Your budget is the most important part of your next property development project.
Property development is a massive undertaking, if you don’t know it already. One of the first things you have to figure out before you start building is how much all of this is going to cost.
A mistake could not only kill the upside of your investment, in could leave you in debt.
The following tips will help you to develop a realistic budget for your property development project.
Choose the location wisely.
Not just any patch of land will do. Choose a site in an area with a demand for new housing and a growing economy. If the location is good, then you’ll be more likely to recoup your expenses quickly. Prime locations for development will ensure that you get the best value for your budget.
Your land purchase will be one of the biggest (if not the biggest) expenses in your project development so finding an ideal block will give you a baseline for your budget.
And don’t fool yourself into thinking that a cheap price for the land equals a smaller budget. There are still the site costs to consider. Preparing the site for building can bring another list of expenses.
– Are there trees or shrubs that need to be removed?
– Are there any sloped patches that need to be levelled?
– Will you need to install a retaining wall or water drainage system?
– Is the soil quality difficult to dig in or loaded with rocks?
– Do you need to demolish any existing buildings or pay for rubbish removal?
Count up all of these additional costs before deciding on a block of land to purchase.
Plan your building type.
The complexity, style, size and purpose of your building will also have a major impact on your budget. A standard design by a volume builder will be much cheaper than a home designed from scratch by an architect. A single-level house will cost less than an apartment complex. Your property goals and local demand will help you determine what type of property is worth developing.
Account for the little expenses.
Aside from the major expenses like the land and build costs, you’ll encounter numerous additional expenses. And you might not have expected all of them. When planning your budget for property development, allow yourself a wide margin and then some to ensure that you’re covered for all expenses, expected or otherwise.
Give yourself time.
When it comes to developing property, time equals money. If your project is complex, it will naturally take longer to complete and will require a larger budget. You can plan for a smaller budget by keeping your build simple.
Be careful not to rush, however. You have to set a realistic time frame for your project. Hurrying things along or trying to cut corners to save time or money can actually end up costing you more than you planned. An unrealistic time frame can make you massively miscalculate your budget.
Accept the fact that there will be some unexpected problems that put a brake on your development project. Give yourself time to deal with those and factor that time into your budget so that you don’t feel the financial squeeze when things don’t go as planned.
Keep careful notes.
Save and document every receipt, invoice and bill you acquire throughout the course of the property development. Keeping a detailed record will help you determine whether or not you’re within budget.
Start this process and get organised early on by carefully documenting your research and estimates to help you develop a more detailed budget.
Assemble a property development team.
Yes, hiring great people and experts costs money, but those are the people who will help you to not only stick to the most realistic budget, but ensure your investment is a success. Finances in particular are everything in property development so it’s worth the cost to get the right advice and support.
Assemble a team that includes engineers, surveyors, architects and builders. Work with independent experts, whose only motivation is delivering a great outcome for you. These trusted individuals will be able to tell you how much things are going to cost, and importantly point you in the right direction.
Get advice about your property development budget.
Before you begin, the first person to talk to is an accountant with extensive experience in property investment and development. They’ll know all the tips and traps, especially when it comes to loans, budgeting and ensuring the investment pays off.
Contact Nitschke Nancarrow, specialists in accounting, financial planning, loans and finance, investment and business for property investors. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.Tags: property development, property investment