What you need to know about custom home building and land development.
Before you start the process of planning or building, it’s important that you find out whether you are able to build on a particular piece of land and what kinds of structures are permitted. A few factors relating to your property will determine how the land can be used. Ask yourself the following important questions:
- Is the property part of the Official Plan? In other words, is the City planning on building or developing around your property or does it form part of the infrastructure?
- What is the current zoning of this property? Examples of zoning include A (Agricultural) and C1 (Commercial). These properties would need to be rezoned in order to suit your intentions. You will need to consider how much time and money this process with require.
- What about utilities? If none exist in the area, you may need to consider how much such things as utilities, streets, sewers, and sidewalks will cost. If the utilities already exist, an upgrade might be necessary. Again, the costs and time required also need to be considered.
- How about environmental concerns?
Heritage Lands and any properties protected under Natural Resources by the Ministry of Environment is subject to various regulations. The answers to these queries can be established by performing an environmental audit. Find out the phase (first or second) and if any parts of the property are not permitted for developing. If the area is part of a flood plain, you will also need to take this into consideration. Understanding the nature of the property and your surroundings is essential prior to any kind of land development.
These are just a few of the factors that will come into play during the planning phase. Once you have answered all of the questions listed above, you can begin working on the following phase.
The first thing you need to do is prepare a financial statement. You will need to begin with your assets, liabilities, as well as your expenses. Finally, you will end up with your net profit. Now compare the amount of profit with the amount you need in order to transform your goals into reality. Break down your costs and remember that you always need to leave room for unexpected expenses. For example:
Consider the initial costs of physically building on the property (excavation, building materials, landscaping, etc.). The average building cost is $300/psf. If the home measures 5,000sq. ft, you will then multiply that by $300 to reach a total building cost of $1,500,000. As with any building or home improvement project, it’s always best to obtain several estimates from various builders before you sign any agreements.
Next up, you need to consider your admin costs. These costs relate to any and all legal work that needs to be done in order to get all the approvals and permits before work can commence. Without the proper authorization, you are setting yourself up for some nasty surprises! The last thing you want is to be forced to demolish your building just because you failed to file all the right documents. The cost of all of this paperwork, engineer fees, maintenance, and so on, can cost $50,000 to $300,000 or maybe even more! It’s always important to be prepared to pay more since so many aspects of building and maintenance are unpredictable.
Is it all worthwhile? It’s not just about money but also time and effort. It’s important to ask yourself realistically if it’s worth it. What position do you find yourself in during the planning phase – positive, neutral, or negative? Will you make enough of a profit? How easily will you be able to sell the property if need be? What if the cost turns out to be more than the income you expect?
Trends and Market Statistics
The next thing you need to consider are the market trends and statistics relating to local land development. Your goal is to make a financially wise decision which means that it’s incredibly important that the property either makes money or can be sold reasonably quickly if need be. In-depth market research will help you make an educated decision.
The property market is highly dependent on the concept of supply and demand. So, take note of the properties that are on the market as well as those that have been sold recently. Look ahead and consider what other properties will most likely hit the market when your project is completed.
As for demand, you need to establish how many people are likely to move to that particular area as well as how much you believe they will be prepared to pay. Always think from the buyer’s perspective rather than your own. It’s easy to be enthusiastic about your own property, but you need to maintain a realistic approach. Consider the future and what will likely change over the next 5 to 10 years. For example, if you buy a piece of land for a great price, but the trends take home buyers in another direction, your property won’t be worth as much as you’d initially hoped. Take a look at the Official Plan to get some insight into what the Ontario Municipal Board has in store.
The more research you conduct, the more information you will have, and you can make the best possible decisions for the future. It’s also a good idea to make contact with a professional realtor and ask them about all the ins and outs before putting your team together.
You’re almost ready to take the plunge! After you have all the information you need for your project, and you are happy with the financial aspect and future possibilities, it’s time to handpick your team. You will need to get quite a few experts involved, and these professionals will need to work together to see this project through. A mortgage broker, bank, or private lender will take care of your financial needs. As for legal aspects, you need to hire a lawyer to ensure that there aren’t any loose ends to trip you up. A professional developer or contractor is also an essential part of the team as well as engineers and architects. They each have a role to play in the construction process and, by hiring specialists, you will ensure that the job is done both effectively and efficiently. Getting the right realtor to back you up from start to finish is also important. The realtor’s knowledge and expertise will always come in handy. Not all real estate agents work with the process of land development since it’s more involved and specialized than other areas of real estate.
For any queries, concerns, and further assistance, feel free to contact Vlad Rigenco at (647) 448-0454 to make your land development goals a reality!