An Insight into Property Development - Part 2
Having the Right Team.
In order to be successful in property development, you need to have ambition, patience, tenacity and positive attitude in varying degrees. It requires a continual focus on the bigger picture of what you are trying to achieve and not be disheartened at the many hurdles that are put in front of you along the way. Council process, bank policy changes, unreliable consultants and even bad weather are just some of the challenges that can be frustrating. It may take many sleepless hours at night pondering the best course of action, but a positive intent and a willingness to negotiate will overcome most issues thrown at you.
It's often said that if you're the smartest person in the room, you need to start mixing with new people. This is certainly true with any of your professional advisors and consultants. However, and this is probably the most important piece of advice be aware that they are specialists only in their chosen field. By educating yourself in property, markets, economics, town planning, finance, building design, engineering, construction process and real estate marketing, it allows you the confidence to question a consultants opinion when it conflicts with your overall vision for a development.
A classic example is the view of the architect or building designer. They are great at designing beautiful buildings and spaces; their specialty is not maximising yield and designing a product for a chosen demographic. Without strong guidance and a direct brief to what you want and the reasons for it, an architect will typically design you a fantastic building that makes little profit. Great for their portfolio, not so good for yours.
Simarlily, Real Estate agents can be a valuable ally in sourcing potential development sites and opportunities but contrary to their opinion, not every piece of land on their books is a great development opportunity! You have to look at everything put to you and consider what it presents, but the reality is, you will look at many opportunities before one suits you. But, by consistently looking at different sites and looking at their potential and best use, you improve at sorting good opportunities from bad. Over time, having run figures and design options over and over again, you are able to instinctively know if a development will be profitable. By being able to act quickly and back yourself confidently, often you will be in a position to purchase a site when the opportunity presents itself.
So once you start, depending on the difficulty of the development you undertake, you will probably need all of the following in your team
- Real Estate Agents if you're someone who has developed or built before, it's a good chance they will find you! But if you are new to an area or starting out, contact the key agents from all the main offices and let them know your intentions. Its better to have too many calls and emails with opportunities that don't suit, than no opportunities at all.
- Finance Brokers a good one will let you know early on the difference between development finance and investment finance. Its important to know your financial limitations with the end product in mind prior to purchasing land. Sadly, many buy the land without factoring in the finance needed long term.
- Accountants to purchase in the right ownership structure
- Solicitors/ Conveyancers to handle sales contracts
- Town Planners the level of complexity to council policies and applications is such that now it is nearly impossible to lodge a Development application without one. While most councils believe that every development should be able to meet all their policies the reality is not that black and white. Every site and every development has individual issues that challenge their policies, that typically work very well on paper and not so much in the real world. A good town planner knows how to frame your arguments, and is able to provide legal precedents where possible to support your applications.
I would say however, dealing with council in their local area is something they do daily they aren't going to jeopardise their ongoing dealings and key relationships at council over your one job if there is an issue that needs to be challenged. It will probably come back to you as the developer to take up the arguments town planners typically leave any emotion out of it.
- Architects and Building Designers
- Engineers Civil, Structural, Traffic and Acoustic
- Landscape Architects
- Building Certifiers
- Building Contractors
- Project Managers
- Real Estate sale or Marketing agents
Like your overall knowledge, your team will change and be refined over time. Sometimes you mightn't even know that you weren't receiving good service or advice until you experience it elsewhere. However, in the long term one of the most important traits you can have as a developer (or generally!) is loyalty. If you have existing and longstanding relationships with your consultants, it makes development that much easier. Being able to speak to someone you know and trust built on years of experience together, rather than their fee being the cheapest at the time, is invaluable.
Next - Project Costs and Feasibility
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