Multi-Unit Development Townhouses

 In Multi-Unit Development, Site Appraisal

As the populations of our cities continue to grow, state government’s are putting an ever-increasing focus on the building of multi-unit developments such as townhouses and apartments as a way to increase the density of the population in our major cities. Increasing the density in a certain area adds to the vibrancy of the community and also has the added benefit of contributing to the local economy while easing pressure on governments who are often forced to construct new and expensive infrastructure for newly established areas outer-city areas.

What is a multi-unit development?

When a developer looks to build more than one dwelling on a block of land, that is considered a multi-unit development. Generally speaking, a multi-unit development will be three or more townhouses or apartments on a block of land made up of a combination of different sized
dwellings. Unlike building a single home on a block of land, there is no guarantee that you will be able to create a multi-unit development on a given site. The developer must apply for planning permission and there are a number of considerations that must be taken into account.


The first of which is whether the zoning will allow for the scale of the development you’re looking to undertake. The quickest way to understand your site’s potential is to speak to the Town Planning department of your local council. They can offer general information about any Zoning issues, Schedules and Overlays or any constraints. Bodon Homes can quickly advise you on the likelihood of a development being approved, by taking into account zoning issues, plus multiple other factors.

Land Size & Building Envelope

The size of the block is another factor that will heavily impact the number of dwellings that are able to be built on it, assuming the correct Zoning, Schedules and Overlays are in place. Generally, you’re not able to build on 100 per cent of the land and you will need to factor in how many dwellings the land could accommodate. Working with an architect or builder will allow you to maximise the land area and find the right combination of dwellings. You must account for setbacks, easements, public open space, significant trees and any driveway or crossover considerations amongst others.

Neighbourhood Character

It’s also important to assess the neighbourhood and see what other projects of similar size and scope have been approved and/or completed. Generally speaking, Government’s both local and state and interested in higher density dwellings around transport and amenities. Their goal is to maintain the character of their streets and suburbs and as a developer, you need to understand their planning policies and work within those bounds.

Working with a builder on a multi-unit development site

Once you’ve established that you will be able to create a multi-unit development on a block of land, you can then focus on the specifics of the site and the project. It’s important to engage a builder and design team early on in the process, to get an understanding of both price and design considerations. Bodon Homes can assist you from very early on in the process and give you a construction estimate along with your options for maximising the site and also its profit potential with a FREE Site Appraisal. The designer and builder in a multi-unit project must focus on creating a product that will appeal to the end buyer while also working within the projects budgetary and planning constraints. This is often a collaborative process between all the various stakeholders and it’s important to start with the end in mind.

Financing a multi-unit development

One of the key considerations when looking to create a multi-unit development is financing. As a rule, when you look to create more than three dwellings on a block of land, lenders will view that as a commercial undertaking and commercial finance will likely apply. Commercial financing is different from residential finance, which would apply in the case of the construction of a single-family home or a dual-occ style property. Commercial finance requires lower LVRs (more initial equity) and is subject to higher interest rates. In most cases, commercial financing is based on the viability of the project and should be undertaken by more seasoned developers. For new developers, keeping the number of dwellings to three or less is a way to maximise the value of the land and also staying within the residential finance space. However, it is worth noting that land is usually valued according to its ability to be developed. So for example, if a site is able to accommodate 10 townhouses, it will be priced to that level, compared to the same sized area of land that can only accommodate two dwellings because of the zoning restrictions.

Case Study – Multi-Unit Development

As an idea of the various considerations and costs involved, we can examine a recent feasibility conducted by Bodon Homes for a site in Melbourne’s inner west.

– The land was valued around $1.3 million and it had the ability to build six townhouses.
– The end sale value of the townhouses when constructed would be in the vicinity of $700,000.

Land Value  – $1,300,000.00
Acquisition and Holding Costs –  $100,000.00
Planning Costs – $55,000.00
Building Permits – $80,000.00
Construction Costs – $1,300,000.00
Subdivision Costs + Levies – $100,000.00
Sales Costs – $85,000.00

Total Costs – $3,000,000.00
End Sales Value – $3,900,000.00
Profit – $900,000.00
Profit/Cost – 30%

Getting Started on a multi-unit development project
When undertaking a multi-unit development, it’s vital that you start with the end in mind. Please contact Bodon Homes for your FREE Site Appraisal and we can assist you with your site and give you a better understanding of the construction costs involved and what you might be achievable with your site

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