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Five factors to consider when choosing a builder for your property development

Monday, 19th Nov 2018

Surrounding yourself with the right team is an important aspect of any property development, especially when it comes to selecting a builder for your project. Delays in construction timeframes, poor communication and low quality workmanship can all impact the profitability of your development, so it’s really important that you put careful consideration into the experts you choose to support your development strategy. Here are five key due diligence questions to ask when choosing a builder for your next development.

Builder

What projects does the builder specialise in?

The type of project you’re developing should be one of the main factors you take into account when choosing a builder. When it comes to selecting a company, make sure they have experience constructing similar property types to the development you have in mind. If you’re developing a single-storey house in a lower socio-economic area, for example, you will likely be choosing a different builder than if you were developing luxury apartments above 3 or 4 storeys in a high-end suburb. It’s really important that you choose the right builder for the type of project you’re developing, as this can have a huge implication on the quality and suitability of your end product.

What is the financial standing of the builder? 

Before contracting any builders, it’s important to check that your chosen company is financially viable. Selecting a builder with a poor financial standing could leave you in hot water should the company go into administration mid-way through a project, leading to delays in construction and potential loss of income.

To ensure the builder you select has a strong financial standing, get an insight into their financial position by asking for financial statements and researching independent credit reports. You may also want to visit their current building sites to speak to sub-contractors and ensure their current developments are well run. If a builder is consistently late in paying other contractors, this may be a sign that they are unreliable or in a poor position financially, which could lead to a compromise in the quality of your development.

How high is the quality of their finished projects?

Whilst experience can tell you a lot about a builder, nothing will tell you more about their commitment to quality than viewing one of their projects in person. As you progress through discussions with a potential builder, it’s always a good idea to conduct a walk-through of one of their recently completed projects to assess the quality of their workmanship and the level of finish. If the builder is confident in their previous work, they should be happy to show you around a completed development. This is also a good occasion to ask the builder any additional questions regarding build contract price and project timeframe to help you reach a decision.

What are their contractual conditions?

Whilst price will inevitably be a key consideration when selecting and negotiating your contract with a builder, it’s also important to consider the clauses contained in the contract itself. There are various different contracts that builders and developers use in Australia, and you need to ensure that these conditions are favourable to you as a developer. For instance, will the builder allow you to include clauses for penalties should they not complete construction on time? And what are the specific conditions surrounding the calculations of time extensions? Remember – the cheapest builder doesn’t always translate into the highest quality work, so it’s important to take all aspects of the contract into consideration.

What do previous clients say about them?

As well as speaking to sub-contractors involved in existing projects, a great way to gain insight into the reliability and quality of a builder is by speaking to clients who have dealt with them directly in the past. Delays in communication could set your project back considerably and cause delays in construction timeframes, so speaking to previous clients is a good way to find out how effective the builder is at communicating and keeping to project deadlines. If this option isn’t available, ask whether your chosen builder has any client reviews or testimonials from clients they have worked for in the past.

Mitigate risks with professional project management

Choosing a builder is just one of the many factors you will need to consider when completing a property development project. In reality, a huge amount of due diligence, research and planning goes into a successful property development, and even a small oversight during these stages could have a detrimental impact on your bottom line. In these cases, having an experienced development management team to oversee your project and identify the right professionals on your behalf could be fundamental in helping you mitigate risk and capitalise on the potential profit of your development.

If you would like to speak to our Perth development team about an upcoming project, contact our team today to organise an obligation-free consultation.