Why it’s always important to have a Plan B
As a developer, it is absolutely critical that every property development has a Plan B. In fact, it’s preferable that a project even has a Plan C, but at the very least, every developer must ensure they have a contingency plan or exit strategy before launching a project.
Make no mistake, the property development game carries innate risk. Things don’t always go your way, so it is your responsibility to carefully plan scenarios that mitigate as much risk out of the deal as humanly possible. For example, throughout the planning application you can receive unanticipated objections from a neighbour, or the council may also object to your plans, despite your plans meeting all the regulations specified by the code. It’s incredibly frustrating, and not at all uncommon.
Here is an example of a Plan B.
A potential site houses a tired home, which you can either demolish or renovate. Your Draftsperson or Town Planner indicates that the subject site is suitable for 3 dwellings. There are references for this nearby, and the site meets the planning codes. Everything seems promising.
What do you do, though, if you don’t get planning approval, even after fighting the matter at tribunal?
If you have multiple plans in place, you would understand that there is still healthy profit by renovating the front home and building a second dwelling at the rear, or building two larger dwellings, or renovating the home and selling for a smaller profit margin.
Throughout my career I have encountered multiple refusals and have come out with a healthy profit every time. For instance, consider my Chadstone development.
My initial application was for seven dwellings. We received refusal and lost our case at the tribunal. However, because Plans B and C were already in place as options from the beginning, we knew that our next step was to build fewer residences on this lot.
At this time, there was an upturn in the market and larger properties were achieving better prices. As such, we decided that the most profitable option was to go for four large residences instead. In the end, our final return came to 40% of the total cost. This wasn’t what we had envisioned from the start, but it was still a very successful outcome. And it was all because we took the time at the beginning to consider the possibility that things wouldn’t go the way we’d planned — and in the property development industry, this is a possibility that you simply can’t afford not to plan for.