Today we are continuing the series published last week dedicated to saving subdividers from possible property disaster.
As I explained last week, this post should be seen as an important “refresher course” for those of you readers who’ve been around the block once or twice – and as a potential life-saver for those who haven’t pulled the trigger on their first deal.
So what is this all about?
Well, as you probably know, there are A LOT OF HOOPS to jump through in a property subdivision. Many are confusing, many are time-consuming, and all them are required in order to complete a successful, profitable subdivision.
And the most significant, most confusing, most critical hoop of all is…
…the one that’s the difference between developing a profitable subdivision and being stuck with a block of dirt that doesn’t earn you a cent… is…
Obtaining the coveted development approval from council!
So I reached out to my friend Craig Christie, owner/director of ASI Planning. I always prefer to know what the people I deal with look like as it gives me a feeling of “knowing them” a little bit. So for your benefit if you’re like me, this is Craig:
Now that you know Craig, here’s what you really need to know about him: He’s an award-winning town planner who really, truly knows subdivisions. In fact, what Craig doesn’t know about obtaining development approval from council is not worth knowing!
OK, so in Part 1 of (published last week) Craig discussed how to:
- Hire a qualified town planner
- Be aware of the risks
- Respect your town planner
- Learn from your town planner
And today I bring you Craig’s next tips for guaranteeing your next subdivision is a “money-in-the-bank” one:
5. Use other educational resources
Although your town planner is a great source of information, there are several other places where property investors can turn for free education.
After completing a few basic checks, calling Council regarding a potential subdivision project is another step that property investors can take on their own, Craig said.
Making a simple phone call to a knowledgeable person doesn’t cost a thing and can help you to reduce the risk of the project, he said.
When speaking to Council, Craig said that property investors shouldn’t be afraid to keep someone on the phone until they get all their questions answered.
In addition to asking if the property can be subdivided, property investors should also ask the Council representative to show them where they can find the relevant information.
“If you are still happy with the results of your searches and your conversation with Council, your next step should be to contact your town planner,” Craig said.
6. Confirm the results of your research
Although Council and other sources can provide lots of free information for property investors, Craig cautions his clients to double-check with their town planner about any information they receive—because it may not be correct.
Council often gives black-and-white answers, but your town planner should be aware of any grey areas,” Craig said.
Craig said he has seen some unfortunate situations where Council incorrectly and informally told a client that they could go ahead with a subdivision—and Council ended up being wrong.
In one case, the property investor was already locked into an unconditional contract when he found out that he couldn’t subdivide without getting permission from adjacent property owners to dig up their land and place storm water and sewer lines.
To make matters worse, he paid a premium for the land because he was incorrectly told that he could subdivide.
“In this situation, the only person who made out was the property seller,” Craig said. “I try to make clients a lot of money—but if I can stop them from losing a lot of money, I feel like I’ve actually made them a lot of money.”
It’s easy to walk away from a potential deal, but it’s not so easy to spend a year on a project only to break even or lose money, Craig said.
In this case, a two-minute phone call to a town planner could have saved the property investor a bundle of money.
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7. Understand the costs
Most property investors underestimate the costs of a subdivision project, Craig said.
He said that he typically charges around $2,300 to $2,500 for his town planning services on a standard “one-lot-into-two” subdivision.
However, many property investors forget that the services of a civil engineer and a surveyor will also be required—or, they sometimes forego hiring a civil engineer to save money, he said.
Craig said that civil engineering can be a big variable in the total cost of the project, but property investors can be in for some expensive surprises if they decide to proceed without civil engineering services.
Property investors should also be mindful of costs related to infrastructure and earthworks, he said.
Because subdivision costs come from many different places, Craig said it can be difficult to pull all the costs together to get a final number. He recommended speaking with as many knowledgeable people as possible to find out how much everything will cost.
He also said that in his experience, the most sophisticated property investors also ask questions to find out the reasoning and logic behind every cost estimate they receive.
He advises his clients to beware of contractors who can’t explain things in layman’s terms—they may lack an understanding of the project or could be trying to cheat you, he said.
If the logic behind the estimate sounds good to you, it can help you to be more certain and allows you to ‘de-risk’,” he said. “Don’t be afraid to challenge members of your team.”
8. Be prepared to solve problems
The most successful property investors are those who are willing to solve problems that other people won’t, Craig said.
“I can tell if a developer is going to make it pretty quickly. When I start giving bad news, those who aren’t going to make it say, ‘OK, we can try another property.’
Those who are really keen say, ‘Help me understand that.’ The ones who have more of an appetite ask how we can make it work.”
Sophisticated investors, he said, look at sites with an open mind and try to find twists in deals that will allow them to uncover gold. Assembling the best possible team can help you to see obstacles as opportunities, Craig said.
“Because more people are looking for low risk projects, the profit margins are much lower,” he said. “You can’t make money from no-brainers.”
If you are looking to develop a profitable subdivision, a solution-focused, qualified town planner can help you to maximize your profits and avoid costly mistakes that can set you back years and result in nothing more than a big, red council stamp saying “declined.”
Craig also recommends that his clients check out the Property Resource Shop Subdivision Mega Pack, which includes tips and tools to help you make your subdivision project a success.
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