6 Keys to successful

property development
 About this report
The content of this book has been developed after researching property development projects
executed by both the authors and a significant number of other investors

Franco Buildings has been involved in Property Development projects for the last 10 years. Over
that period we have executed hundreds of projects for both our clients and ourselves. This report is
based on the learning and experiences accumulated during property development project of all sizes
an budgets.

While we have experience in the end-to-end lifecycle of a development project, its important to
clarify that we are not town planners, architects, lawyers or tax accountants. This report has been
written primarily from our perspective as builders and investors.

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 Property development can be both a fulfilling and lucrative
activity. It provides an opportunity to create new homes for
families to enjoy while providing superior returns to the investor

Keys to and developer.

During our research we have identified several keys to a

property successful project, divided in 3 critical areas:

development Buying the site

Ensuring that the selection and feasibility of the site take into
consideration critical elements for success

site selection Designing the development

Plan the target product in a way that maximises the benefits for
both the developer and the ultimate user

Executing the construction

Use specific building and construction strategies to provide
certainty of outcome and optimise construction results.

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 1 Planning zones
Selection a site within the right planning zone is critical
to ensure the property can be developed successfully

Each property in Victoria is assigned to a specific zone within a planning

scheme. A planning scheme is a statutory document which sets out objectives,
policies and provisions for the use, development and protection of land in the
area to which it applies. A planning scheme regulates the use and development
of land through planning provisions to achieve those objectives and policies.

Planning zones are

consistent across
victoria, which means
that properties with the
same classification
need to meet similar
requirements
irrespective of where
they are located.

Zoning will determine

what you can build in a
development site,
including requirements
of site coverage,
maximum height and
private open space
requirements

Some zones are

accompanied by a
schedule which adds
or alter the
requirements for the
development.

Zoning can significantly change within the same are or suburb and sometime
even from one side of the street to the other. In one instance we saw a single
property which was marked as having two separate zones in different parts of the
block

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 2 Deposit
The contract deposit is one of the most underrated
negotiation tools in property development transactions

Normally when you enter into a land purchase contract you pay a deposit. Many real estate
agents ask for a 10% deposit without even thinking about the implications. They are simply
following what they usually do in residential transactions.

Many people don't know there's no minimum percentage legally required to be paid as a
deposit on a purchase contract. Deposit can be as low as $1,000 and it could technically
be even $1.

Deposit is one of they key elements you can negotiate and leverage. Negotiating a lower
deposit allows you to get into the transaction while locking less of your money, and the rest
of your money can be use for other things we cover later in this report.

We normally go with with a lower deposit than primarily because by default, no one can get
access to the deposit. If neither you or the vendor can use the money of the deposit, then y
how much the deposit is becomes irrelevant.

The amount of the deposit can also set size of the penalty that you'll pay if you can't settle.
While not strictly determined as such in the contract. The deposit is usually the first amount
the vendor can get access too if you can’t settle.

While many vendors simply take your deposit and proceed to re-sell the property in the
market, you should consult your legal professional to get comprehensive advise.

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 Another way of negotiating around the deposit is early release. Many vendors are doing
concurrent sell and buy transactions at the same time. They are selling their house or the
block of land and at the same time buying somewhere else. Some vendors are selling
because because they need the money for something else. In both of these cases having
early access to the deposit is of value to the vendor and literally cost you nothing financially.

In Victoria, the mechanism for early release is commonly known as Section 27, taking its
name from the section 27 of the Sale of Land Act 1962. By using this mechanism, a buyer
can give a buyer access to the deposit money, and in doing so have a powerful negotiating
tool that can allow the developer to obtain a better price and/or favorable conditions in other
areas.

This process, on the other hand, requires a bit of trust. You obviously don't want to release
the deposit without making sure first there's enough equity in the property. This is critical so
the vendor is able to settle. During settlement the vendor will need to discharge any mortgage
so the property can be can be transferred to you.

There is a little bit of risk here but your conveyance or solicitor can help you conduct the
checks so you can make the appropriate judgment. In many circumstances you will be ok
provided you're careful.

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 3 Settlement
The time before settlement provides an opportunity to
get your development project to an quicker start

When they talk about settlement, most people talk about the time that elapses between the
signature of the purchase contract and the moment in which the land transfers to the new
owner.

In a property development project, we prefer to have a longer settlement, usually in the

order of 12 months. This allow us to start the planning of the project while incurring holding
costs only on a portion of the contract value.

Even though the contract will have a date or settlement, there are ways to establish the
contract so the buyer has the option to settle early. This clauses sometimes require
consultation with a with a vendor, and sometimes the buyer can have the option
independently. We prefer to have that option available to us because if we do complete the
planning stage of the development project early, we can settle at that point.

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 There are a number of
misconceptions about settlement.
Many people believe that you need
to have ownership of the property for
you to start a the planning permit
application or a development
application as it's called in other
states. That is simply not true. You
can submit a planning permit
application to counsel without yet
being the legal owner of the land.
We have done it and seen it many
times.

That is part of the reasons why we

like a longer settlement. It allows us
to prepare and submit the
application process to council and
sometimes even get a result from
that application before taking
ownership of the land. By doing this
you can save up to 95% of your
money or more specifically, of the
holding cost the value of the
contract.

However, you probably want to settle

on the land before the start of
construction. Normally you don’t
want to start construction on a
property that is not yours. Even if
you have permission from the
current owner to demolish the
existing house and commence
construction of the new properties,
we advise against it for a number of
reasons.

Such an approach is risky not only

because demolishing a property is
pretty final, but also because it
means that now you're spending a
significant amount of money on a
property that is not yours. If anything
were to go wrong with the settlement
or the transfer of title into your name,
you now have additional obligations
than those of the paper based
process that has happened to that
point.

