The essence of pre-planning viability
Often you notice a development site advertisement may be for 3 units accompanied by the initials STCA (subject to council approval), but when you seek the agent’s opinion, they suggest that you might even get 4 units. Could it be their knowledge of planning laws is weak? The fact is agents are rarely adequately experienced to offer a judgment on the development prospects of any potential site.
Many second rate developers go to council offices to consult with planning personnel, unfortunately they are told to present an application since the council will not offer an opinion on highest possible development prospects as different council workers will give you different opinions.
Why is expert pre-planning necessary?
In locations like Victoria, each piece of land is subject to the Res Code planning policy guidelines by the state government as well as the decisions and policies of the council which include its development plans, tree policies and at times some environmental management policies. Other authorities such Melbourne Water and Vic Roads also affect prospective developments.
Apart from considering the above, you need to be conversant with recent property and planning law changes as these constitute often change. In addition every site has unique characteristics that deserve a developer’s attention. Land terrain, drainage and accessibility to transport will also contribute to limiting the number of residences to be constructed on a site.
As with other types of investments, precise information of city planning increases the chances for achieving great financial returns. Pre-planning advice from a seasoned real property manager will tell you of prospective planning hitches early.
Often, an application which most developers regard as simple, for example the nature of occupancy, can be delayed in the council for more than a year because of an objection by neighbours or councilor’s general opposition to the project.
Using a planner with your project architect will tell you in advance of any chances of an objection to the development by the neighbours. Such knowledge allows you to organize a plan with high chances for rapid assessment.
The importance of the above cannot be overstated. Developers have gone bankrupt waiting for applications to be dealt with by council officials
Setbacks and the building envelope
There are a myriad of things to look for and consider when choosing a property for development and each type of development will have different criteria to meet; i.e. if your aim is for a 5 unit site there will be different setbacks required to those for a dual occupancy site. Setbacks relating to existing homes, where you want to put another dwelling, are usually different again.
Definition of setback as per Legislation.vic.gov.au – “setback” from a boundary or building, means horizontal distance from that boundary or building
But firstly, what is the building envelope? This term refers to the area of land within the boundaries of a site that a building can be constructed on. Building envelopes vary from council to council and from site to site depending on their size. It is not a standard size.
Even though this hypothetical block may well be above 900m2 you will see there are four constraints marked on the site;
1. “E-1 Easement” running parallel to the rear fence
2. A significant “Average Front Setback” for this street
3. An allowance for the driveway
4. An allowance for “Private Open Space”
These four constraints alone can effectively halve your building envelope. Victoria’s Planning Scheme for residential developments RES CODES, Clause 55, defines 34 such constraints, so be sure you read it thoroughly and understand it. If you discover the building envelope of your site is too small, you will need to make some compromises. You may discover the compromises you need to make dramatically affect the outcome of your proposed development or subdivision. One way of keeping your proposed building size is to reduce the car parking. But this can creates a problem too – reducing the number of bedrooms you are permitted to have for example.
Let’s say you want your development to consist of 3 three-bedroom townhouses, and you want them all to have double garages but you discover the building envelope is too small to allow for this. You will then have to scale it back; i.e. to maybe 2 three-bedroom townhouses with double garages and 1 two- bedroom townhouse with a single garage. In the worst case scenario you might find you have to change your development so it consists of two townhouses instead of three.
It might even affect the feasibility of the whole development as your return may be too low to make it viable.
There is a rule of thumb that many planners and developers use when it comes to working out the site allowance for each dwelling. Before deciding to purchase they allow 250m2 per dwelling. If there isn’t that much space they don’t purchase. They use this rule this rule of thumb without paying for the assistance of professionals.
As a result they can run into problems when it comes to what can actually be permitted. Assumption can be a dangerous thing, especially in development. It may be they have a 900m2 parcel of land, they do their figures and come to the conclusion they’ll be able to get a planning permit for three townhouses because purely on a square metre basis, the land exceeds the allowance of 250m2 per dwelling.
Where they come to grief is in working within the constraints of the local Council’s planning requirements. If you ignore them and your proposed development does not fit within these constraints, your site will not get a planning permit.
Of course, there are times when the building envelope is just simply too small to develop the number of townhouses you’d like, and as we mentioned earlier sometimes if you have to scale back too far, the project ceases to be viable
Now, let’s say the house to the left of our proposed development site has a 6 metre setback from the front boundary, and the house to the right has a 3 metre setback. If you study the street line and you discover 3 metres is the average setback, then you can usually start the new dwelling at 3 metres. If, on your site, there is an existing dwelling with a setback of 6 metres, and you’re going to demolish it and re-build, you will have 3 metres more to build on than what is already there. You’ll find that setbacks usually follow the street line. The front setback rule varies from Council to Council. The usual formula is the average of the setbacks of the properties on either side. However, the setback formula can extend to more properties on either side as well as those across the road
Connections – look underground first
It is of the utmost importance to know where the assets are in order to connect such as a new sewage pipe or new storm water system. I knew of one development in an old low-key area where there wasn’t huge amount of profit to begin with and the underground assets hadn’t been looked into prior to purchasing the property. The developer had permits granted and contacted us about a problem when he wanted to subdivide.
