that engaging with specialists who have relevant experience is a must.
Once each consultant has completed their work, it needs to be checked for errors, and then cross-checked against the work of all the other consultants to ensure that everything matches and lines up.
All of these design documents are then collated into a Design Package which is submitted to Council.
Submitting a planning application to Council involves a cost, which varies depending upon the type of development, the scale of the development, and the legislation of the location in which you are developing, but it will most likely be a few thousand dollars.
After submitting to Council and paying the required fee you’ll almost always receive a Request for Further Information (RFI). Prior to COVID, it was typically a four to six week wait to hear back from Council after the initial submission. After COVID, with Council’s having large backlogs, it can take even longer. Unfortunately, there’s not much that a developer can do other than wait and politely ask for them to go faster.
The RFI will draw attention to elements of the submission that the Council needs additional information about in order to make their decision. Once the RFI has been received, we have a set period to resubmit plans that address the Council’s requests or the application will lapse and we must resubmit from the beginning and pay the fees again. This period is outlined in the Council’s RFI letter, and is approximately six weeks.
The RFI will draw attention to elements of the submission that the Council needs additional information about in order to make their decision.
As an example, the Council’s RFI may call for additional information related to the height of fences. So in this example, in our response to the RFI we would ensure that we include plans that specify the height of the fences and include a comment explaining that the height of the fences will not impede onto adjoining properties or affect views.
The Council may issue multiple RFIs until they are satisfied they have all the information they need to make a decision, so it’s worthwhile to be thorough upfront in order to minimise delays throughout this process, since each RFI will add two to three months to the duration of the Council application process.
Depending on the nature of the submission, the Council may decide that an Advertising period is required before they approve the submission. In this context, ‘Advertising’ refers to notifying neighbours and locals about the development by placing signs on site. The purpose of Advertising is to provide locals the opportunity to voice their concerns about the development if they are going to be affected by it.
If any appropriate complaints are raised, the submitted plans may be rejected until those objections are addressed. The period of advertising varies per state but is usually around two to four weeks. Once any concerns from neighbours are addressed, we can make a final submission and receive the Council’s decision.
At this point, the Council can either accept the application and grant planning permits, or they can reject it. If the submission is accepted, we can move on to the next step. If the submission is rejected, we can appeal the Council’s decision by taking the case to a civil tribunal.
Having to go to a civil tribunal may add 6-12 months to the total duration of the project so it is far from the ideal situation, but it’s better than abandoning a development. If the appeal is successful, the Council will be required to grant planning permits.
Now that the Council has approved our design and granted a permit, we need to prepare the “working drawings” which are required for later steps. These working drawings go into incredible engineering detail and fully explain how the homes will be built.
There are many different specialists who will need to be engaged to prepare the working drawings, as these drawings cover a wide range of engineering disciplines, from civil engineering to fire safety.
Each engineer will work on their own area, and then the document will need to be checked and cross-referenced with the work of all the other engineers to ensure that they all match.
This milestone involves a lot of management: making sure that Engineer A is working effectively Engineer B, making sure everyone is on the same page and working to the same requirements, and most importantly, keeping all of these third parties accountable to the deadline.
Once all of the working drawings have been completed, we may need to submit them to the Council for endorsement. This is a process where the Council that any conditions specified in the planning permit have been adhered to. If the Council is happy with the working drawings, they will be endorsed and we can proceed.
Someone has to build the development and this is the stage where we choose who will get the job. We use a tender process when we choose builders for our projects. We identify possible builders by researching construction companies that are in proximity to the development site and evaluating if they’re a match for our project—you don’t want to engage a builder who specialises in commercial construction if you’re building townhouses, since that’s not their area of expertise.
Based on our research we create a shortlist of at least five possible builders and approach them with our endorsed plans. We ask them to provide a quote for how much it will cost to build the project, and it typically takes six weeks for builders to prepare their tender submissions.
