Why is a triplex development a great investment?

The fox is cunning. He knows many things. Each day he thinks of a new plan or strategy to capture and eat his prey. The hedgehog goes quietly about gathering food on the trail each day. The fox approaches with cunning stealth bounding through the grass. As he gets closer the hedgehog rolls himself into a ball of spikes and the fox retreats. Each day sees a new plan from the fox and each day the same result. The hedgehog knows only one thing but it’s a very important thing. And so Isaiah Berlin’s parable of the fox and the hedgehog goes.

At this point, you’re probably wondering what this has got to do with the benefits triplex developments.

To be completely honest, when I started this blog I was not totally convinced a triplex was a great investment. When considering a development there are many options to choose from that are far more interesting than the humble triplex.

Apartments and Townhouses for instance are more exciting options for developers to consider. There’s no doubting that these, along with larger multi-unit developments provide a huge incentive for those with the ability and resources to make them work. In direct contrast to this, the humble single-storey triplex development often gets overlooked as it seems like a rather dreary option with only modest potential gains.

So, then if it is not truly great, what are some of the points that make a triplex development a potentially good investment? 
Fact-it’s a proven method to increase equity. The right triplex development will provide you with uplift in the value of land on subdivision of the land, and again on the houses on finishing the triplex building. Developers then have the option to sell off one or two units to pay off debt and roll profit into the remaining dwellings. You now have additional equity to start the next project. This is a simple but effective strategy for long term growth that offers an honest but modest profit for the effort involved.
Still not convinced myself, I asked my team of development consultants what the best type of strata development is for investors, and to my surprise the humble triplex development came top of the list. According to them, there are a number of reasons why the triplex development is superior.

Top 4 factors why a triplex development is a great investment:

  1. Advantageous non-commercial lending.
  2. Experience and understanding of triplex designs means fewer delays in approvals.
  3. Established processes and consistent delivery.
  4. It can be surprisingly affordable.

This is all well and good, but I know you are still wondering what relevance a triplex has to a hedgehog?

At this point I started to see some similarities with the ‘Hedgehog Concept’ made popular by Jim Collins’ bestselling book “Good to Great”. In this book the author and his research team study a set of already “great” companies and a set of comparable companies during their transition from a “good” company into a “great” company.

As I still needed convincing of my team’s conclusion, I decided I would run the humble triplex development through my own simple comparison test with some other larger grander developments.

Average Triplex Development vs Apartment and Townhouse developments
You may only make $100,000 profit on a triplex development but it only takes 12 months and can requires minimum involvement if you choose a specialist strata development builder who specialises in end to end triplex building.

A number of apartment and townhouse projects would have been estimated to deliver returns of five times this amount, but due to common delays in the approval process plus a further requirement for pre-sales means that 2 years later they have still not begun construction. They will take an additional 18 months to 2 years to complete as they are larger projects and take longer to build. Due to these delays there will be an increase in construction costs due to inflation and potentially it’s looking like it will take 4 years to get a return on investment if things go well.

In contrast, if you had a long term investment strategy of building back to back triplex developments, by the 4th year if you only completed one per year you would be finishing your 4th development. This is around the same time that some larger, more glamorous projects see their first returns. Consider this, what if after 2 years you had the capacity to complete 2 triplex developments per year? How about 3 per year after 5 years?

Still not convinced that a triplex development is a great investment?
After adding time to the equation I started to see that the right triplex development has the potential to be a great investment development. Not necessarily in a standalone sense but as part of a long term wealth generation strategy. Can you now see the similarity of the hedgehog and the fox parable?
A strategy of focusing on triplex developments for long term wealth generation is clearly a great strategy.

My opinion of what greatness is was obviously skewed. It appears that greatness does not come overnight through a great idea, but rather it involves discipline to focus attention on the right areas. All the “great” companies in “Good to Great “did not find overnight success, the road started long before with only modest gains.
Often working in difficult markets and industries, they made small increases over a sustained period of time which eventually gained momentum that ultimately was an unstoppable force. While everyone else is distracted looking for the answer to the next best development strategy, the humble triplex development could be out there generating equity regardless of the market just like the hedgehog concept.

And that’s why a triplex development is a great investment.

Disclaimer: The information within this article is general information only and it does not constitute advice or recommendation. It does not take into account your financial situation, investment objectives or personal circumstances. Before making a decision about developing your property, you should seek independent financial, legal and taxation advice.

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