7 key tips for property development success
Property development, also known as real estate development, is the process where buildings and/or land is developed with the key objective of raising its value.
For some, property development is a strategy used for manufacturing property to help build a portfolio, whereas for others it's a business of building and selling real estate - for profit.
There is no right or wrong as everyone's beliefs, and circumstances, differ. For me, I'm a big believer that wealth is a measure of your holdings! So, for this reason, I decided to step up my property journey by developing townhouse sites as a way of accumulating more property to add to my growing portfolio.
Over the past decade, I have successfully developed multiple sites into residential townhouse developments, mostly in blue-chip inner-city locations where I could foresee growth.
As the saying goes, success leaves clues, so today I wanted to share with you my seven key tips for development success.
My 7 key tips for development success...
- Expect the unexpected:
Be sure to have a sound financial buffer BEFORE you start as there will be issues outside your control. For example...- COVID19 happened - a black swan like no other!
- Interest rate rises have been coming hard and fast since May 2022
- Troublesome neighbours can hold you up, adding cost to your project especially if you land at the tribunal
- Permit approval hold ups - driven by unnecessary red tape - will add to the overall project cost
- Time is your most valuable resource:
Each day costs you money - from holding costs to opportunity cost. Here are my suggestions...- Always be proactive and stay on top of your team and stakeholders
- Be extremely diligent, "...I'll get back to you" doesn't cut it - you must be on top of everything and on top of everyone!
- Be decisive:
Make timely decisions and don't over analyse everything - your gut is usually the best compass. Here's what I mean...- Make smart timely decisions
- Sometimes you just have to drop the ego and consider the bigger picture, even if this means paying your neighbour "go away money"
- Engage your dream team:
If nothing else, you must get this bit right. The success of your project will all come down to the quality of your team and the experience they bring. Going cheap will cost you. Here are my tips...- Hire slow, fire fast
- Don't compromise on quality - as the right consultants are worth their weight in gold
- Include consultants that walk the talk, with a development success record to demonstrate
- Pay your team on time - or before time if you can - as this goes a very long way!
- As Warren Buffet once said "price is what you pay, value is what you get" - enough said
- Don't commit until your funding is confirmed:
You wouldn't go on a road trip without knowing how long your fuel will last, and/or where the next refill station is located, would you? Here's what I recommend...- Allow a healthy margin for the unknown
- A cash buffer between 7% and 10% is recommended
- Study the conditions of your pre-approval and be sure you understand the draw-down process
- If you're funding the project in other ways, know how to access the funds and timing thereof
- Get out of the ground, fast:
Your biggest (unknown) risk is underground. Your due diligence here is of utmost importance. Common issues which can come up include...- Rock is very costly to have blasted and removed, even if the site was tested prior to digging
- Delays with hoarding permits, demolishing permits, and other permits, can hold you up - adding cost to your overall project
- Traffic management issues may pop up if not planned thoroughly in advance
- Tradesmen are quick to jump onto the next job if you're not organised, which will delay you
- Engage experience to secure the right site:
If you want to reduce your risk, engage an experienced Buyer's Agent with runs on the board, someone who has travelled the path you want to go down. My thoughts here are...- Success leaves clues, depth of experience can be the difference between success and failure
- Proper due diligence will reduce your risk of buying the wrong site
- A project feasibility is most important BEFORE you determine what the site is worth to you
- Off market opportunities are plentiful and is where the gold mostly is. These are mostly handed to Buyer's Agents (generally speaking)
When it's all said and done, those who are diligent with their due diligence - and those who seek expert advice and guidance - will come out on top.
You need to understand that a development site is not just any run-down property that looks ripe for development. There is so much that goes into town planning and understanding local council's strategic objectives and planning - which all play a key role for what you're wanting (or hoping) to achieve.
Property development can be very lucrative if you buy the right site, at the right price, and with the right terms. An experienced Buyer's Agent is the best person to have in your corner at the outset, hopefully someone who has been successful with developing sites and who has depth of experience.
In my travels I have seen many people buy a site thinking they'll be able to get the same permit as the developer down the road, to later discover that the unexpected happened and they are now sitting on a paper loss as the purchased site is no longer viable to develop.
If we can help you with your next move, please feel free to reach out as we have the experience, the know how, and the contacts, to ensure your next project is a success.
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