Once we have received tenders back from potential builders, we select one based on their quoted price for the build, the quality of their previous work, their projected time frame, as well as their credentials.
We choose a builder based on their quoted price for the build, the quality of their previous work, their projected time frame, as well as their credentials.
Since we tend to conduct multiple projects in the same area, we typically already have relationships with builders who could build any new project we have. However, we still undergo a tender process in order to ensure that we’re getting a market-competitive build price for the project and that we are giving new builders a fair opportunity to work with us.
Ultimately we do tend to re-pick builders that we already have experience working with for a couple of reasons. Firstly, they have a proven track record and we already know what it’s like to work with them. And secondly, since they already have a relationship with us they are normally willing to go above and beyond with their level of service and price reductions compared to a builder we haven’t worked with before—someone you know is more likely to cut you a better deal than a complete stranger.
Once we’ve confirmed the builder, we may continue to negotiate the price while we prepare the building contract. In some instances, a Letter of Intent may be issued to the builder prior to the signing of the contract so that the builder can begin some preliminary tasks for construction sooner. When negotiations are concluded, the building contract is signed.
Generally speaking, the most cost-efficient way to fund the construction of a project is via a construction loan. We work with brokers as well as several large funds that we have existing relationships with in order to find the most competitive loan possible for a given project.
There are several factors that we consider when applying for a Construction Loan. The standard factors apply: interest rate percentage, fixed or variable rates, loan term, and so on. The two that warrant special mention in the context of our development process are presales and loan-to-value ratio (LVR).
While not all construction loans require presales, it is better to have them and not need them, than to need them and not have them.
Some lenders, and some types of construction loans, will have a presale requirement, which means that a certain percentage of properties must have been sold off the plan before the lender will release the funds. The percentage will vary depending upon what types of properties you are building, the amount of money being loaned, and the requirements of that particular lender. While not all construction loans require presales, it is better to have them and not need them, than to need them and not have them.
The LVR requirements of possible lenders also plays a major role. Just like with a mortgage, lenders will only loan up to a certain percentage of the value of the asset that they are funding (in this case, the construction). LVRs on loans typically range from 60% to 95%, but the higher the percentage, the higher the interest.
The actual process of obtaining the funding will vary per lender—each will have their own requirements. But there are a few common requirements we can expect.
The lender will likely have a preferred quantity surveyor, so we will need to engage the quantity surveyor and provide them with the design documents so they can provide a valuation to the lender. This valuation will affect how much money the lender is willing to provide for a project (see LVR above).
After receiving the valuation, the Lender will be able outline their offer. If the offer is acceptable, we sign the loan agreement and the funding is secured.
Now you just have to fund the remainder that is not covered by the lender; we tend to do this either out of our own pocket or by finding further funding.
Obtaining a building permit requires us to demonstrate how the properties will be constructed and what materials will be used to ensure that they comply with all relevant building codes, regulations, and legislation. For example, in Australia, all residential building work, including developments and renovations, must comply with the Building Code of Australia.
This is where the working drawings from earlier really get scrutinised.
In Victoria and Queensland, building permits are obtained via a building surveyor who is chosen by the Developer. Only one building surveyor can be appointed to a building project. A building surveyor is a qualified professional who has the authority to assess building plans and ensure that they comply with the Building Code of Australia and any other requirements of the jurisdiction that the proposed site lies within. Building surveyors are also responsible for undertaking site inspections during the construction process and issuing Occupancy Permits upon the completion of Construction.
A building surveyor is a qualified professional who has the authority to assess building plans and ensures they are compliant with relevant regulations.
The building surveyor reviews the design documents for the project, focusing on the engineering side. Whereas the Council approval was focused on making sure that the developed property suits the neighbourhood, the building surveyor is focused on making sure that the developed property doesn’t fall over from shoddy construction. Depending on the jurisdiction that the development site is located in, there may be additional permits that are required from other authorities before construction can occur. For example, permits from the local water or energy authority may be required.
