Scott's Weekly Column

Pioneers get shot!

When talking with property owners who are selling a property with the ability to be subdivided or developed into units, we often hear the question, “How much extra can I get for its future potential?”

Future potential is exactly that, unrealised profit that you may achieve in the future once the property is developed. If you are one of these property owners you really have two choices: to continue to own the property until the profit is realised by developing it yourself, or leaving much of the “potential” in the property for the next owner/developer who will be assuming all the risk.

An astute developer will be able to work out the potential selling price for the end product then deduct development, building, finance, marketing and holding costs, and factor in a profit margin (acceptable risk is 18-24% over two years). Once this has been accurately calculated they can then work out what price they can pay for the development site and potential risk.

Over the years I have seen many “first time” developers who don`t do their homework properly and either design a product that is not targeted to the right market or pay “overs” for a development site and try and make up for their mistake by overpricing their end product. Unfortunately, just like the unprepared pioneers in the Wild West who went out trailblazing in front and got shot, these developers usually end up in a heap of trouble!

Development sales and project marketing are specialised skills which not all agents are experienced in. At Nolan Partners, we have a highly trained and experienced team who can advise you on all aspects of buying or selling a development site, as well as many years of experience in selling projects from land subdivisions through to high-rise developments. Please don’t hesitate to pick up the phone and give us a call, our advice is free but a misinformed decision may cost you $$$thousands.

Have a great weekend!