The analysis of place involves assessing the physical location of the property. It requires a two-fold process investigating the property firstly from a ‘macro’ point of view and secondly from a ‘micro’ level.
The ‘macro’ analysis involves looking at the potential development’s location from a wider and more general perspective. Ask yourself this basic question – “is this the right place for the project?”. You need to look at fundamental supply and demand issues and work out if the area you have chosen is going to provide long term growth or high rents depending on your goals. For example, history has shown that properties along coastal areas experience higher growth than those in inland locations.
When assessing from a macro perspective, also take notice of what big businesses, large developers, retailers and councils are doing. Is there a major shopping centre undergoing a large redevelopment? Where are big commercial projects being built? Are more and more swanky cafes and restaurants opening up in a certain area? What suburban renewal programs are local councils thinking about for the future? These organisations spend significant sums of money researching the market before investing, and if you can tap into this knowledge early you just might be onto a winner.
Secondly, you need to look at your project from a micro perspective. This involves assessing your development at ground level and investigating its immediate surrounds. Do some digging and find out whether there is any state housing surrounding the property. What is the streetscape like? Will it appeal to the type of buyers for your property? What types of homeowners are positioned around your property – are they a positive or negative factor? What features would attract buyers to this property’s location – is it walking distance to a school or shopping precinct, is there easy access to public transport, etc? Even consider if this property is well located from a solar aspect. Does it get plenty of natural light? Is it protected from strong coastal winds? This micro analysis will help you ascertain if this individual property is ripe for development, or whether you should move on to look at others in your chosen areas.
The last P that needs to be assessed is that of Promotion. The importance of Promotion will depend on whether you are developing to sell or developing to hold. If you are planning to hold then naturally your focus is longer term and your interest is on renting it out. But if you are selling, then you need to have a marketing strategy in mind before you purchase the property (depending on the scale of your development). Consider how much money you will need to budget to adequately promote your development. Will you need materials like signage and brochures? What about a website? How much is advertising going to cost? Will you be using a sales agent – who will you use and how much will their services set you back? And don’t forget about the importance of naming your development – a name should suit your development and appeal to the emotions of prospective buyers.
A thorough market analysis that includes completion of a Real Estate Market Analysis covering the ‘4 P’s of marketing’, is one of the most critical stages involved in property development. Get it right and you could be just one step closer to your retirement, but get it wrong and you could end up knee deep in debt.