Our experience and research show that the greatest returns over the entire property investment cycle are made right at the beginning. Significant profits can be made when land receives development approval and this happens before developers even build the properties that property investors traditionally buy.
However, just buying land on the off chance that it may obtain development approval at some later date is a sure-fire way to lose money.
So, the team at Versailles Capital focuses on locations that have been earmarked for expansion under State and Federal Government initiatives or have other compelling factors that will support an application to develop a particular site. We carefully study State and Local Council planning laws and restrictions to ensure a site meets detailed planning requirements. We also undertake a comprehensive financial analysis of the proposed opportunity and only then do we consider making an offer to the current owner of the land.
And, if we do make an offer to the owner, we use a novel option strategy to acquire the right, but not the obligation, to buy the land at a future date at a fixed price. That future price is set so it is attractive to the current owner and, when development approval is received and the value of the land increases, there is sufficient upside for Versailles Capital and its investors to also make a profit.
This means our capital outlay is significantly less than buying the land outright and, if things go wrong, we can walk away from the purchase. Yes, as with all investments, things can go wrong. The development application process is complex and demanding and it must be followed exactly otherwise Local Council or State Government approval may be delayed significantly or may not be granted at all. And because our option to buy has an expiry date it means there is a risk that development approval is not received by the expiry date. And that is why it is so important to have a team that knows what it is doing – a team like Versailles Capital’s which has over 120 years of direct property investment experience.
Then once development approval is received Versailles Capital will sell the land to a developer and we move onto the next project. As a result, the investment cycle can be as little as 3 years.