I talk a lot about doing your research and becoming an Area Expert. It's closely tied to the concept of 1 Strategy, 1 Council and 3 Suburbs.
As you dig further into the data, though, you'll start to notice that although there's a median price for a suburb, there can be quite a variance in sales prices in different parts of the suburb.
So what makes one area more expensive than another? And how can you use that information to turbocharge your development profits?
The old adage remains true - location is often the single most important factor in determining a development site’s potential for profit. A prime location attracts buyers or tenants, commands higher prices, and typically sells quicker. But “prime” doesn’t necessarily mean expensive or central. It means well-suited to the likely buyer.
Which means a crucial part of becoming an Area Expert is understanding the demographics of your area and having a good understanding of what that target population wants.
For example, here are some typical buyer groups:
Looking at the list, it's easy to see that these different types of buyers aren't looking for the same things when they want to buy a new home.
This can be site specific. A family with young kids is much more likely to want a backyard for them to play in, whereas busy professionals want minimal outdoor space that requires care, such as mowing.
Downsizers who are ageing are likely to want their home on a single level, whereas a family with teens might like 2 stories so that the upper level can become a teen zone free from parents.
And while design principles are important, the demographics of your potential buyers play an important part in determining what local amenities appeal to each buyer group. Understanding their needs is key to choosing a site which bumps up your profit.
School Zone
Being close to a good school is a huge factor for families with kids. In Melbourne, for example, there's one suburb with an area dubbed "The Golden Triangle" because it's the catchment zone for the local high school with a stellar repuation. Homes there regularly fetch a substantial premium.
But for other demographic groups, this is very low on their list of priorities. In fact, living close to a school may actually downgrade the property in their eyes because they'd prefer peace and quiet.
Transport
You'd think our reliance on cars to get around would mean transport doesn't have the appeal it used to, but based on your demographic group it's likely to still be important. What changes, though, is how your potential buyers are likely to want to use transport, and so what type of transport they look for.
Despite all the changes over the years, many workers still need to travel into the CBD for work. For them, particularly if they live a long way out, trains or trams within walking distance are a bonus. Apartments near a train station are a great choice for young professionals, for example.
A good bus route, though, can be great for transporting kids to school or university. Elderly people who find driving to a shopping centre and parking a bit daunting will be glad of a convenient bus.
Roads are also part of transport. As I said earlier, lots of us drive wherever we want to go. Local roads that flow well onto major roads, and then connect onto highways and toll roads, make life easier. Roads that clog up constantly because there's only limited options are going to frustrate the heck out of people trying to get places.
So think about your target market and ask yourself what type of transport options they're likely to want close to their new home.
Shops
Shops fall into three main categories - big shopping centres anchored by multiple major retailers, shopping centres anchored by a major supermarket, and smaller local strip shops.
Having a big shopping centre close by appeals to people who want to go there frequently to eat, shop and for entertainment.
For others, a good cafe within walking distance means they may be quite happy with the local shops.
Supermarkets are great to walk to if you only want to buy a few items, but people are much more likely to drive when they're doing their weekly shop, so proximity isn't as important. Plus with home delivery it may not matter at all.
Young professionals might be keen to have lots of good restaurants within walking distance at night, whereas families might be happier with takeaway being home delivered.
Spend some time at the shops in your local area. Look at the people who are using them. Are they your target market? Or if you have a site close by, what can you develop that will most appeal to the people you can see?
Reputation
Let's face it - suburbs have reputations, good and bad. If I ask you to name the "blue ribbon" suburbs or the "bad" suburbs in your nearest capital city, I bet most of you would name the same ones.
But that's fairly broad. There are also better and worse areas within each suburb. As an Area Expert, you need to understand where these pockets are located when you're looking for a development site.
Talk to multiple real estate agents, go and sit in the local cafes and watch the world go by. It's a fun way to pass the time, granted, but you can also learn a lot about the people who choose to live in the area.
Walking around the streets and chatting to anyone you meet is another way of finding out about the area, although you might want to exercise some discretion when it comes to walking around the bad bits!
Other Considerations
At this point you get down to more site specific elements. Does your site have a great view, but the site down the street is lower and they miss out? Parks, playgrounds, bike paths, lower crime rates... basically, just use your imagination.
What does your target market want? And how many of those items on the wish list can you tick off with a particular site? As the old saying goes, the more the merrier.
In the end, no two properties are exactly alike. And while location remains the kingmaker, factors like design, development potential and market timing all play essential roles in determining how much profit you can make.
A profitable development site is one where the right conditions come together: demand meets opportunity, smart design meets market needs, and risk is balanced with reward. By doing your research, understanding what your potential buyers want and then developing it, you massively increase your chances of turbocharging your profits.
