DEVELOP YOUR PROPERTY - Bright Capital Finance

Why now is a good time to develop your property

The current property markets offer some of the best development opportunities for people who own property with the potential for development.

We are experiencing strong population growth, with a shortage of the right type of dwellings for new homeowners, existing homeowners wishing to downsize and for investors.

Councils are re-zoning to allow more development to accommodate for the population growth and Government encouraging higher density living.

Bright Capital Finance is a company with a team of experienced professionals who have been assisting clients realise their dreams from small renovations to multi million dollar developments.

Our services include liaising, engaging and managing the right people to ensure the best strategies and structures are implemented for the client.

Whether you have a single or multi property development project, Bright Capital Finance has the expertise to create a management structure for your development, including but not limited to:

obtaining a report outlining the Zone / Policy Area Objectives, and the Principles of Development Control in relation to proposed property development and land divisions;
meetings with Council, prior to lodgement of your application(s).
lodgement of required plans and supporting documentation to Council and any other statutory bodies, to facilitate all required approvals for your property development or land division.
engage a Project Manager to manage your development including building tenders, for any dwellings to be constructed, if required, with an emphasis on ensuring that all your building inclusion requirements are

Bright Capital Finance takes pride in working closely with our clients to ensure they feel informed, confident and comfortable with their development project from conception to completion.

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Would you like to develop your own property?

Property owners now have the opportunity to become their own property developers and make the profits for themselves. Bright Capital Finance have the right team of professionals to guide and assist you through this process.

The following information sets out your options, benefits, risks and processes, helping you make a more informed decision when developing your own property.

What is property development?

The business of buying land and buildings,then making improvements to them so that their selling price exceeds the price paid for them.

New apartments, townhouses, houses, office buildings and shopping complexes don’t just happen. Someone takes the initiative to start the process in managing the idea from creation through to completion of the spaces in which we live, work and play.

Property developers take ideas and bring the project from conception stage, to the design and approval phase incorporating finance, construction and eventual leasing or sale of the project.

Property developers buy a property shrewdly, add value and sell to make a profit. They “manufacture” properties and create capital growth.

Property development was the domain of large property development companies and the very rich. Over the last few years a new form of property developer has entered the market. These consist of highly motivated individuals who saw the opportunity to make larger profits for themselves rather than selling to a large developer and missing out on the overall development profits.

Bright Capital Finance can manage the entire property development process for Individuals who are, or want to be high net worth property developers, from conception to completion.

You can renovate a property to add value. A few property developers started out doing renovations. Some developers prefer to sell their property after renovations. Another option is to refinance your property and take advantage of the added equity that has been created.

You can land bank. This is a concept used by large property developers who buy large tracts of undeveloped land, and keep it in their own ‘bank’ of land for future development. This can be done on a smaller scale by purchasing an old property at close to land value. The land size should be of sufficient size to have future development potential. In the future, when you have more funds and/or Council makes changes to zoning, you can proceed to develop your property.

You can buy a property and add value by getting development approval (D.A.) to build new dwellings such as duplexes, townhouses or apartments. You then have two options:

sell the property with development approval (DA) to a builder or You often receive a higher price, because their time has been saved with the Council D.A. process; or
proceed with the development project yourself and make the developer’s

Whether it’s your first development or you have completed previous developments, Bright Capital Finance can assist you with your Finance or help you manage the development from conception to completion.

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Rewards of becoming a property developer

In any business there are benefits and potential risks. Set out below are some benefits and potential risks to consider.

Savings: by developing your own property you effectively only pay cost price for the development rather than purchasing a property that has already been developed and you’re paying for the developer’s profits and other associated costs (ie. Agent’s commission, GST and marketing).

Profits: you can make healthy profits selling your whole developed property or by selling a portion of the property to cover your borrowing costs. The remaining equity can be used to borrow against for your next project.

Easier Finance: as above with profits, the remaining equity can be used as the starting point for your next development. As the equity grows, obtaining finance becomes easier for future developments.

Tax Benefits: owning new properties can provide you with many deductions and depreciation allowances.

Higher Rental Yield: tenants will pay the market rental rates. Your rental yields will be higher compared to an investor who bought their property at market value.

Security: when you develop your own property, your investment will always be underpinned by the security of real estate in a prime location.
All these benefits allow you to grow your property portfolio quicker than most investors. They also allow you to be the owner of high quality properties below market value, that enable you to obtain higher rental yields and tax benefits.

Risks of property development

Successful development is simply a matter of understanding and mitigating the risks. Below are some potential risks involved in property development:

Downturn in the property market, leading to lower property values reducing profit margin.

Finance Risks: no access to additional funds or financial buffers to cope with interest rates rising during the development.

Construction cost increases during the project. This was evident during the last property boom. Some inexperienced developers thought they entered into a fixed price contract, yet were hit with cost variations.

Supply & demand ratio changes in the real estate market. This can reduce property values and your projected profit margin

Unexpected disputes with building/trade contractors or unions, which can cause costly delays to a project.

Amendments to the laws relating to property development could adversely affect the profitability and viability of your development project. These can include laws relating to zoning and town planning restrictions on land use, environmental controls, stamp duty, land tax, income taxation and capital gains tax.

Unexpected delays and increased holding costs may be encountered when town-planning (DA) approval is required for a development.

Over-capitalising – inexperienced developers find that some of the improvements they have made, does not necessarily increase the value in line with expenditure on the improvements.

Stages of property development

Whist the development process can be challenging, when the appropriate due diligence is carried out, the challenges are greatly reduced.

Developers follow a sequence of steps from conception to completion of a project. While the sequence may vary slightly, the development is broken up into the following elements:

Concept: consultation with client to identify their aspirations for their property and advise if their ideas are possible. Also consult with a Real Estate Agent to discuss saleability of proposed development idea.

Development Planning: engage with an Architect and Town Planner to investigate best development options for their property. Assist with lodging Development Application (DA) with Council.

Ownership Structure: seek advice from a Solicitor and Accountant in regards to the appropriate ownership structure set up to ensure you are protected legally and advise on the best taxation strategies.

Finance: consult with Finance Broker to discuss the best loan structure ensuring you have enough funds to complete development and cover any unforeseen expenses.

Negotiating Contract: seek advice from Contract Solicitor to identify and mitigate risks associated with construction and development contracts.

Constructing the Project: engage a Builder / Project Manager to commence and manage the construction of the development.

Completing the Project: liaising with Real Estate Agent to continue marketing and selling of the property.

Strategy for next Project: consultation with Bright Capital Finance to work on strategy for next development project.

In summary

When effective due diligence is done on your proposed development idea and the right professionals are consulted and engaged ensuring the structure of the development is set up correctly, the benefits can be highly satisfying and financially rewarding.

Property Development has until recently, only been available to those in the industry or those “in the know.” Now people who own property have the opportunity to make development profits, with the professional management and guidance from Bright Capital Finance through the previously mentioned stages of a property development.

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