Know the full costs of a property development

Dominique Grubisa
Dominique Grubisa

Published 3:49 am 3 May 2019

Facebook Twitter Pintrest Linkedin Google Plus

Knowledge is power. Before you embark on your residential property development, make sure you’re across all the potential costs and have a plan to meet them, advises DG Institute Founder and CEO Dominique Grubisa.

Developing property can be a great way of building wealth and an exciting career choice. But, no one ever said it was cheap.

As a developer, you must cover a wide range of costs from acquisition through to marketing. One of the best ways to safeguard the success of your project is to be fully aware in advance of the various costs that can crop up and to plan for them.

→ Download The Exclusive Ultimate Property Developer’s Guide To Success

Property Development Cost Breakdown

Here are the top 10 property development holding costs to consider as you create your feasibility study and get moving towards your development.

Acquisition costs

The first major cost is your land purchase and acquisition costs. These include the price of the land/property you are buying, and also stamp duty, legal fees for things like conveyancing, council rates and tax adjustments. Stamp duty and council rates vary depending on the state and area in which you are buying and there are online calculators that can help estimate these costs.

Finance fees and charges

You will need to consider fees and charges associated with financing for both the site purchase and development. These may include application, establishment, valuation and legal fees. There are also the ongoing costs of interest being charged over the life of the loan.

You can negotiate with your financial institution on the way you may want to do secure finance. For example, you can settle for the development site first and secure a residential loan then decide later to undertake the development and apply for a construction loan.

Professional fees

This covers the property development team professional fees charged by consultants including architects, civil, hydraulic and structural engineers and building designers. The number of consultants will vary according to the size of the development as will the costs involved.

Not all consultants and professionals are used on every project. A single dwelling development may only require a designer and architect, whereas a multi-storey apartment block will require the services of an array of consultants.

Watch more videos on buying property, click here: https://youtu.be/pWwLHAlzPVQ
Read Dom’s interview with realestate.com.au about Buying Off-The-Plan, click here: http://snip.ly/OffThePlan

Development costs

These don’t just cover building materials and contractors. They also include things such as council charges, professional fees, application fees, planning submission and building permit fees. Depending on the type of development you are planning, there could also be costs for subdivision, strata titling or rezoning. In a nutshell, the development costs include everything that takes your development from its raw state to its marketable end product.

Construction

Rather than guess how much your construction costs may be, do your calculations on a square metre basis or better yet, use a quantity surveyor or building estimator.  You’ll need these estimates to give your architect an idea of your budget and they are also used to get approval for finance. Formal finance is generally approved when building costs have been firmed up and a contract with a builder is signed.

Council contributions

Councils don’t just put their hand out for planning and development fees. As well as the development application, you’ll also have to pay for building permit fees and planning submission fees. Councils can also charge a council contribution fee known as development contribution which offset the extra load or new load on council infrastructure.

Utility connection fees

Without power, water and sewerage, you won’t get too far with your development. There is a fee involved when connecting utilities to the development site even before breaking ground for things like water, electricity, drainage, stormwater, telecommunication and gas.

Insurances

You wouldn’t drive your car without insurance, so don’t start a property development without it either. There are always risks involved in construction from personal and public liability to building insurance. It’s important to also ensure that everyone involved in the project from consultants, builders and their contractors have insurance of their own to cover the project.

Marketing or selling costs

Once the development is complete, the costs don’t stop. You have to factor into your feasibility budget how much it’s going to cost to sell the project. A percentage of the sale will be eaten up in estate agent fees, but these can be negotiated.

Contingency

Lastly, it’s advisable to factor into your overall costs, some extra cash for contingency. There are always cost overruns or challenges that are faced by developers so it’s a good idea to allow between 5-10 per cent extra in your costings to cover things for which you hadn’t planned.


Brian Tracy


DOMINIQUE GRUBISA
Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing legal practitioner with over 22 years of legal and commercial experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author. You may contact Dominique at info@dginstitute.com.au


This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

Accelerate Your Wealth And Cashflow With
Property Development

Our Happy Clients

  • Lisa Mitchell

    "My name’s Lisa Mitchell. I live in Chatswood in Sydney. Since joining the Elite Mentoring Program. I’ve done two deals made around $240,000. And probably when I add the extra rental that’s coming, it’s another $70,000. I could not be happier with that result. And I’m amazed by it, to be honest, I’m absolutely amazed. […]"

    Lisa Mitchell, Property Uplift Elite Mentoring Graduate

  • Jennine Kimbal

    "Janine Kimball from Newcastle since joining DG Institute we have two projects currently in progress with a gross realization value of about 10 and a half million dollars expected profit from those is going to be probably around $1.8 million when they complete the reason we joined DG Institute and the Elite Mentoring Program, was […]"

    Jennine Kimbal, Property Uplift Elite Mentoring Graduat

  • Michael Kuligowski

    "Hi, my name’s Michael, and I’m from New South Wales. Since joining the Elite Mentoring, we’ve been able to secure three properties. Well, under market value, both in inner Sydney, New South Wales, also regional new South Wales and one in Victoria by, undertaking, this program, we’ve definitely benefited, and we can see that we’re […]"

    Michael Kuligowski, Elite Mentoring Graduate (Property Uplift & Real Estate Rescue)

  • Sharon Harvey

    "Hi, I’m Sharon Harvey. I’m from South Australia. I joined the Elite Program because I was looking for something more in property and I was looking for more education and somebody who would inspire me and Dominique was that person. I listened to her talk and realize that there was a great synergy between us. […]"

    Sharon Harvey, Property Uplift Elite Mentoring Graduate

Recent Blog Post

Protect your assets and become more tax effective by setting up a trust

Protect your assets and become more tax effective by setting up a trust

View Post
Why A Will On Its Own, Is Not Enough To Secure Your Wealth

Why A Will On Its Own, Is Not Enough To Secure Your Wealth

View Post
How to use the new, historic-low interest rates to build wealth

How to use the new, historic-low interest rates to build wealth

View Post
How a Debt-Management Plan Could Solve Your Money Troubles

How a Debt-Management Plan Could Solve Your Money Troubles

View Post
Bank figures reveal the truth about the coming economic storm

Bank figures reveal the truth about the coming economic storm

View Post

EMERGENCY Webinar Briefing on How To Safeguard Your Wealth While You Profit Safely

Lock Away Your Home, Investments & Business from harm while positioning you for the amazing capital growth and cashflow opportunities ahead

REGISTER YOUR FREE SEAT NOW