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.
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.
Somebody must motivate and manage
the creation and eventually the recreation of the spaces in which we live, work
and play.
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 170 million people and it took us over 50 years to
get to this size.
Yet it’s likely our population will
almost double again to 250 million people by 2020.
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 project
Along 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 manage 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.
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