ARCHITECTURE
Buying a Property to Develop ?
What You Need to Know : an Architect ’ s Guide
BY RAAZIK NORDIEN
When buying a property to develop , understanding your own investment parameters must come first : how much money do I have to put towards this venture ? You then need to understand what sort of properties you want to be involved in . Finally , and most importantly , you will need to know what the development potential of the property in question is .
This information should be used to make an informed decision on whether to proceed with the purchase and development of a property , as property is an expensive and high-risk environment . Remember , the bigger the deal , the higher the risk .
Protect yourself against a bad deal To secure and protect your investment and have a long and profitable property journey , a deep understanding of what you are investing in ( i . e . property ) is crucial . Always protect yourself against the potential of a bad deal .
This could be :
• Over paying for the land ;
• Not being able to develop what you envision on the land ;
• Over capitalizing on the land ;
A bad deal is also when your purchase is in fact not what you thought it would be and the purchase is not as profitable in the end as you planned .
Define development potential through proper research I believe that the investor should be making their decision based on the same information the architect would have needed to analyze to give a professional recommendation .
( Note : Recommendations carry liability [ financial ] and as such , must be well researched .)
When advising a client to risk money on a development deal , our firm defines , through research , the development potential of the site from an analysis of the following :
1 The Title deeds and Surveyor General ( SG ) Diagram for potential restrictive clauses , such as height restrictions , single dwelling only , bulk limitations , servitudes etc .
2 Heritage , specifically in the Western Cape , but also in other regions as well . This could potentially stop developments or delay them considerably if not understood correctly .
3 The city zoning scheme : to define the Permissible floor area , height restriction , coverage , building lines and parking requirements . This can also be done by approaching Council and verifying it with zoning certificate .
4 Full inspection of the site , looking for any clues that would stop you from doing what you planned to do .
5 The National Environmental Management Act ( NEMA ), December 2014 , for vacant sites ‒ in case there are any environmental issues pertaining to the site i . e . natural water courses etc .
6 The Building regulations ( SANS 10400 ) and the
Municipal by-laws which may apply . 7 Other : o Urban Development Zones ( UDZs ) – these offers create tax relief benefits . o Health & Safety in the interest of liability . o Asbestos – there are specific costs attached to the removal of asbestos from a site . o Existing structure – if the development consists of minor refurbishments , study the existing building , look for dampness or signs of leaking . Check that all toilets are flushing and check the water pressure .
The above should be done in a secure environment . To create this environment , an offer to purchase ( OTP ) with suspensive conditions must be entered into , which will allow you a Due Diligence period to do all your homework and research without the risk of losing out on the deal .
In conclusion , we believe that property investment is not an individual sport , it needs team work to yield the most positive outcomes and limit financial risk . Find your team mates ! An architect should definitely be one of them , as they should be able to guide you through all of the above pointers . You can then base your final decision on what you know and on bankable recommendations received from your team i . e . “ is the juice worth the risk / squeeze ?”
RESOURCES
UF Architects
22 MAY 2017 SA Real Estate Investor www . reimag . co . za