Due diligence for any development site

This may seem like a strange way to get the relationship  underway, however it is really important to set expectations clear and the reality is any address is  governed by a set of rules, overlays & regulations that restrict what we can actually do as part of our  development. Whilst the perfect property doesn’t exist, NPI Group’s process of due diligence certainly makes finding the great development opportunities much more streamlined & efficient. 

Each of the below are areas that we spend a lot of time researching before landing on any property to  purchase. As part of any due diligence process these are the council or regulatory body non negotiables  that must be adhered to. 

Zoning:  

What zone the property falls in and the development parameters that lay around this site/zoning.  Land size:  

There has been a lot of changes in recent years regarding minimum land sizes for number of dwellings &  also the percentage of garden size required to be incorporated. Knowing each state or territories  requirements is critical before deciding where to buy. 

Council infrastructure:  

This is often the most confusing and cumbersome information to find, however questions that need to  be answered are: 

• Are there any easements on the block? 
• Are there any telecommunications pits on the footpath outside? 
• Does the block have any big indigenous trees that will be hard to remove? 
• Do the Neighbour's have any trees that the tree protection zone will impact our building? • Flood overlays, landscape overlays, special building overlays, single dwelling covenants? • Legal point of discharge for storm water? 
• How far away is the closest electricity pole to service the new dwelling? 
• Minimum setbacks from side, front and rear boundaries 
• Minimum private open space for new dwellings (generally this is between 40sqm and 80  sqm & must be accessed from the main living area of the property) 

In addition to the above, NPI Group look at many other factors in order to find target areas for our  developments. Theae are the next level of due diligence and whilst they are not required as part of an  compliance process, they are just as important to identifying the right opportunities for our clients. 

These include:  

Subdivisions: 

Is the area likely to be flooded with new stock that will ultimately hinder our value once completed.  Subdivision approvals that have been approved is also another great metric to see what stock is coming  to market in the near future if they haven't been started. 

Rental yield: 

Rental yield of the holding property is important for cash flow to make sure we can keep our payments  up to date whilst we are waiting approval for our development application 

Economic demographic: 

How much do people in the area typically earn, is there enough disposable income for capital growth to  occur? 

Land supply: 

This is a very important metric but not one that we really deal with, we don’t want to be buying in areas  that have lots of land supply that could be potentially opened up in the near future, because we buy in  well-established suburbs with well-established suburbs around it we don’t see any land supply issues.  

Sales prices: 

We want to know what sale prices we will achieve with the product that we bring to market Rental vs owner occupied:  

We want to buy in areas where there is strong owner occupied presence, when buying in investor fueled  markets we run the risk of our property being pulled down by investors that don’t take care of their  property through lack of maintenance and low gentrification, investor fueled markets can have more  susceptibility to price falls due to the external factors such as interest rate rises or low economic growth  in the area but in owner occupied areas people are in for the long haul they tend to take care of their  properties more and the turnover of property isn’t so prevalent. 

Land to asset ratio:  

We want to buy in areas with a high land to asset ratio. With the 2 components of property being the  land and the dwelling, we always look for a higher land component because this is the part of the  property that appreciates, whilst the dwelling depreciates. Looking for land to asset ratio of 60%-80% is  optimum for development.  

Due Diligence is one of the most important steps as a property developer and although can be time  consuming for little or no return it’s a necessity when selecting the most suited block for your  development purchase, at NPI Group we cover all these metrics and more to make sure your  development will achieve the absolute maximum returns for your outlay. 

 

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