The water authority for the area conducted a search in order to give him the information he needed to connect. They discovered their sewage pipe was 6.2 metres underground. Unfortunately according to their rules and regulations, anything below 6 metres required a manhole to be placed to give access to the asset. In most cases, for anything less than 6 metres we are able to use what is called maintenance shaft which is basically a shaft that goes down to the asset so the authority’s workers are able to access the asset in the case of a blockage or for other work that may be required. In this case, because it was deeper than 6 metres, they required a manhole.
The price of the manhole was $15,000. This client had a profit margin of approximately $45,000 and he stood to lose $15,000 prior to starting the labothe slab – just to get the sewage connected! It was not a good situation to be in. The water authorities wouldn’t budge so he lost over 25% of his profit to a man hole.
From this you can see why it is so important to establish where the assets are. Once you know how far underground the pipes are, it’s probably a wise idea to check with the water authority to ask if there’s anything specific that affects them. If there are any pipes more than approximately 2.5 metres underground, then I would definitely be checking with the water authority as they may have rules about how to connect and the costs. Some water authorities tell you which plumber to use. You can’t go to your own plumber and to negotiate a better deal, you have to use their plumbers. It’s a case of, ‘their asset, their property and their way.’ Checking where the easements lie and having a good look into what affects them, is something you need to do before you purchase.
Condition of Existing homes
It is important that when you are purchasing an existing home you check the normal faults that are likely to exist if it has not been well care for. These very basic checks that will ensure you buy a good property.
First check whether the structure has decayed because of possible water leak, or has termites, or other pests that destroy the structure, if a given property has evidence of these, then more investigation is necessary. A good starting point is the power stumps because you can always tell the condition of the property by looking at the bottom. If it is dirty and decayed it is time to call a professional inspector to check all of these for you. A good starting point to look for a good industry professional is
Make sure you also check other important factors such as the area in which the property is located as it will tell you more. Finally however the final decision lies with you.
Among the questions you should be able to answer before parting with your money is whether it is liveable, or is substantial cleaning required before you can move in as it will add to your cost not even counting time used cleaning. Also, is the style of the property suitable for incorporation into new development, or will it need to be demolished? As demolition will add more cost to the project, is it possible to make improvements on the existing property by adding new design? Does the property need an additional carport or can it be converted to a room? Will the extensions need to be removed especially the rear ones?
If you answer these questions satisfactorily you will find you have purchased a great property at a bargain price. For example the back yard may not meet development criteria (size wise) yet by removing a car port or extension – sometime even part of the home – it can open the door to a new dwelling. Obviously you don’t tell the agent!
I once purchased a home in Bentleigh that developers had knocked because of lack of room in the rear yard. I ended up with a great purchase and placed 2 units in the rear by removing the extra living room at rear. Of course costs have to be taken into account prior to purchase, if you are planning on removing a part of the home so please do your homework or you may end up throwing all you profits away. Most people don’t realise that the existing home is the key to the success of the rear dwellings. If the site is a battle-axe block then the new home in the rear must complement the existing home. I have seen many developers do up a great new dwelling at the rear of existing dwellings only to totally forget about the old existing home, they are still wondering why three different agents and six months later why they can’t get a sale for their new dwelling??
Res Code Requirements on Driveway widths
You should always observe driveway widths when developing property. The Res Code clearly states the acceptable average driveway width for battle axe and Multi units’ sites is three metres between boundary walls, with some exceptions. In order to be on the safe side, it is advisable to follow the established rule of thumb, by going for properties that have a driveway width of 3.1 metres. You should remember that the measurement is taken from the eve to the boundary. This seems to be one of the most misunderstood rules, as in the 14 years I have been in the property development industry, I have only encountered one planner who knew the rule existed and can be enforced. If you want to be on the safe side then observe the Res Code.
You can get a good deal if you encounter an agent unfamiliar with the property development business, as it is possible to convince them that the property is not for further development and it’s for use as a home or as investment as this will keep the price down.
North facing property
It’s important, but not essential to locate north facing property. At least the proposed development should be positioned with the entrance facing north. If the living area is facing north the property is likely to attract more buyers. Most buyers want to have sunlight during morning and then later have the sun while having good time in the garden. Too much sun can be problem however if you need to put blinds to block the sun.
Vegetation – trees and other matters
Now we are going to look in the back yard; the thing we need to find out about here is the vegetation or the trees. Most councils are in favor of keeping as many trees and as much greenery as possible, so if your back garden has trees, you need to get an arborist to tell you if you can cut the trees down. It is important to do this before purchasing the property. I have seen many applications for permits rejected because one tree couldn’t be removed. Remember the majority of councils will not allow the removal of a tree until they have an independent arborist’s report, stating it is not important to the area. If it is it will be difficult to remove but it may be dying or dangerous, in which case the arborist will state this and it may be deemed necessary by council to remove the tree, something the arborist can then organise to do. An arborist’s report will cost anything from $500 to $1000 depending on how much work is involved and it is definitely wise to use one prior to purchasing a property that has trees.