Fast Track Acquisition – Tips for Getting a Great Site Fast

You can’t have a property development if you don’t have a site. With these tips from Steve Chandler, you’ll find the perfect site for your project.

It’s crucial that you understand how to acquire a development site as a property developer.

However, there’s more to buying a site than meets the eye. Many developers don’t even realise that some of these factors come into play.

Property Development Institute (PDI) founder Steven Chandler understands this better than most. He’s shared four tips for helping you to find your site.

Tip #1 – Establish Demand

Before you even start thinking about a site, you need to establish demand.

There’s no point developing several apartments on a parcel of land if nobody wants to live in them. Supply and demand lie at the heart of site acquisition.

Think of property as a product. What do people really need from it and how can you adapt your development to suit those needs?

A lot of people do this the other way around. They buy a site and then start looking at the demand. If you research demand first, you’ll have the knowledge needed to choose the perfect site for your project.

How can you research the demand? You can use a platform such as ArchiStar to see how many properties have been recently sold and how many are for sale in the area.

Tip #2 – Understand the Different Forms of Property Title

The property title is a legal document that describes the legal name given to a parcel of land or property. In fact, any built form that exists, such as a road or railway, will have a property title.

When you acquire a parcel of land, you also acquire its title.

Developers usually come across two title types during their work.

The first is a freehold title. This tends to offer you much more control over the parcel of land that you acquire. Once you buy it, you have the freedom to build, sell, gift, or even will the land to someone.

The other is leasehold. With this type of title, you’re leasing the land to use for a set period of time. For example, you may lease the land from the government and get a 99-year lease. Or, you could lease it from a private owner with a shorter lease. At the end of the lease, you have to remove any improvements that you made.

You also have to consider encumbrances when looking at titles.

An encumbrance is anything that constrains you from doing certain things with the title that you acquire.

For example, you’ll pay a deposit to acquire a property. However, you don’t actually own the land for a period of time following that deposit payment. You may wish to secure your financial interest in that property. Thus, you may create a caveat for the property title while you’re waiting to assume full ownership.

Awareness of the different title types and any encumbrances you may need to consider ensures you don’t make mistakes when buying.

Tip #3 – Understand the Five Basic Structures for Acquisition

There are five basic structures for acquiring property:

Outright Purchase

This is the simplest structure. You place your deposit and acquire the property. You wait for the settlement period to end and then you complete the transaction.

Call Option

With a call option, you negotiate a price now for the right to buy the property in the future. You may have to pay a fee or offer slightly more to get those rights.

However, you also have the right to walk away from the transaction if the market doesn’t work out as you expected.

Put and Call Option

This works in the same way as a call option with one significant difference.

The seller can compel you to settle on the transaction.

This option comes with additional risk because you can’t walk away from the transaction.

Development Agreement

Typically, this sees you work with the land or property owner to create an agreement. That agreement covers what you can develop on the land. Plus, it will put constraints in place regarding what you can and can’t do.

Development agreements vary substantially because there’s a lot of negotiation involved. You’ll also usually have to provide a percentage of the profits to the owner or a higher price for the land.

This is a great way to develop a project without having to pay for the land right away.

Joint Venture Agreement

With this agreement, you work with another party to acquire the land and do the development.

For example, you may work with an investor who offers up the cash for the purchase and other development costs. You bring the development expertise and you work in tandem to make a profit.

The key here is that you build an agreement that suits both parties and covers all foreseeable eventualities.

Tip #4 – Do Your Due Diligence

A lot of people shudder with fear when they hear the term “due diligence”.

However, it’s an extremely important facet of what you do in property development. There are several facets of due diligence that you have to consider.

These include the following:

Legal

This is where you look at the land and title. What are you allowed to do with the parcel of land once you acquire it? What zoning requirements do you need to meet and are there any constraints?

Are there any existing leases and what are the terms?

Any legal question related to the land or the title gets answered here.

Contamination

We know a lot more now about how certain contaminants affect the land.

You need to research the history of the property that’s already on the land, and anything that the land was used for beforehand, to find out what those previous owners used it for. You’ll likely work with an environmental consultant to discover all of this.

You’re looking to establish what risks exist if you associate yourself with the land.

Environmental Issues

This covers other forms of environmental investigation that you’ll need to undertake. This includes:

• Flora
• Fauna
• Heritage/Native Heritage

Town Planning

As well as considering what you can develop, you also need to consider how that development meshes with current town planning legislation and regulations.

How does the property fit into the wider picture of the area?

You’ll likely work closely with a town planning consultant to determine this.

Purchasing Your Property

This covers the basics of some of the key components of property acquisition.

Steven goes into greater detail in the modules he presents for PDI.

And with Archistar, you can conduct effective due diligence to ensure you purchase the property that works best for you.

Book your demonstration today.

This content comes courtesy of Steven Chandler of the Property Development Institute. Steve Chandler is a third generation property developer with over 35 years’ experience. He is a lecturer at two of Australia’s most recognised universities and travels Australia delivering property development training at introductory and advanced levels. Steve has also authored a number of books on building and property development.