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 4 Development contributions
Development contributions vary between areas and can
have a significant impact on a project viability

When people develop land for residential, they often contribute to or cause the need for new
or upgraded infrastructure. This is specially true in most projects that seek to increase the
density of properties though the construction of units or townhouses.

Development contributions are payments or works-in-kind towards the provision of

infrastructure made by the proponent of a new development. The Planning and Environment
Act 1987 allows for development contributions to be provided through the:

• planning scheme amendment process

• planning permit process, or

• building permit process.

Development contributions vary from council to council and from area to area. In some
areas can be as low as $300 per dwelling while in other can be 8% of the value of the land
or higher.

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 Development contributions are usually calculated as a percentage of the land value. In
some in some instances some council areas contributions may be calculated as a flat fee.

Development contributions are paid at different stages of the project depending on on the
specific local government area or the specific Council. Some council areas require payment
of the development contribution at the end of the project, just before the subdivision get
completed and before the new titles get issued. That's obviously good because it means you
make payment just before the realization of the project and the completion of the sale of the
product.

On the other hand, some councils have some areas that require payment of the
development contribution at the moment of settlement of the land. This obviously mean
payment much earlier in the project and the consequent holding costs

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 5 Trees
Selection a site within the right planning zone is critical
to ensure the property can be developed successfully

One of the issues most under estimated by novice or first time developers, when considering
site selection is the issue of trees.

Trees are particularly important if you are developing in an area where we're landscaping and
trees are prevalent, like on the edges of the Dandenong ranges , or on some of the inner
suburbs of Melbourne.

Some trees are protected, irrelevant of their location. Some developers think that because a
tree in your property, you have the right to knock it down to make way for your development
project, but that may not be the case. Some trees, and in particular native trees, are protected
by law and registered with the council in what’s called a significant tree register.

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 Some trees are protected by what what it's
known as planning overlay. When you look at
the planning or zoning report for the block of
land that you intend to develop, you might see
a number of overlays, that may impact the
development potential of the land.

Some of these overlays are related to trees,

and they might say things like not tree over a
certain height may be removed without a
permit.

Now, you can request a permit to remove

some of those trees. Still, if the tree is
considered valuable to the area or valuable to
the Council, the council might not be willing to
let you remove that tree. The reality in both of
these situations is that you may not be able to
remove the protected tree.

If you cannot remove a protected tree, then

the tree will have to stay in place and you will
have to design around the presence of that
tree. This can significantly impact what you
can put on the block. It might reduce the
number of townhouses or units you can put in
a block. Obviously if you can only create a
reduced number of units, then that will impact
your return and ultimately may impact your
project viability.

It's very important that you take into account

the issue of trees when selecting blocks of
land and that you consult with a with an
experienced development team to ensure that
you know a tree issue will surface too late in
the process.

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 6 Other permits
Developers need to factor in a number of additional
permits that will be required during a typical project

There are a number of additional permits beyond the

planning permit that are needed throughout the life of the
typical property development project.

We are going to mention a few of these permits here but it's

very important that you consult with your, with your property
development advisors and professionals to ensure all of
these requisites are included in your feasibility.

Sewage Permit

The first permit I have on my list is a sewage water permit.

This permit is issued by the water utility, and involves a fee
that they charge for the additional load on the sewage
system that the new properties will create.

To illustrate, you should think about the fact that you may be
demolishing a house to build three or four townhouses.
Well, now you have three or four new properties,
discharging sewage in place of the original one.

Sin addition, the water utility reviews the plan for the
development to ensure that it's compliant with the
requirements in terms of building over any easements,
connecting to existing infrastructure.

Drainage Permit

The council will issue a drainage permit that will ensure that
storm water coming out of the property, is discharging
appropriately.

If your project is beyond a certain size, you're very likely to

have to install a water retention system or storm water
retention system. Much like in in previous cases, the council
will charge a fee and will have to ensure that the
surrounding infrastructure can cope with a additional load,

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 Road Opening Permit

the council will also require you to obtain a road opening permit if you are creating or modifying
existing cross-overs. Your planning permit may include the approval to create or add additional
crossovers to your property, maybe for additional driveways for for some of the properties that
you're creating.

That planning permit gives you initial approval. However, during construction, you will need an
actual road opening permit to perform the work and to open the crossover by working over the
nature strip and creating the new opening towards the road where your properties face,

Asset Protection Permit

Before you start construction you will also want to need an asset protection permit. An asset
protection permit is a permit that involves a bond levied by the Council to the developer to
ensure that council assets do not get damaged during the development and construction
process.

If you consider the way most development projects work, you will have trucks going into the site
to perform excavation, deliveries and other activities. The council wants to make sure that the
footpath and the crossovers don't get damaged during the project. And if they do get damage,
then you as a developer are responsible for for restoring those assets to their original condition.

Demolition and Building Permit

A couple of other common permits you will need during the project are a demolition permit to
demolish the existing house (if applicable) and a building permit to construct the new dwellings.
The demolition permit is usually organised through the demolition company or through your
builder included in the construction contract. The building permits is usually, but not always,
included in the building contract.

You want to make sure when you review building quotes that you check whether these permits
are part of the contract or not. If they are not included, you want to make sure you include them
in your feasibility so you can account and pay for them.

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 Have any questions?

If you want more information, or would like to

talk to a certified builder to get all your questions
answered, call us on 1-300-882-728 or email us
at info@francobuildings.com

Check out what others are saying about working

together with Franco Buildings by visiting our
website on http://www.francobuildings.com

If you are ready to start your property

development journey and would like to discuss
with a builder specialist in the building of dual
occupancy and multi-unit developments, contact
us today for an no obligation free consultation

www.francobuildings.com

15 keys to successful property development