By Michael Yardney
In these changing times when property investors can no longer count on double digit price growth many are considering getting started in property development to help them ‘manufacture’ some capital growth.
In fact one of the most read blogs on my site is How to Get Started in Property Development.
It all sounds so simple.
SO WHAT EXACTLY IS PROPERTY DEVELOPMENT?
To me it is the continual reconfiguration of the built environment to meet society’s needs.
Houses, apartments, office buildings, shopping complexes, road and sewers don’t just happen.
The need for development is constant because of our massive population growth and the changing tastes of how we want to live.
Interestingly our population recently ticketed over to 23 million people and it took us over 200 years to get to this size.
Yet it’s likely our population will almost double again to 40 million people by 2050.
While this will cause numerous of social, financial and infrastructure challenges it will also create some amazing opportunities for the property development industry.
SO WHAT MAKES A GOOD PROPERTY DEVELOPER?
Successful property developers aren’t born and they’re definitely not created overnight.
Their success comes from a combination of attitude, experience, education, instinct and the lessons learned from both victories and failures.
Property development is an extremely creative process.
Successful property developers are a bit like movie producers.
They take a project from the conception of an idea in somebody’s mind through the design and approval phase, financing, construction, marketing and then eventually the leasing or sale of the project.
Developers assemble a highly talented team of people and skillfully lead them to develop a profitable outcome, which means they need to be proactive and make things happen.
They must also be creative, flexible and adaptive to take their project through this maze.
Developers need to work hard, have patience, remain focused and have a burning determination to succeed.
While the process of property development can be a lot of fun, it is not without some pain and considerable risk.
When all goes well the results are fantastic but if things go wrong, they really go wrong.
Developers follow a sequence of steps from the moment they first conceive a project to the time they complete the physical construction and begin ongoing asset management.
While the sequence may vary slightly, usually the development is broken up into the following elements:
• Coming up with the idea
• Refining it
• Testing its feasibility
• Negotiating contracts
• Making a formal commitment
• Obtaining development approval
• Formalizing building contracts and specifications
• Constructing the project
• Completing the project and finally
• Managing the new projectAlong the way they will need to negotiate with real estate agents, banks, financiers, councils, neighbours, consultants, owner occupiers and tenants.
A good developer must be a big picture thinker, but must know when it’s important to take care of the details.
Who becomes a property developer?
Any one get can get started in property development.
While the big development projects are usually constructed by large corporations, many of the medium density developments in the suburbs of our capital city are run by part time property developers who have a “real” full time job.
Some are in property related industries such as builders, architects or estate agents, but many are “ordinary” successful property investors who are now looking at development to fast track their wealth.
Do you have the right attributes?
While a property developer does not need to have intimate knowledge of all aspects of the development process, he must have a good understanding of the economy, property markets, the town planning process, building construction and finance so he can assemble a proficient team around him and manage them with credibility.
Before getting involved in property development, be honest and ask yourself:
• Do I have sufficient general property investment and market experience?
• Do I have the knowledge required to undertake a development?
• Have I assembled a good team around me?
• Do I have the time required to mange the project?
• Do I have deep enough pockets? Property development always seems to take more money than you initially think.
While property development can be very lucrative, many beginning property developers get themselves into trouble because they don’t know what they don’t know.
They step into a potential minefield without doing sufficient homework.
I have created considerable personal wealth for myself and security for my family through property development and investment. And so can you.
Make no mistake; it’s going to be hard work, so I recommend that you don’t invest any money into a development project until you’ve first invested heavily in yourself and your education.
ABOUT MICHAEL YARDNEY
Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au