So, you’d like to be a property developer… but just how do you start your property development journey?
Budding developers like you generally have an overview of the process and want an accessible and simple way to go about it, especially in the current property market. However, there are some important basics that you need to know to start you off on the right foot.
Property developers can still make money in the current market, but mistakes will be very costly, and you can’t rely on the historic property boom to cover these up. Did you know that developers can build houses at a discount? This can be a great strategy for building a property portfolio and may allow you to acquire high-performing properties at wholesale prices, thereby building your portfolio faster than the average investor.
But let’s back up. To be a successful property developer, above all else, you need patience, ambition, and knowledge. Commit to your equity, talent, and expertise to convert land to higher and better uses. You need to educate yourself on property markets, finance, economics, town planning, construction, and marketing. Some of this you can research, but some of it can only be learned through experience.
Who should you connect with? Some of the key people you’ll want on your books are:
– Real estate agents to buy property from — not to rely on advice on property development!
– Finance strategists to help with development finance, which is completely different to investment finance,
– Accountants to assist with ownership structures,
– Lawyers to help with contracts,
– Urban designers and town planners,
– Architects, draftsmen, and designers,
– Civil, traffic, structural, and environmental engineers,
– Building contractors,
– Marketing specialists,
– Development managers,
– Project managers,
– Construction managers,
– Quantity surveyors,
– And property strategists to help with research, location, and contract negotiations. They’ll help maximise your investment returns.
So, you’ve got a project—what should be your next steps? First, look into the project costs and profitability, to decide whether you should undertake its development. Is the profit worth it? We always recommend seeking finance pre-approval before starting.
Next, create a concept and determine its feasibility. Different councils have different guidelines, and you need to understand town planning principles and how councils interpret these, before you buy land.
Things you should ask:
– What property you can put on the land?
– How many units and how big can they be?
– Are there any restrictions, easements, or covenants?
The key thing is to know your market and find the best site. Prime locations might cost 15–20% more, but these can yield greater profit margins.
Before buying a property for development, be sure to consider:
– Purchase price, date, settlement, and fees,
– The project equity, to determine the size of the required borrowings and interest payable,
– Legal and conveyancing costs,
– Consultants’ costs,
– Construction costs,
– Taxes,
– Contingency amount,
– And income from sales and rentals.
We have a lot of property developer clients, so if you want to pick their brains or ours, sing out and let’s have a chat! We’d love to hear from you and see how we can help.
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Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
