How do you start your property development journey?

Budding property developers seem to have an overview of the process and just want an accessible and simple way – perhaps because of the slow growth market. However, here’s some of the basics of property development you need to know – comprehensive and no shortcuts.

Property developers save money, make money, get better rental returns, obtain easier finance and achieve great tax benefits if they get things right. The project could cost 20% below market value, so you could make large profits, pay the mortgage, and borrow 80% of the property value for better leverage. This might allow you to acquire high performing properties at wholesale price and build your property portfolio safer and faster than the average property investor.

To be a successful property developer, you need patience, ambition, and knowledge. Commit on your equity, talent, and expertise to convert land to a higher and better use. You must educate yourself on property markets, finance, economics, town planning, construction, and marketing. Some of these you can learn through research but some can only be learned along the way.

Who should you be connected with?

–          Real estate agents to buy property from – not to rely on advice on property development!

–          Finance strategists to get you development finance, which is completely different to investment finance

–          Accountants to assist you with ownership structures

–          Lawyers to help with contracts

–          Urban designers and town planners

–          Architects, draftsmen, designers

–          Civil, traffic, structural, environmental engineers

–          Building contractors

–          Marketing specialists

–          Development managers

–          Project managers

–          Construction managers

–          Quantity surveyors

–          Property strategists to help with research, location, and contract negotiations. They will help maximise investment returns.

Look into the cost of the project and its profitability to determine whether you can make a worthwhile profit if you undertake this development. We recommend you to undergo a finance pre-approval before starting.

Create a concept and determine its feasibility. Different councils have different guidelines and you need to understand town planning principles and how councils interpret these before you buy land. Ask what property you can put on the land, how many units, how big will they big, what restrictions, easements or covenants are there. Know your market and find the best location site. Prime locations might cost 15-20% more but you can receive greater profit margins.

Some of the most important things to consider before buying a property for development are:

–          Purchase price, date, settlement, and fees

–          The project equity to determine the size of the required borrowings and interest payable

–          Legal and conveyancing costs

–          Consultants’ costs

–          Construction costs

–          Taxes

–          Contingency amount

–          Income from sales and rentals