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5 Jan 2015

2015 PROJECT PLAN 2

Remember my decision to document the projects I plan on undertaking this year to build onto my 2015 goals. The first project being a furnished rental, with the hope of doubling the income. That was my first of maybe five projects I will work on this year. I don't know about you, but setting and documenting goals pushes me to act on them. I just try to avoid failing to achieve what I promised myself to do. I fail or change my mind sometimes, because this is real life. That will never stop me. Well, the second planned project is a small development in a small town.
2015 Project Plan 2 - Small Town Property Development
I have a few posts about the deceased estate acquisition. The main reason I actually wanted us to buy this property was to develop it further. The land is not so small, at above 800m2. I changed my mind several times about this development project. The small town figures are very low given the low rental amounts. You need huge quantities to see what you are doing. And I am definitely not a quantities kind of a girl. I try to reduce the management demand of an asset to the bare minimum. Now, with the high returns (low cost) from these kinds of developments, I decided to just throw myself at this project again. The other interesting part of this project is that I can develop it in phases. It may take a full year or longer. This is how things are done in the town of choice. And like the locals I won't take a loan for this project.

Unlike in my small town, we are quite strict in Gauteng on project time frames. Even building plans expire if one does not construct on set time after submission at the local municipality. Well, my small town gives more time because, I guess we don't really have that kind of money lying around. The idea of starting on this project is getting more exciting by the day. I have a hand drawn sketch of the development with six or eight bachelor flats. The target market is young professionals like teachers, nurses, policemen, young doctors, bank employees, etc.

The Development Project Plan

I am trying very hard to not over capitalise by trying to match the standards of the existing properties in the area. However, I will definitely pay attention to the quality and maintenance of the development. The rental will be based on the local market range. Screening the tenants will have to be done with caution to lower the cost of maintenance, vacancies and ensure the longer term occupancy. I generally like a lady with a school going child. They tend to occupy the place for a longer term. Seeing that these are bachelors, I will have to see how I get tenants that are promising to stay for long. I already have a manager who lives in the area to look after development, the tenants and the units.

Those who have followed this blog for a while will know that I like to keep my rental income as passive as possible. This means getting a property manager among other things. With the location of this property, it is even more important to have a manager that is easily accessible. My manager and myself have assessed the town and saw gaps in the current rental income properties. We are looking at low cost ways to make ours more attractive. One of said ways is having all units fitted with a shower which saves space and water. We also plan to have tiny L-shaped kitchenettes in each unit.

Some of the strengths of this development include: 

  • The location of the property in question is within a walking distance of a very popular school and close to a big hospital. My manager has already done the market research and has a few tenants awaiting the project. Yeah I know; my manager is pretty amazing.
  • Whilst the rental prices are low, the cost of the project is even lower in comparison to metro project costs. This ensures higher development yields.
  • The prospective development meets my rental property acquisition rule. Even if it were to be financed by the bank, it would generate positive passive income from the first day of occupation.
If this works out as well as I hope it will, I will repeat the process in this same town or another town of similar size. I am planning to start with the project before March and complete the first two units in a couple of months (I think two). We will have to target completion of the first two bachelors by the end of June. I think this is the target implementation time for the first project too. This will be the busiest six months for me then. But busy is always a great thing.

There goes one of my projects for 2015. Do you have plans for the coming year? 

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