Being able to develop your land has long been the privilege of a select few. We’re out to change that by offering a partnership model that means you don’t have to be an experienced property developer to earn high returns.

What is needed is a good head for business, sufficient equity (money) and an appetite for work and risk.

The time is right for this approach. Record housing demand and new development rules under the Auckland Unitary Plan have made many people’s land in Auckland extremely valuable. RDCC can help you release this valuable capital in your property, so you can broaden your options.

RDCC’s services commence with a minimal, upfront cost to you to establish the possibilities for your land. This enables RDCC to confirm the development return you can expect based on the initial high level feasibility study. This is key to assisting your decision as to whether to proceed down the development track.

If you do, RDCC can manage the whole process from start to finish for you, doing all the heavy lifting required.

Five things make now an especially good time for property development in Auckland:

1. Housing supply: Auckland lacks good quality housing.  Modern housing often commands a higher price thanks to being warmer, dryer and lower maintenance than older homes. New build warranties and no need for expensive, stressful renovations add to its appeal.

2. Location: The land older houses sit on is often extremely valuable, especially in desirable areas of high amenity
   and good school zones. For many people, the lower cost of newer subdivisions on the outskirts of the city do not justify the long commute.

3. Land costs: It’s a cliché, but Auckland is not producing any more land. As a result, many sections in older, established suburbs are ripe for higher density development.

4. Population growth: Auckland’s population is growing fast and is forecast to reach 2.5 million by 2040 (one million more than today). With the flow-on effects of the Covid-19 pandemic and eventual re-opening of New Zealand’s borders, the pace of growth could well be even greater. This will only increase housing demand.

5. Cash flow and capital growth: Many people worry that development ties up too much cash for too long a time. Our model can help you achieve your development with minimal cash input. The secret is having a team capable of not only designing and building an appropriate scheme but securing funding arrangements that suit your situation.

That depends. If you tackle a development without partners, you’ll certainly need deep pockets. But with RDCC, our in-house expertise and arrangements with leading banks/finance providers mean we can develop your land with you, often with minimal additional cash input from you. A little time with our financial expert will help determine exactly what’s possible for you.

Possibly, but not inevitably. In many circumstances our financial team can ensure you do not need to put any money in, with lender security taken against the land. The greater your equity in the land, the more likely this will be achievable. Our financial expert will quickly help determine whether you can afford to develop your property and then find a suitable solution for you.

That also depends. Returns can never be guaranteed, but RDCC’s model does create arguably the greatest opportunity to maximise your return in a market that is very amenable right now to property development and sales. Before beginning a project we always provide a full development feasibility report that includes expected profits.

Yes, many property investors see this as a method of growing their portfolio, turning one rental home into many. They may retain the new properties for further income or sell some or all of them for capital gain or to reduce total debt. Part of the attraction for owners of rental properties is that new builds are especially popular with tenants, as well as being lower maintenance and designed to meet modern Healthy Homes Standards.

You will need advice from your accountant, but generally you will have to pay tax on your profit after all related expenses are deducted from revenue.

You may elect to keep some or all the properties you have built for long-term residential investment. With the tax changes made by the Government in early 2021, tax deductibility of interest cost on new properties with CCC issued after 27 March 2020 to be retained, whereas it is no longer available on older properties. Therefore, developing your own new investment properties provides not only a cheap way of acquisition (as you avoid paying another developer his profit margin), but also tax deductibility of interest is available to you due to the interest cost tax shelter remaining allowable on new investment homes.

RDCC’s fee is partly paid progressively based on an arrangement where a monthly payment for management is made by the developer or lender, with the balance paid on completion via a success fee based on a very modest share of the profit (usually less than 20%). This coupled with the use of an independent professional team means that RDCC have the same goals as you for development success, i.e., controlling costs to maximize return.

All residential development carries risk. We created RDCC to minimise the risk you face by bringing together a full range of specialists across every aspect of property development. We also spend time with you to outline potential risk scenarios and answer all your questions. We also encourage you to get your own independent legal advice.

It is important to RDCC that you are capable of making your own appropriate financial decisions. To ensure this, unless you are clearly a wholesale investor as defined in the Financial Market Conduct Act 2013, you will be asked to provide a certificate from your accountant certifying that you are an ‘eligible investor’ as also defined in the Act. This confirms that you are sufficiently experienced to make your own financial decisions in relation to any proposed property development (as opposed to a ‘retail customer’ who is deemed not).

No, we use independent builders selected for their suitability for your project. This ensures that we gain no profit or commission from the build, which then ensures we remain truly independent consultants focussed on maximising project profits, rather than “clipping the ticket” on any aspect of it.

