It pays to take your time when settling for a development property

WHEN it comes to property, everybody has to settle.

And while homebuyers might be happy to accept a shorter settlement period so they can move into a new home, a developer should be aiming for a long-term handover.That’s the perspective of real estate agent and iSeek Developments co-founder Grant Lynch. “One of the negotiating tools that every professional developer tries to use when buying property is to ask for a long settlement,” Mr Lynch said. “How long? Usually between six and 12 months.” He noted that while it might seem the better idea to get started with your development as soon as possible, a delay at the start made good financial sense. “The reason why developers will ask for a 6-12 month settlement is this period is when they get their groundwork done,” Mr Lynch said. “This is so you don’t have the additional overheads and monthly mortgage repayments at a time when you’re not actively working on the development. “As soon as you settle on the property (I recommend you always use the bank’s money for the balance of a loan), the interest repayments start.”

Mr Lynch noted that in the settlement period a developer should aim to organise surveying, plans and submit a planning permit to council. “Then, when you do settle, you are ready to start building,” he said. To this end, it could also be smart to find an off-market property.“Generally, when a property is being advertised, the vendor will want a 30-day, 60-day or 90-day settlement,” Mr Lynch noted. “So if you can negotiate a longer settlement term and the vendor isn’t in a rush to move, that’s a win for them, the buyer and the agent.” He added that it was also wise to help the vendor with any requests that arose in the settlement period as they can provide substantial assistance during one of the riskiest stages of a development: applying for plans. The real estate agent is another person it will help to have onside. “Tell the agent that if all goes well, you will let them sell the property,” Mr Lynch suggested. “This means they will go out of their way to make everything go smoothly.” His final advice for the settlement period is to make friends with the neighbours, which might help avert objections to your plans. “With all this work done, you will have saved tens of thousands of dollars and be ready to settle,” Mr Lynch concluded.