Did you wonder where the site was executable for development, from the property boundary?
A site with old warehouses / manufacturing plants may be suitable for redevelopment into houses or new industrial facilities, perhaps for other things. But how do you know?
If it is an existing industrial site, it is a reasonable bet that it is zoned for industrial use, but there is a possibility that it will be zoned for residential / mixed use if there is a house for very close proximity Yes. First call; local parliament's land compartment map. Please call local council or watch yourself on a smartphone or tablet.
If you are seeing a residential block (or two) in an area where there are many apartment blocks nearby, it is likely to be set up a residential zone. You can confirm this with a quick telephone to the local council.
As most people are interested in housing development, I will focus on "quick evaluation" of housing. You may have heard about feasibility of "behind the envelope". What I am doing is so so. Please beware that everyone has their own way. This is my way and you may not agree with it. It worked. I work for it because this works for me.
There is a land block of 2,000 square meters and it is said that there are 4, 5 story apartment blocks nearby. For me, this means that we can develop a gross floor area of about 4,000 square meters. In NSW Australia there is a new apartment design guide stipulating the minimum apartment size. You can average the typical 2 bedroom and 1 bathroom apartment to 85 m² total floor space per apartment. As a result, there is a possibility to develop apartment of about 47 apartments. We will make this into 50 buildings.
Now, starting with the overall realization, work in the opposite direction. Suppose two bedrooms and one bathroom apartment are sold for $ 800,000 each. You need to know your market to do this. This means that potential development means realizing a total of $ 40 million.
From the overall realization I will deduct my profit rate I desire. I can say 25% of that. I divide $ 40m by 1.25 to earn a profit of $ 8 million. I now know my total development cost is $ 32 million.
Do not forget that you are doing this behind the envelope. It is a very high level. My next step is to consider construction costs. Cost of land and all other costs applicable to my project.
We are looking for the remaining land value from this process, so we need to know construction etc. I will start with others.
From my experience I supposed that other development costs account for 30% of total development cost, I divided $ 32m by 1.3, and other development costs $ 7.4m and construction cost and land balance $ 24.6 Give m.
Next, construction costs will be deducted. Construction cost will change depending on where you are. I will use $ 280,000 as a construction fee for 2 bedrooms and 1 bathroom apartment. The total construction cost will be 14 million dollars.
I deduct $ 24.6 million to $ 14 million and the remaining land value amounts to 106 million dollars. If the requested price of the land is less than this, your site is feasible. If the site is not for sale and you want to get close to the property owner, you can roughly pay for that site and still earn money.
Please remember that this is an exceptionally high level. We must undertake appropriate feasibility before doing financial commitments.
