Getting Started in Property Development – Six Tips You Need to Follow
Many see property investing as the only way to make millions from real estate. However, it’s in property development that your true fortune may lie. Let’s look at how to get started.
So, you’re looking to get started in property. You’ve already done a lot of reading and you think that becoming a property investor is the way to go.
And it may well be.
However, some of you may want to do something more. Instead of simply investing, you may want to develop your own properties.
That’s where this article comes in. We’re going to show you what it takes to get into property development. These tips will get you ahead of other budding developers.
Tip #1 – Understand the Differences Between Developing and Investing
A lot of people treat “property developer” and “property investor” as interchangeable terms. However, there are key differences between these two professions.
Property investors take a passive approach to their work. This means that they do a ton of research before buying a property that already exists. This requires a deep understanding of the Australian property market. It doesn’t necessarily require a deep understanding of how property gets put together.
As a developer, you’ll take a much more active role. You’re either creating a property from scratch or you’re enhancing something that already exists. This also requires extensive knowledge of the market. Unlike an investor, you’re in a position to adapt to changes and create the perfect development for the current market trends.
On top of this, property development tends to be more of a short-term endeavour than investing. You could complete and sell a development in the space of a couple of years. Investors will usually hold onto a property for the long term to try and benefit from capital gains.
Neither route is better or worse than the other. What’s key is that you understand how active a role you’re going to play if you decide to enter property development.
Tip #2 – Build a Relationship With the Local Council
The local council can make or break your development project. You rely on them to approve your potential development so that you can turn it into a reality.
The problem is that there are hundreds of councils in Australia. And each one has its own rules and ways of doing things. As a result, you can never assume that what worked for one council will work for them all.
As realestate.com.au puts it:
“Before you purchase the land, you need to become familiar with the local council’s rules and regulations, as they will generally be the body that will grant or refuse your Development Approval (DA).”
That point about checking with the council before you buy is the key. It’s a bad idea to buy land until you know what the council requires from a development. Otherwise, you may end up with a useless block of land and a loan with a high interest rate.
That’s why you need to build a relationship with the local council before you start a development project. This relationship may highlight issues showing that a site isn’t quite right for you.
And that could save you thousands of dollars in planning. Plus, it could ensure you don’t waste time on a pointless development application.
Tip #3 – Learn the Property Development Process
According to The Urban Developer, you can describe the property development process as a lifecycle. While there are variations that occur within each stage of the cycle, the stages themselves tend to stay the same.
The site says that there are seven stages you need to understand:
- Pre-Acquisition – This is the stage before you actually buy the land or property. It’s where you conduct a large portion of your research, as well as your feasibility study.
- Concept Design – At this stage, the project starts to take form. You’ll assemble a team to help you to create your design. You may also start to engage more with the local council and other professionals.
- Permits and Approvals – You need the necessary documentation before you can start building. It’s at this stage that you lodge your development application. You’ll also be working with an architect, town planner, and engineers to make tweaks to your design.
- Pre-Sales – In an ideal world, you’d start selling the project before you finished building it. At this stage, you’re doing some marketing and trying to drum up interest in your project.
- Finance – You need funding before you can build. Traditionally, this involves going to the bank to get a loan. However, there are many ways to sort out the finance side of things. You could enter a joint venture where you handle the development itself and someone else supplies the funding. Or you could become a money partner in an existing development.
- Construction – With all of the planning and approvals completed, you can actually start building. You’ll engage directly with a construction crew at this stage. However, you’ll likely still need the rest of your project team, especially if you need to make changes.
- Settlement – This is the final stage of the process. You’ve completed construction and you’re ready to sell. Ideally, you’ll have buyers lined up for whatever you’ve developed. If you don’t, you may need to ramp up your marketing efforts.
Almost every property development project goes through a similar process. It’s crucial that you understand what’s involved at each stage.
Tip #4 – Get Focused
It’s possible to be a part-time property developer, assuming you have the right set-up. For example, if you act as a money partner you can rely on somebody else to handle a lot of the work.
But if you want to get your hands dirty, you need to get focused.
That’s the opinion of successful developer Sunhoc Khou. In an interview with Property Investory, he told us what he’d tell his younger self:
“I would say to him, get focused a lot more quickly. And get focused and sort out why you want to do it. And stop procrastinating because I’m, by rights, quite a lazy person.”
Having that reason is actually an important part of becoming a successful developer. The reason itself varies depending on the person.
You may want to develop properties to create a better future for your family. Perhaps you want to create a life of financial freedom so you never have to work full-time again. Or maybe you just want to develop properties for the sheer joy of creating something amazing.
Whatever the reason, you need to know why you’re doing this. Otherwise, you may find that your focus starts to wane when you go through a rough period.
Tip #5 – Start Learning (And Never Stop)
Property development is not a simple thing.
There are many strategies you can employ in a development project. You need to understand all of them and know which ones suit your circumstances if you’re to make the right choices.
And on top of that, the rules and regulations that govern your work change constantly. You’ve got to stay on top of them too to ensure the success of your projects.
In other words, …you need an intense thirst for learning.
Trent Giumelli of the Giumelli Group is a keen learner. Right now, he runs a property development company that holds over $100 million in assets. And this is what he has to say about learning:
“…You can’t stop learning. That’s probably the biggest thing. We’re on some of the forums on Facebook, Property Development Australia, a lot of good guys and girls on there and we’re always learning from them as well.”
This is a man who’s at the top of his game when it comes to developing properties. However, he’s also acutely aware that he can’t allow the industry to leave him behind.
Never pass up an opportunity to learn. You may have to invest time or money into that learning, but you’ll reap the benefits when you start to work on projects.
Tip #6 – Find a Great Mentor
“Book learning” isn’t the only thing you’ll need to become a great developer. It also helps to have a great mentor. When you’re brand new to property development, there are a lot of hurdles that could trip you up. A mentor can shine a light on these obstacles and help you avoid them.
They can also provide you with a sounding board for any ideas that you may have.
That’s the opinion of Steve Stemp, who’s worked in the industry for over 30 years. In an interview with Property Investory, he discussed the importance of mentors:
“…I think it’s just about relationships and mentors and getting good people besides you that you can just sound off on… I just like forming good relationships with ethical professionals in the industry.”
These relationships don’t just help you in terms of the advice you can glean from your mentors. A focus on building relationships also opens you up to more opportunities. And as your network expands, you’ll find yourself getting access to more development projects.
It’s Time to Get Started
There’s no simple way to get into property development. The truth is that it’s a difficult, and at times complex, industry. Many potential developers fail because they don’t take the time to prepare themselves before starting a project.
With these tips, you’ll understand a little more about what property development actually entails.
Education is the key.
You must learn as much as possible before you commit to working on a project. And that’s where Property Investory would like to help you.
Download our FREE report today and learn how becoming a money partner could provide you with a route into development.