Are you considering getting involved in property development? If your answer is yes, then you should understand that this is a business that you can’t dive into without knowing the process of getting started in the first place. To successfully start in property development, research the processes, steps, and timelines that come with it before committing your money into any project.
Site Analysis and Acquisition
The first two questions you need to ask yourself when looking into a site are these the following: is the site developable? Is it profitable? You can get the answers to both of these questions by consulting with a town planner and civil engineer, among other types of consultants. They will be able to tell you what you’re realistically able to do with the site in question, whether you’re able to get water to and away from the site, and more. They’ll also be able to cement the project’s costs, which you can then calculate into what you can afford to pay for the site.
Once your site is secured, you can move on to developing the site itself. This will, of course, take a team of experts and construction professionals alike to finish. A few of these include the town planner and civil engineer you consulted earlier, landscape designers, mechanical engineers, etc. As the development manager, you’ll need to coordinate everyone with the town planner to apply for development approval.
The development approval lets you build, but it doesn’t permit how you build your development. Building approval gets into your project’s details on an engineering level to figure out the footings material, the concrete thickness, and more. During this phase, you’ll need to go back to your engineers and architects to obtain more details in your drawings. It’s important to triple-check whether each level is compatible with the other so no conflict arises.
During construction, be mindful of what’s specked in your scope of works. This way, all of your builders use the same foundation, rocks, landscaping, and more. Budget for provisional cost items to even the playing field for your builders—this way, your builders have quoted each material, and you can either choose from the list or have money aside to nominate your own supplier.
Of course, once you’ve built your development, you’ll want to start selling. Pre-sales will help reduce any risk on your development project and reassure the bank that you’ll pay back your construction loan. This can impact the profitability—the purchaser won’t be able to see the finished product, so they’re taking a risk when they buy before you’re finished. The valuation of your property will be conservative, so you’ll likely engage with project marketers who specialize in charging higher commission structures than traditional agents.
Post-sale is easier than pre-sale, but this is also when you’re at your peak debt. Every day you don’t sell, the interest adds up. Having a balance of pre-and-post-sales will balance your debt and profit.