Some of these permits can only be obtained by the builder. Some of our projects have required more than ten different permits to be obtained before construction could commence.
The builder will also need to complete a few items with the local Council, the largest of these being a Construction Management Plan (CMP). The CMP ensures the builder remains compliant with the relevant Codes of Practice, and mainly covers things like public safety, site security, dust management, noise and vibration controls, traffic management, and so on.
Once we’ve obtained all necessary building permits and the CMP has been approved, we’re ready to clear the site.
Before construction can commence, any existing properties (that are not part of the new development) must be knocked down and the site cleared.
This begins with service abolishment. Any existing utilities, such as water, gas, and electricity must be disconnected. This requires us to submit forms requesting the abolishment to the relevant supplier and waiting for the connection to be abolished and utility meters to be removed.
The demolition process begins with the abolishment of services and utilities.
While this is happening, we will engage a contractor to undertake the demolition. The process is similar to choosing a builder: approach a few contractors, obtain quotes, pick the best one based on history and price, et cetera.
After we have signed the contract with the demolition contractor, they will begin obtaining the necessary demolition permits, which may take a few weeks.
If the development site contains any hazardous materials, most commonly asbestos, it will need to be removed and transported off-site first.
Then the rest of the demolition can occur. Once demolition has been completed and all waste has been removed from the site, construction proper can commence.
During construction, the developer’s job is to make sure that the builder is doing theirs. Whenever the builder does work and wants to be paid, they will submit a claim. This claim will be verified by the funder’s selected quantity surveyor (see the chapter on Construction finance) who will inspect the site. If the claim is supported by the surveyor, the lender will release the funds to pay the builder. Then the builder will move on to the next phase of work.
The construction process itself involves several stages. Once the site is clear, the surveyor can begin laying out pegs on the site as markers for the builders. If they are required, retaining walls may be built at this stage.
When the site is marked, work on the concrete slab(s) will begin. The plumber lays out any plumbing that will be contained under or within the concrete slab. Concrete is then poured around the plumbing to create a solid foundation of concrete for the structure to be built on.
With a foundation in place, work on the frames can begin. Modern houses have frames made of either timber or metal, with trusses on top to mount the roofing. A truss is a triangular frame that, when paired with other trusses, forms a triangular prism that becomes the shape of the roof. Frames and trusses are generally prepared off-site and then delivered to the site to be assembled. As a result, this stage passes very quickly.
Roof tiling may or may not be the next step, depending on the builder’s preference. Many like to get the roof on as soon as possible to protect the framing from the elements. This task involves the builder attaching the roofing material to the trusses and forming the roof.
The next task is referred to as ‘brickwork’, even though many modern homes aren’t made exclusively of brick. Regardless, brickwork is where the outer shell of the homes are constructed.
Once the outer shell is erected, the builder can work on installing electrical wiring, plumbing, and other piping in the interior of the property. This is called ‘rough-in’.
Insulation is then installed around the piping and wiring in the walls and ceilings. Once the insulation is installed, the builder can begin plastering the interior walls to create the internal lining. Once the plaster is set, the interior walls will be painted.
The next set of tasks is called ‘timber mould out’ and involves the installation of skirting boards, architraves (window frames), door jambs, interior doors, and kitchen carpentry. This usually occurs in tandem with waterproofing and tiling works.
The builder can then move on to the Lock-Up phase. By installing exterior doors, garage doors, and windows, the homes can effectively be locked up for the first time. Prime Cost Items can then be installed. These items include taps, baths, sinks, mirrors, and vanity items.
By this point, the building is 99% complete, and all that needs to happen is minor touch-ups that were missed during construction, such as spots that are missing paint. We will walk through the property with the site manager and point out these small errors so they can be fixed for handover.
Once all parties are happy with the end-product and all invoices have been settled, the keys will be handed over to us.
The last step is to obtain an Occupancy certificate or permit from the building surveyor. An occupancy permit is a document that confirms the building surveyor is satisfied that the building is suitable for occupation. It is illegal for a residence to be occupied if it does not have an occupancy permit.
