How does the size of the Development Impact my Investment Property Future Value?

When considering an investment property it's worth thinking about what size of development a property is in. The size of a project matters because it can have far-reaching implications for exit strategy, which is something investors often don't think about when they are entering a property transaction.

If you're considering buying an apartment that will be one of 200, you'll need to think about what that means if you want sell your property down the line. When you have a development this size there are almost always around 10 for sale. When this is the case, the most desperate vendor determines the price for everyone else. Because the apartments are so similar, you only need one or two vendors who are desperate and want a quick sale. By willingly accepting a lower price than what their property is really worth, these vendors cause a downward pressure on prices for everyone else. This is one of the risk factors to consider in large developments.

Another reason you'll need to consider the size is because large developments can result in ?investor ghettos? - projects that have been predominantly been sold to investors. This is another situation where selling price can be negatively impacted.

A much better situation is a smaller development that has a healthy mix of owner-occupiers and investors. Owner occupiers create better prices for a number of reasons. They are not driven by calculators, they're driven by emotion, so they will pay more for a property. They will also look after a place better because of pride of ownership.

Small projects of 20-30 apartments are often the best size because the risk of competing for buyers is much lower when you're selling. The risk of an investor ghetto is also smaller. In some instances it may be out of your control but it should be part of the consideration process.

One way of deducing whether you are potentially buying into an ?investor ghetto? is by speaking to the developer of a project beforehand. They will often be able to tell you how many owner-occupiers versus investors have bought

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