As you dig further into the data, though, you'll start to notice that although there's a median price for a suburb, there can be quite a variance in sales prices in different parts of the suburb.
So what makes one area more expensive than another? And how can you use that information to turbocharge your development profits?
The old adage remains true - location is often the single most important factor in determining a development site’s potential for profit. A prime location attracts buyers or tenants, commands higher prices, and typically sells quicker. But “prime” doesn’t necessarily mean expensive or central. It means well-suited to the likely buyer.
Which means a crucial part of becoming an Area Expert is understanding the demographics of your area and having a good understanding of what that target population wants.
For example, here are some typical buyer groups:
- first home buyers
- families with young kids
- families with teenagers
- professionals, both singles and couples
- downsizers
Looking at the list, it's easy to see that these different types of buyers aren't looking for the same things when they want to buy a new home.
This can be site specific. A family with young kids is much more likely to want a backyard for them to play in, whereas busy professionals want minimal outdoor space that requires care, such as mowing.
Downsizers who are ageing are likely to want their home on a single level, whereas a family with teens might like 2 stories so that the upper level can become a teen zone free from parents.
And while design principles are important, the demographics of your potential buyers play an important part in determining what local amenities appeal to each buyer group. Understanding their needs is key to choosing a site which bumps up your profit.
School Zone
Being close to a good school is a huge factor for families with kids. In Melbourne, for example, there's one suburb with an area dubbed "The Golden Triangle" because it's the catchment zone for the local high school with a stellar repuation. Homes there regularly fetch a substantial premium.But for other demographic groups, this is very low on their list of priorities. In fact, living close to a school may actually downgrade the property in their eyes because they'd prefer peace and quiet.
Transport
You'd think our reliance on cars to get around would mean transport doesn't have the appeal it used to, but based on your demographic group it's likely to still be important. What changes, though, is how your potential buyers are likely to want to use transport, and so what type of transport they look for.
Despite all the changes over the years, many workers still need to travel into the CBD for work. For them, particularly if they live a long way out, trains or trams within walking distance are a bonus. Apartments near a train station are a great choice for young professionals, for example.
A good bus route, though, can be great for transporting kids to school or university. Elderly people who find driving to a shopping centre and parking a bit daunting will be glad of a convenient bus.Roads are also part of transport. As I said earlier, lots of us drive wherever we want to go. Local roads that flow well onto major roads, and then connect onto highways and toll roads, make life easier. Roads that clog up constantly because there's only limited options are going to frustrate the heck out of people trying to get places.
So think about your target market and ask yourself what type of transport options they're likely to want close to their new home.
Shops
Shops fall into three main categories - big shopping centres anchored by multiple major retailers, shopping centres anchored by a major supermarket, and smaller local strip shops.
Having a big shopping centre close by appeals to people who want to go there frequently to eat, shop and for entertainment.
For others, a good cafe within walking distance means they may be quite happy with the local shops.
Supermarkets are great to walk to if you only want to buy a few items, but people are much more likely to drive when they're doing their weekly shop, so proximity isn't as important. Plus with home delivery it may not matter at all.
Young professionals might be keen to have lots of good restaurants within walking distance at night, whereas families might be happier with takeaway being home delivered.
Spend some time at the shops in your local area. Look at the people who are using them. Are they your target market? Or if you have a site close by, what can you develop that will most appeal to the people you can see?
Reputation
Let's face it - suburbs have reputations, good and bad. If I ask you to name the "blue ribbon" suburbs or the "bad" suburbs in your nearest capital city, I bet most of you would name the same ones.
But that's fairly broad. There are also better and worse areas within each suburb. As an Area Expert, you need to understand where these pockets are located when you're looking for a development site.
Talk to multiple real estate agents, go and sit in the local cafes and watch the world go by. It's a fun way to pass the time, granted, but you can also learn a lot about the people who choose to live in the area.
Walking around the streets and chatting to anyone you meet is another way of finding out about the area, although you might want to exercise some discretion when it comes to walking around the bad bits!
Other Considerations
At this point you get down to more site specific elements. Does your site have a great view, but the site down the street is lower and they miss out? Parks, playgrounds, bike paths, lower crime rates... basically, just use your imagination.
What does your target market want? And how many of those items on the wish list can you tick off with a particular site? As the old saying goes, the more the merrier.
In the end, no two properties are exactly alike. And while location remains the kingmaker, factors like design, development potential and market timing all play essential roles in determining how much profit you can make.
A profitable development site is one where the right conditions come together: demand meets opportunity, smart design meets market needs, and risk is balanced with reward. By doing your research, understanding what your potential buyers want and then developing it, you massively increase your chances of turbocharging your profits.