Typically, Auckland developments will be terraced 2- or 3-level townhouses, in line with ‘medium density’ housing requirements under the AUP. This kind of build provides good development yields and is also highly desirable to new home buyers who often prefer it over higher density, apartments.

RDC has a strategic alliance with Young and Richards with great experience in designing high density, freestanding homes and terraced townhouses. While many such homes are a similar shape, they can vary greatly in the level of finish, specification or foundation design.

Terraces and townhouse homes of good design, noise control and streetscape appearance are extremely desirable, especially in suburbs of high amenity, transport links and good school zones.

As a developer borrowing money to undertake a development, you will always have to provide your personal guarantee. This is standard practice, both for banks and non-bank lenders. However, on the basis that you will only be going ahead if there is a decent profit to be made, this together with the project contingency sum normally provides a comfortable buffer to allow for the unforeseen. Also, to completely segregate your other assets from any risk, it is usual to ensure that they are not in your personal name.

The building works and materials on site are insured but it is not normal to insure against loss of profits from a one-off business venture such as property development. RDCC would not take on a project that did not have a sufficient contingency and profit buffer to cover unforeseen items, so a loss is unlikely. Also, we are sufficiently experienced to not cause a project failure through negligence. If we were concerned about this, we would not be in this business. However, things do not always go to plan, and we can't control everything. If you want to make money, risk is always a factor, but we mitigate the risks by good management based on years of experience.

Square metre cost comparisons can be misleading as they are generally not directly comparable. Many people quote rates that exclude things such as civil/foundation works, demolition, landscaping etc., and others include some of these items. Specification (types of finish, plumbing and kitchen fittings etc) is an important factor that significantly influences such rates. 

Good quality costs, and we need to ensure that what we're building meets market expectations and is in fact better than the competition. Also, a smaller home with a kitchen and two bathrooms has a higher square metre rate than a larger home, as the high cost service rooms are spread over a larger proportion of the build. GST is also often forgotten in such comparisons.

Building costs are increasing at the moment, largely because of freight and supply issues, but robust house prices mean this is manageable. 

The actual cost for any project we undertake will depend on the design, specification, and site conditions. This could easily range from $3,500 to $4,500 psm plus GST but cannot be established without specific detail on a particular site, and these rates would not include all related costs.

The banks normally require a minimum return (profit margin on cost) of 28% as an additional buffer, which is standard for property development. Large land subdivision is generally more profitable, but it is also riskier. Feasible housing development profit margins generally range from 25%-35%, but most are around 30%. This is calculated by the net profit divided by total project cost (TPC).

Return on investment (ROI) is different. This is a percentage calculated by taking the profit figure divided by the equity input into the project. This should be a much larger figure and is usually annualised. It demonstrates the power of leverage – using someone else's money (borrowing) to create good profits. For example, a recent deal for a client (acceptable to him) only showed a profit margin of 18.3%, but the ROI is 75%, and we view this one as at the low end of acceptable. Another client whose profit margin is 35.9% and ROI is 278% (185% pa) is exceptional and at the other end of the scale. 

There are many reasons for variances in return, including:

• the equity injected into the project and size of the loan required to complete

• the price of the land at the time of purchase (said another way, how long ago the land was purchased)

• locality – some locations command a premium price

• the amount of local competition

• the building site – is it flat and easy to build on, or steep and needing expensive retaining walls and special foundations?

• the distance from the site boundary of services like power and water

• unexpected cost overruns.

Before RDCC embarks on a project, a comprehensive feasibility is carried out and projected profit is established based on a realistic budget. It is then agreed acceptable or otherwise and the project is either commenced, reworked or ditched. If it goes ahead the plan is to keep as close to the budget as possible and maximise profit. The client is kept appraised of the situation and remains fully aware of how things are progressing.

Now! One thing New Zealand does not make more of is good land. This is the key ingredient you already have and that all successful developers want. With the RDCC team behind you, good land well developed will always produce a successful outcome. Remember, there is never a cheaper time to build new housing than right now.

Disclaimer and Financial Service Providers legislation: RDCC nor the authors are registered Financial Services Providers under the Financial Markets Conduct Act 2013 (as amended by the Financial Services Amendment Act 2019). RDCC nor the authors are in the business of providing legal, financial advisory, tax or accounting advice and this statement does not contain "Personalised Advice" as defined by the legislation. Neither does it take into account the reader's financial position, needs, goals, risk profile, or asset allocation. Readers who require "Personalised Advice" should contact a licenced Financial Adviser.