How Much Is Land Worth To A Developer

“Why do people become greedy as soon as development is mentioned when selling their property?”

You desire to sell your house that sits on a lovely 6000m2 cake of country?  It’s worth well-nigh $750,000.  Just, the sales agent mentions, a developer might exist interested and, suddenly, y’all are seeing $$$$ Dollar Signs on every door and you lot desire $1,200,000 +

As a Heir-apparent’south Agent, who works for various Developer’s, I see this all the time.  Owners about doubling the value of their holding because they remember a Developer will buy it and brand heaps of money from it.  If the Developer is going to brand heaps of money from your house, it begs the question, why don’t YOU brand heaps of money from YOUR OWN House!!!!

Well, there are usually several reasons why owners don’t do their ain developments.  Mostly because they don’t know where to starting time and what to exercise information technology, AND it costs money, AND it may not actually make any coin until two years downwardly the track when you lot have finally finished your subdivision.

“Developers are greedy & rich people who will overpay but to become a site to develop” – Incorrect.

Here’s a little chip of advice:

Developers take actually large calculators!!!!

Which means they know what something is going to cost to purchase, to concord, to develop, to sell.  All these factors are included.  Developing property is a business, and then it must brand money.  If you lot are lucky enough to get a developer wannabe / newbie, and so you lot might strike information technology lucky and they pay too much for your property. They won’t ever do once again, considering they will exist bankrupt and/or bankrupt.

A developer estimates around $150,000 per newly created block of land (business firm or townhouse) to develop.  If at that place are copse, water, gradient, koalas, house, shed etc, that toll goes Upward.   So, your 6000m2 block, which may be able to be turned into eleven house blocks (in a perfect world), would means development costs will be approximately $1,650,000 equally a starting point.

Yes, that’s a lot of money.  Somewhere on top of that needs to be some turn a profit and these types of developments can take 18-24 months.  That’south a long fourth dimension to have your money tied up, earlier you lot tin ever sell the adult land and get your money dorsum.

Forth this 18-24-month journey, many things can happen.  Not only do you lot have to become a development blessing from Quango, y’all then demand to go Operational Works on the property, which is the technical details on how you build the streets, the drainage, put in lite poles, where the electric poles go, retaining walls, driveways, water basin, vegetation management etc.

After all that, you lot finally get to put the bulldozers on site and actually start ‘developing’.  As you tin see, at whatsoever plow, costs can drastically escalate: ie.  Demand to movement a telegraph pole, Council want you to upgrade the intersection etc.

When I say a Programmer has a very large calculator, I mean they to take one capable of handling all the $000’south of work that needs to be done.

Yes, sometimes Developers do make a lot of coin from a project.

Merely usually there are a few million dollars put up forepart, with a lot of risk and fingers crossed that council won’t exist besides hard. AND so possibly 18-24 months afterwards, later being millions of dollars out of pocket, the programmer tin can finally sell the developed property.  If, amalgam townhouses, the programmer as well needs to cough upwards the toll of building the townhouses, which can add up to millions of more dollars.  Presales are dandy, but simply for the bank, as developers don’t go that money until everything is completed and sold.

Next fourth dimension a developer is accessing your footling piece of paradise to buy, there are literally, millions of dollars’ worth of things, for them to consider.  When y’all nigh double the price, because you lot think a developer can beget it, remember again.  They take feasibility tables that are pages long, and every cost you can imagine is entered into that spreadsheet.

Also remember, often the higher the price y’all are demanding, the more conditions a developer wants to add into the contract. Possibly tying up the contract for i-2 years while they go the permits in place earlier fully committing financially to the site.

Beingness greedy will complicate your sale

This is the cost for an owner existence greedy, you will become your high price, just settlement will be 1-two years down the track.

If the cost is very realistic, a programmer will often take the run a risk on the site and settle quickly and early.  This is the reward of selling for a reasonable price.

For more than information on this article or anything holding related, contact us via 1300 66 77 89 or via e-mail hither.

Karin is a passionate property investor who owns multiple investment properties. She has spent many years researching holding, law and literature in her previous job roles with McCullough Robertson Lawyers and QLD Libraries. Karin’south is head of Research at Real Holding Communication, not only focusing on backdrop, just regions, suburbs, social trends, industries, infrastructure and demographics.