Understanding the development potential of your site

So you have just purchased your dream property or you are looking at a site and thinking this site looks fantastic but can I build on it what I want. A feasibility study is a low cost early stages evaluation of what can be done on the site you are looking at prior to leaping into detailed design. This can be done for any type of development whether it be a granny flat, house or apartment building and is designed to give you a degree of certainty about what you are proposing.

A properly prepared feasibility study will reduce risks, forecast future investment required, advise of returns and assist with managing timelines

Typically it might include the following:

1. An assessment of the council rules which apply to the site which determine the type and extent of development that can be undertaken on the site.

2. A summary of potential problems or risks that may be faced and that should be factored in to any plan

3. Concept drawings. Looking at how much floor area can be achieved on the site (otherwise known as yield) factoring in things such as setbacks, floor space ratios and building height. This would typically involve a series of diagrams showing how the floor area might be located on the site.

4. Reviewing local sales and understanding what types of development are being undertaken in your area. e.g Are four bedroom units what people are buying or is it one and two bedroom units. Real estate agents can be very helpful here.

5. What other development approvals have been granted in the area or perhaps more importantly what applications have been rejected.

“A feasibility reduces risk and gives a sense of development viability”

Crunch the numbers

While undertaking the steps above its important to crunch some numbers. This might not be so important for a new house or renovation but is essential for anything bigger. There are numerous pieces of software on the market to assist with this including Smart Feasibility Calculator  , Altus Group Feasibility Software , Devfeas but at the end of the day an xcel spreadsheet will do the trick because the result is only as good as the information that goes in. The important things to be looking at include:

1. Looking at the property purchase price and your budget, settlement periods and the associated stamp duty and repayments.

2. Likely construction costs for this sort of development.

3. Associated legal costs with the purchase

4. Consultant costs to prepare a design, submit it to council and document it for construction. These consultants might include an architect, town planner, structural engineer, surveyor, BCA consultant etc.

5. Expected income from return on sales or rentals. A ‘20%’ profit margin’ is a rule of thumb often used after all development costs are factored in.

6. Contingency sums. All projects should include a sum for unknowns.

7. Timelines for establishing loan periods and understanding when sale returns are likely to appear. Will there be pre-sales for example.

Feasibilities for complying development?
One of the most valuable uses of a feasibility particularly for a house or medium scale development is to understand what approval process is available for your proposal. Choosing the right pathway will save time and money. Development approval can be obtained through a traditional DA application or via a complying development application. The cheapest, easiest and fastest way to work out whether you can do one or the other is to undertake a feasibility. Without spending large amounts of money this small step ensures you can ascertain early on which of these approval pathways is available to you. A complying development certificate (CDC) could potentially save you time and a considerable amount of money.

Now that the Low Rise Housing Diversity Code is operational a feasibility forms an important part of the process. Development approval obtained via this pathway is subject to a series of very particular rules and requirements. To understand if this pathway is open to you undertaking this inexpensive part of the process  makes a lot of sense and avoids a larger investment in time and money at this early stage.

If you are thinking about developing, looking at a site to purchase or looking to build your new home we would love to hear from you. Feel free to email or call us to have a chat. We offer a feasibility service tailored to your needs and project type.

If you are looking for a few additional resources you may find the sites below helpful.

1. How to tell if a development site is feasible

2. Property Development 101: Feasibility Study

3. PropertyUpdate – How to get started in property development