When it comes to selling the finished properties, there’s a balance that needs to be maintained between achieving the highest sales price and how fast the sale occurs.
If you take the first offer you receive, you’ll sell quickly but you might be leaving money on the table. Conversely, if you hold out for a higher price, you may end up waiting for a long time and holding costs will eat into your profit anyway. Set the price too high and the sale may take months to accomplish, set the price too low and you can kiss those profits goodbye.
Our sales objective is to find the optimal point between sales price and how long the sale takes.
That’s why when we sell, our objective is to find a middle-point, where the compromise between maximum sale price and optimised selling time is just right. This way everyone gets a result they can be happy with.
For projects that are suitable for selling off-the-plan, we utilise our our internal real estate agency which trades under the name Mane Property Group as well or a third-party realtor, depending on where the project is located.
For the sale of completed properties, we engage a third-party realtor, someone who is local to the area with a proven track record and a results-based ethos.
For our high-end projects, we engage a specialist realtor who has the necessary know-how, experience, and networks at the top-end of town to sell luxury real estate.
Regardless of the strategy we use, we communicate regularly with the agents, we review sales results weekly to determine campaign effectiveness, and we provide investors with sales updates on a monthly basis or more.
The transfer of Titles is a requirement for property settlement, so any tasks related to Titles must be completed before subsequent milestones can be completed.
The type of property development that has been undertaken will affect the type of Title(s) that are used to register property ownership. In the case of a single property, all that’s required is a property title transfer to transfer the Freehold title to the purchaser.
In the case of a property development that involves subdivision (which is most of our projects), the single Freehold Title(s) will need to be converted into new Strata Titles for each of the subdivided lots. The plan of subdivision along with the current Title is provided to a lawyer or conveyancer who organises all of the required documentation. This documentation is then provided to the relevant authority (such as Land Victoria) to verify.
Once verified, the plans are registered and the new titles are issued.
Once the subdivision has been registered and the purchaser has obtained finance, we can officially settle the property by presenting them with their Title and the keys to their new property.
Since the properties are almost always sold individually, Settlement occurs separately for each property as soon as possible, rather than collectively.
The finish line is in sight, but now it’s time to look back on the work that has been done so far and check that everything adds up.
Accounts Reconciliation refers to the process of matching internal and external records with third parties to ensure that there are no overcharges or discrepancies throughout the project. This process is a complete audit of the financials from the inception of a project and can include, but is not limited to: loan statements, settlement statements, GST and more.
It’s important to check that you haven’t overpaid or been double-charged for any of the hundreds or thousands of expenses that have been incurred along the way.
Even on small-scale development undertaken by an individual, it’s important to check that you haven’t overpaid or been double-charged for any of the hundreds or thousands of expenses that have been incurred along the way. And on the flip-side, it’s important to ensure that you don’t have any outstanding invoices—owing more money than you think you do will change the bottom-line of the project. If anything is outstanding, you’ll need to pay it now.
Because we’re a business with an Accounts department, the Accounts Reconciliation process is completed by our internal team. Once this process has been completed we can see what the net profitability of the project has been and determine what the final returns to investors will be. With this information, our Legal and Accounts teams will be in a position to facilitate the final steps in the settlement of the project.
If you don’t have any investors in your project, you should be done by this point.
Because we do have investors, now’s the time for us to pay them. We pay them in two steps.
Their return is paid out first (either in instalments throughout the investment term, or as a lump sum at the end.
Returning their initial capital requires a bit more paperwork. In order to return capital, an investor must complete a Deed of Release which allows the SPV, (refer to the chapter on capital raising if you can’t remember what this is) to buy back the investor’s shares at the same price.
For example, if at the start of a project an investor bought 100 shares for 100,000 dollars, the SPV would buy back those same shares for the same price of 100,000 dollars.
