- Undertake Due diligence on your Builder
It is important that you undertake due diligence when choosing your builder. This means that you must be certain of their credibility and capability.
Tasks that you should undertake in completing this include the following:
- look at earlier work that they have done. This does not mean display homes it means properties that are about to be handed over to other clients.
- Talk with clients that have used them in the past. Perhaps look at whether they have any google or Facebook reviews.
- Undertake a builder’s licence check:
- How long have they been operating?
- How many properties they have built and how many properties they have built in the last year
- What is their allowable turnover?
- Fixed Price Turn-Key Contracts
Having[MC2] a fixed priced contract is necessary to avoid any cost-overruns or unexpected charges.
Repeatedly we see unsuspecting investors and owner-occupiers being charged 10s of thousands of dollars in additional fees from large project builders who quote a cheap price initially.
Unscrupulous project builders start with a low-price contract and add in and charge for extras during the contract process for items and allowances that purchasers assume are included.
In many instances the purchasers are so far along in the process or have financially committed to the builder and therefore feel contractually or emotionally obliged to continue costing themselves thousands in unnecessary expense and heartache.
All these additional charges and price gouging can be avoided by ensuring and insisting on a fixed price turn-key contract from the builder. If your builder will not agree to this, you should avoid them.
You must understand what a turn-key contract is and be able to ensure that all items that will be needed in a new home or investment property are included.
- Different Builders for construction types.
It is important that you have a builder that is experienced in the type and method of construction required for your block of land. There are several different construction methods and building types, and it is important that your builder is well versed in the type of construction that you are seeking.
For instance,, many builders are inexperienced in building on sloping land particularly if cut fill a[MC3] nd retain is not going to be undertaken.
It is important that your builder understands and is experienced in the construction method that meets the local standards required for your block of land. Various states use different construction methods for distinct reasons, and even across different Local Government Areas (LGAs) there are different requirements[MC4] .
As well as having a builder that is well versed in the construction method it also vital that they are experienced in the dwelling type that you require for example: houses, dual occupancy, Duplex, Rooming House, townhouse, apartment etc.
Using the wrong builder for your construction may cost you hundreds of thousands of dollars. Some examples of different constructions types that may require different builders include the following:
- A builder can only be as good as their trades and supervision.
It is important to understand that the building process involves the co-ordination of many specialised trades and services. This includes but is not limited to the following:
- Surveyors, Drainers, Concreters, Carpenters, Roofer, Brick Layer, Plumber, Electrician, Plasterer, Finishing carpenter, Cabinet makers, Tilers, Painters, Landscapers.
This means that if your builder’s final product can only be as good as the workmanship from their worst trade. [MC6] Therefore, it is especially important to work with a builder that has good trades and supervisors. Many large project builders have a high turnover of trades and supervisors making it near impossible to guarantee the quality of their builds.
It is important that the builder used has good long-term relationships with its supervisors and trades people. This can also ensure that your project is not only of a higher quality but is also completed in a timelier manner.
- Understand Liveability, Layout and Floor Plan of your property.
In too many instances we see examples of people that have purchased and built dwellings that are difficult to furnish and have an uncomfortable floor plan due to lack of thought and foresight by the designer.
It is important to make the best use of the block of land, site constraints, aspect, and typography, whilst working within the local planning guidelines and estate covenants if applicable.
Many large builders have standard designs that they want you to use and are reluctant to make changes in the floor plans or design aspects. This can mean that whilst they are able to simply their process, it does not necessary suit your specific requirements. Often if they were to make changes, they will charge excessive fees.
Each different dwelling type requires unique design and town-planning knowledge and expertise to ensure that the best outcome is achieved. For example, many large builders will only build their slab on ground standard designs and do not understand the different types of high yielding investment properties such as dual occupancy, Duplex, and multiple occupancy properties.
- Take the Emotion out of it and purchase with your brain, not your heart.
If you are looking to buy an investment property you must focus on the numbers, this is the most key factor.
You must ensure that you do not allow your emotions to cloud your judgement. When you are looking for an investment do not make the mistake of looking for somewhere for yourself to live.
Factors such as population growth, new and planned infrastructure, access to amenities and employment, changes to town plans and demand supply fundamentals are far more important than how you feel about a location emotionally. [MC7]
This also means that you should not procrastinate and fail to act. Many investors get caught up in over analysing opportunities and end up missing out.
You need to have an investment strategy worked out at the beginning and make sure that you stick to it and remain focussed on the plan.
- Do not make the mistake of going for cheap price over good value.
You need to understand the difference between price and value.
To be able to compare price and value you need to be able to compare apples with apples. This means that when comparing two new builds you must be able to compare the same inclusions and specifications, and construction types. There is no point simply comparing the price of two builds if they have different attributes.
Time and again we see investors trying to cut back and reduce the price of their builds at the expense of inclusions, property size, build quality, finishes, specification, design, façade, and layout. This ends up costing them more the track when their properties become harder to rent, receive lower yields and rental amounts, and suffer from prolonged vacancies.
A cheaper price does not necessarily mean that a build contract is better value. To prove an excellent value option there are other factors that need to be taken into consideration. These can include:
- The quality of the build inclusions
- The period and penalty charges
- Fixed price verses variable price
- Contract type
- Builder’s reputation and trades
- Infill verses New Estate
There are pros and cons of both infill land and new land estates. Infill can include small subdivisions of a few blocks in already established areas, while a new land estate is a larger subdivision within a new or emerging area.
An infill block of land has many advantages due to the nature of the well-established infrastructure and amenities. However, in many cases infill blocks require a better knowledge of town-planning and engineering/utility services. The blocks can often be irregular shapes and require a greater amount of drafting and custom design. If you are considering an in-fill block of land you must ensure that your builder has the ability to adjust designs and come up with a plan that utilises the aspects of the block within the council guidelines.
New estates can represent good investment opportunities, but it is important to look at the demand and supply fundamentals and ensure that you are not investing in an area with a potential oversupply of new properties or projects.
- Choose your property manager wisely.
The property manager can be one of the most important aspects in the success of your investment property and is an ongoing relationship.
The value of your asset can be dependent on how your property manager maintains your property, and the return of your asset can be dependent on how well your property manager is able to lease your property.
Some crucial factors in choosing a good property manager include the following:
- Local knowledge and experience
- Understanding of the asset class such as dual occupancy, Duplex, Rooming House, townhouse, apartment etc.
- Ability to keep good relationships with both the tenant and the property owner without being too lenient on the tenant.
- Ability to find decent quality tenants in a fast and efficient manner.
- Forward planning to advertise for tenants prior to property availability to avoid vacancies at property completion/handover, and tenant changes.
