Property Development Lessons Learned
Property development is common BBQ talk. We all know that one bloke who bought a block of land – got an approval, built some units and walked away with a nice 20% profit margin.
Similarly, we have all seen those half finished developments, boarded up and being sold by a financier. Or the local accountant who embarks on an 80 unit project, only to be left holding 60 of the units when the market declines before he can settle the properties, and pay back his bank.
Undertaking a development in Australia can be rewarding, but it can also cause a lot of heartache.
So how do we be more like the first developer – and walk away from a project, with a profit, a strong reputation and the capacity to do it again?
So what can I do?
You need to start by sitting down with a giant piece of paper and asking yourself the questions below. This week we will look at the first 5 questions you need to ask yourself. Part 2 of this discussion will round out the main issues that pop up in most developments.
So what do I need to know?
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Why am I doing this?
Before you embark on your development journey – you need to understand what is driving you. Why are you doing this development? The answer to this will help drive your actions and decisions.
Are you looking to leave a legacy – or just make a profit? The answer to this will result in two very different outcomes and approaches to your development.
Do you want to do one development, make a profit and sail off into the sunset – or are you in this for the long haul?
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What skills do I have?
What are your limitations – as you need to know what they are, to protect your investment from yourself!
And importantly, you need to keep your emotions in check. A development should be approached as a financial and business exercise – the numbers never lie!
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Who is going to help me?
Getting good quality advice, from an independent adviser should be step number 1 in your property development journey.
Surround yourself with a high quality team that you can trust to be honest with you. Pay good money for good quality information – from good quality advisers.
Develop a healthy dose of scepticism – if it sounds too good to be true – question what you are being told!
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Where in the market cycle are we?
A trusted, professional and experienced property adviser will be able to help with this question. The answer to this is critical – as it will determine whether you push the button on starting your development now – or wait until market conditions are ripe.
The position in the cycle will also help with how much you are going to pay to purchase a site. If your market is hot and developments are selling at record rates, vendors of sites will be looking for top dollar for their sites.
The stage of the market cycle will also affect the availability of consultants, builders etc.
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What can I do?
Before putting pen to paper and buying a site – check with your local Council what you can do on the land.
And importantly – what conditions and external works will they impose on you – and how much will those conditions cost me? An experienced Town Planner will be able to provide you with local knowledge and a strong understanding of the town plan.
If you need some help with a development – the team at We Speak Property are here to listen to you! We would love to help you, even if there is nothing in it for us. Give us a call, it could save your development.
Part 2 will cover off on the final 6 questions. Stay tuned.
