As Architects, we are often asked by client’s what type of property, and with what characteristics, should they be looking for. Unfortunately, there is no one property type that fits all, and one of the common conundrums facing land purchasers is how and where to find a property that will provide flexibility across all market influences, uses, short- and long-term returns, and security.

The reality is that purchasers largely fall into one of three types and each of these categories come with their own individual requirements:

• homeowner,
• developer, or
• long-term investor.

The cornerstone of any purchase is the long-standing marketing adage of Location, Location, Location! This holds true for any purchase being made, but depending on what you are looking for, this location will often differ.

Homeowners

“Purchase the worst house in the best street” is something we have all heard. The thought behind this is that you may purchase a competitively priced undercapitalised site in an area that will continue to increase in value and allows scope for improvement. Consideration needs to be given to whether your desire is to knock down and rebuild, extend or renovate the existing conditions. Pushing yourself to your financial limits will not leave money to realistically carry out any of these tasks, and whilst you may have a strong long-term investment, you may be residing in conditions that are less than desirable.

It is important to understand that renovations and construction may be expensive and inconvenient. If you decide that this is not for you, make sure you find something that will suit your needs, requires little alterations with no major structural implications, and don’t apply substantial importance on resale value or capital expense. Home prices will always seem expensive at the time of purchase, but with no capital gains tax they will typically be the best investment anyone ever makes on resale, but it should not be considered or judged in this fashion.

If you are looking for a home, purchase something within your financial means that suits your lifestyle, needs and family. Ask yourself if you have a desire to renovate, extend, or rebuild, and do so with the main considerations again being lifestyle, needs and family, not the financial return which typically follow.

Developers

Due diligence prior to purchase is critical for any development. The intention of most developers is to purchase the site, acquire permits, construct and sell as quickly as possible, in order to maximise returns and profits. Talking to the right people by way of planners and agents, and having an Architect provide a concept that is feasible to make these goals achievable is the starting point. Too often developers will purchase land and then engage an Architect and inform them of what they require in order to make the project feasible. The process needs to operate in the reverse order – what can be achieved on the parcel of land is what sets its value and ultimate price. The required returns are established at the beginning of the project with the purchase price. Overpaying for a site will result in a need to constantly chase greater returns, requiring more time and cost to achieve the required outcome.

“Time is money” - This is never truer than with developers and their developments. Having a development quickly turnover, rather than being bogged down with the on-going holding costs due to multiple applications, VCAT hearings, and protracted and difficult marketing will only increase the cost of the development and decrease the overall feasibility and profits of the project.

Typically, developments are funded with borrowed money rather than capital investment. This is practical when a development, and hence the associated loans have a short duration. Being able to move quickly onto the next project is a far better outcome than being stuck dealing with a difficult development because the initial purchase was flawed and missing the right form of communication and discussions.

Long-Term Investors

Whilst borrowed money and short-term rewards are the characteristics of developer projects, long-term investments are essentially the complete opposite. When long-term investments in the property market are considered, holding costs, loan repayments and returns are critical. A greater level of capital investment is required in order to minimise loans and on-going interest payments, and the return needs to be considered in terms of income rather than a short term boost to your finances. It is a rental model as opposed to a sales model.

Consideration needs to be given to market rental return, capital cost (including property, consultants and construction), typology of product, and future supply and demand within the area. Being able to minimise capital investment, while maximising on-going return is critical to the success of the investment. Product is critical, but you need to be conscious of not falling into the pitfalls of the hype generated by trends and passing fashions. Designing to a trend works if you are selling the product, remembering that with long-term investments you need to consider the long-term appeal of what is being provided.

Many of our recent projects over the past few years have been Specialist Disability Accommodation (SDA) under the NDIS scheme. It has been an educational process for our office, and for prospective clients who are looking to get into this sector. The reality is that this is not for everyone. It is for those that fit into the long-term investor category, and not those looking to simply see an immediate large return on an investment.

With CBG’s 40+ years of experience across all aspects of Architecture, we are experienced and capable of dealing with individual family homes, developments for investors and owner-occupiers, and long-term investment products. Our most recent experience in the SDA field has developed our own understanding of how someone can develop a long-term, viable and profitable product. Importantly in doing so, it also creates a positive benefit to everyone in the community and in particular those that often don’t have the opportunity to create this reward for themselves.

Ultimately before purchasing any property, the pertinent question that needs to be answered is “what is the purpose of my purchase, and what am I trying to achieve with it?” Once you establish your goals, you are able to commence your search. Remembering that the typical characteristics of the type of property you are looking for will differ greatly depending on what you are aiming to achieve. This should neither alarm nor scare you, but rather provide certainty with your decisions and direction.

Once the decision has been made, and your direction has been set, it is critical to talk to the right people and employ the right professionals to assist with making sure the property purchase is feasible, accommodates your requirements, and is the right property for you. Planning consultants, agents, financiers, and architects are critical to gaining this certainty. A small financial investment on your part for their expertise and time will typically result in significant time and cost savings over the life of the project.