What Size of Development Project should Property Investors be Looking At?
If you are considering investing in a development project there is no perfect size of you should be aiming for. Value can be created by getting it right with regard to 'houses per acre' but always your decisions need to be market focussed.
Development Projects and Sizes
Amy: Grant, what I want to ask you is, what size developments, from an investment point of view, is good to focus on?
So, if an investor is looking at new build development, talking about profit, speed, risk, elements like that, is there something they should lean-to over another?
Grant: If you are dipping your toe in, first-time, I would do a one-off house.
But again, you've got to get the site at the right price and understand the bill costs etcetera.
There's no magic number in what size. I suppose it's to do with manageability.
But if, say, somebody came to us and said, we want to build a 40-house scheme but had none of the infrastructures in place to do it, we would, in essence, almost form a design and build type delivery.
When we've done this previously, where we worked for the client, then we get passes across to the contractor, we work with them and supply a design and build, type service.
And there is no right or wrong on that. You do get the economies of scale if you are building more but then you have to look into the idea of the cost of actually standardisation and replication. So, maybe you do a 30-house scheme with maybe 5 house types, you can't make them all the same.
But there's no magic number. I suppose, if you're looking at value, you want to look at house densities. So, we talk about house per acre.
And that's defined by the market.
So, again, if you're doing you're 350k sale-value houses, they'll expect a big garden and a double garage and a front garden.
So, you're HPN might be, say, between 9 and 11 houses per acre.
Whereas if you're in more of a starter home area and you're looking at doing semis and 4-block townhouses you could maybe get your houses per acre up to 14, 16 houses per acre.
But the other big thing about it and this is something people say to us, I have 2 acres of land. If it's not a good proportion, you can't use it all. If you think about it, if you have a triangle then you have a corner over here and a corner over here and a corner over here that you can't use.
A perfect piece of land is actually an oblong or rectangular shape.
But. There's no magic number in how many you should do.