Each investor is paid out as they complete the Deed of Release. Once all investors have been paid out, the project is officially completed, and the SPV entity is dissolved.
| Term | Definition |
|---|---|
| Advertising | A Council planning officer may decide that a planning permit application must be advertised to the neighbours and local community. This is typically done by mailing a notice to neighbours or erecting a sign on-site. The advertising period is typically 14 days, but may be up to 28 days. In that time, neighbours may lodge objections against the application if they believe the application will adversely affect them. |
| Arborist | A professional in the practice of arboriculture, which is the management of trees and plants. Because trees are heavily protected by local regulations, arborists are often needed to assist with things such as tree removal requests, Tree Management Plans, and Arboricultural Impact Assessments. |
| Body Corporate | An organisation that is responsible for maintaining common areas and shared infrastructure in apartment buildings and townhouse complexes. |
| Building Permits | Building permits are documents certifying that a proposed building complies with the relevant building regulations, such as the Building Code of Australia. A building permit is a written approval by a private or municipal building surveyor. It allows the building work to be undertaken according to the approved plans, specifications and other relevant documentation. |
| Buy and Hold | The most common property investment strategy, where a property is purchased and held until a capital gain can be achieved by reselling the property. Rental income can also be generated on the property during the holding period. |
| Certificate of Title | A formal legal record about a particular piece of land. It contains basic information about the land including the location and dimensions of the land and the current owner. |
| Council | The authority that oversees a local government area. Amongst other things, the Council is responsible for issuing planning permits. |
| Feasibility Study | An assessment of the practicality of a proposed project. The costs of undertaking a project are compared against the expected revenues to see if a suitable level of profit can be achieved. |
| Lock-Up Phase | A construction milestone where the property can be locked up for the first time, signifying that all walls, floors, roofs, doors, and windows are installed. |
| Off the Plan Sales | Putting a property up for sale before it has been built. The buyer is committing to buying the property upon its completion and pays a deposit up-front. |
| Planning Permit | When undertaking a real estate development, a planning permit is required from the Council which has jurisdiction over the development site. |
| Planning Zone | Each Council area is divided into a number of smaller areas which are called “zones”. Zones are typically based on land uses, such as residential zones or commercial zones. Different zones have different regulations which affect what can be built there. |
| Property Development | See What is Property Development? |
| Quantity Surveyor | A qualified professional who specialises in building measurement and can estimate the value of construction costs. |
| Request for Further Information (RFI) | Issued by a Council in response to a planning permit submission, an RFI draws attention to elements of the submission that the Council needs additional information about in order to make their decision. The Council may issue multiple RFIs until they are satisfied they have all the information they need. |
| Rough-In | A construction milestone where plumbing and electrical services are installed in a building's wall cavities before the walls are covered in plasterboard. |
| Settlement | A legal process where the ownership of a property is passed from the seller/vendor to the buyer. |
| Special Purpose Vehicle (SPV) | A legal entity specifically created to fulfil a singular purpose. We set up proprietary limited companies to function as SPVs to undertake and complete real estate development projects. |
| Tender | A process which allows the developer to select the building contractor which will undertake the construction of a project. Potential builders are invited to make a submission providing a quote for the cost of construction. |
| Town Planner | A professional who works on behalf of the developer to advise and assess the development plan and assist with obtaining permits. |
| Subdivision | To take one legal piece of real estate and convert it into multiple, smaller pieces of real estate. |
| Pre-Sales | See "Off the Plan Sales". Lenders may require developers to achieve a certain threshold of pre-sales before releasing construction finance. |
If you’ve read all the steps that are involved in property development and thought “that seems like a lot of work” — you’re right, it is.
Which is why more than investors have decided that they’d rather invest into our projects, and let us do the work, than deal with all the work on their own.
If this is an option you’d like to explore, then you should take a look at our latest offer.
Level 3, 80 Dorcas Street,
South Melbourne, 3205
147 Alexandra Rd,
Clayfield, 4011
ACN 625 889 367
ABN 13 625 889 367
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