Subdividing Small Blocks - Still A Good Property Development Investment For Novice Developers

We are often asked this land development question and the answer is usually the same - It can be a great option if you pay attention to the essentials. Some in the property development industry tend to differ, understandably so after the effects of the GFC. The fact however is the Australian economy is recording strong economic growth which invariably leads to a high population growth. Subdividing land is still a very lucrative investment option provided a few property development fundamentals are adhered to.

Let us first examine a few interesting stats before delving into the fundamentals (we'll call them the 4P's) -

1. According to the ABS, the Australian population grew by 2.1% in 2010. That surpasses the growth of even the US, China and Indonesia, let alone other highly populated countries. 2. The increase of 2.1% surmounts to 450,000 people per year, 66% of which came from an influx of foreign migrants. 3. As a result, 165,000 property building licenses were issued. Now here's a question for you - Was your property development one of them?

If then taking the simplest economic driver and relating it to the property development industry, there is a strong indicator that residential and commercial property development is on the up and up!

So here are the 4P's that we talked about earlier -

1. Right product right PLACE - Target a suburb that has a shortage of supply for the product (house configuration) that you want to create, along with one that offers good long-term growth. Also look into other selling points like local infrastructure and closeness to amenities, all advice that your local real estate agent should have readily available.

2. PROMOTE your product early - It can be expensive if your development property takes longer to sell than you think. One way to cover yourself is by looking into pre-selling before you start construction. That will give you a better cashflow when the project completes and reduce your project risk.

3. What is the demand for the building PRODUCT - This is fairly simple. Don't build a house in a suburb and think that you will "flick" it quickly for a profit if everyone else is doing the same thing, with the same property design. Be patient and wait for the supply to drop and the demand to increase.