Author: Georgia

We have a few newbies to our database so for this week I wanted to get back to basics for you and discuss what makes a good development site. 

If you’re looking for a site, continue reading..

Below are 3 key points to consider when searching for a development site:

• Location, Location, Location: One of the most critical factors in selecting a development site is it’s location. Look for sites in areas with strong demand and growth potential. Consider factors like proximity to schools, parks, shopping centres, transportation options, and the overall desirability of the neighbourhood. An ideal location will attract potential buyers or tenants, ensuring the long-term success of your development project.

• Feasibility and Suitability: When evaluating potential development sites, assess their feasibility and suitability for your project. Consider factors like the size of the site, zoning regulations, and any constraints or limitations that may impact the development process. Conduct thorough due diligence, including site inspections, environmental assessments, and surveys, to ensure the site is suitable for your intended development plans. Understanding the site’s constraints upfront will save you time, money, and potential headaches down the line. I suggest checking out my five-minute feaso, click here to watch. 

• Market Demand and Potential Returns: Evaluate the market demand and potential returns for the type of development you have in mind. Study the local market trends, including supply and demand dynamics, rental rates, property prices, and projected growth. Identify any gaps or opportunities in the market that your development can fulfil. Analyse the potential returns on investment, factoring in costs, potential revenue streams, and the timeline for completion. Choosing a development site with strong market demand and the potential for attractive returns will maximise your chances of success.

These are just a few key points to keep in mind when searching for a development site. Of course, there are other factors to consider, such as the site’s infrastructure, access to utilities, and any potential future developments in the vicinity. 

I’d also suggest chatting with local real estate agents, architects, or town planners, who can provide valuable insights and guidance based on their expertise.

I hope these tips help you in your own property development endeavours.

If you’re interested in learning more about us, check out our Podcast that Hilary and I host each week. 

The Property Mastermind Podcast.

Take care and talk soon!

Bob Andersen

Are you dreaming of venturing into the exciting world of property development but feeling discouraged by the notion of needing substantial capital to get started?

We’re here to tell you that with a bit of creativity and strategic thinking, you can embark on your property development journey even with $0 initial investment.

At first glance, it may seem like an uphill battle, so without overwhelming you, today we are sharing 2 strategies that can be used to help you kickstart your property development endeavours without the need for significant upfront funds.

You may already know these 2 standard strategies however sometimes we need reminding.

1. Joint Ventures: Consider partnering with like-minded individuals or potential investors who are willing to provide the necessary capital. With you supplying the knowledge, your investor supplying the equity, and the financier supplying the balance of funds, you can turn a $0 investment into a multi six-figure-return.

2. Creative Finance: Explore alternative financing options such as vendor financing or options. These methods involve negotiating flexible payment terms with property owners who are open to innovative arrangements, allowing you to acquire or develop properties with minimal initial costs.

Remember, success in starting property development with no money requires resourcefulness, perseverance, and a willingness to think outside the box. Stay connected with industry professionals, get active online and continue to educate yourself in property development, especially creative financing options.

So, don’t let the lack of initial capital hold you back from pursuing your property development dreams. With these 2 strategies and a determined mindset, you can overcome financial barriers and embark on a fulfilling property development journey.

If you’d like to learn more about how Property Mastermind could help you on your journey, give us a ring on 1300 729 550

Today, I want to share with you three essential factors that I have not only learned but also taught, which will contribute significantly to your success as a property developer. 

First up, we have “Meticulous Planning,” the secret sauce to achieving property development success. Picture this… you’re sitting at your desk, armed with a whiteboard, a stack of colourful markers, and an unstoppable determination to conquer the market. 

Property development demands more than just enthusiasm; it requires meticulous planning and a strategic approach. It’s like preparing for the greatest adventure of your life, mapping out every step along the way. So grab your compass, define your objectives, identify your target market, and let the planning frenzy begin!

But wait, there’s more! Our next factor is “Continual Learning and Expertise.” Imagine yourself donning a detective’s hat, uncovering market demands and trends. Or sipping coffee with fellow enthusiasts at a networking event. Property development is all about staying ahead of the game, constantly seeking opportunities to expand your knowledge and expertise. So, be a lifelong learner, attend workshops, connect with experienced professionals, and surround yourself with the right people. 

And now, for the grand finale, we have “Resilience and Tenacity,”. Property Development can sometimes feel like a roller coaster ride that tests your mettle. Buckle up, because this journey is full of twists, turns, and unexpected surprises. You can encounter setbacks, regulatory hurdles, and obstacles you never thought possible. 

But, the true secret to conquering these challenges lies within you. Be the writer of your own story, armed with resilience and tenacity. Embrace the ups and downs, adapt when necessary. And when the going gets tough, don’t forget to rely on your supportive network of professionals, the sidekicks who will guide, mentor, and cheer you on throughout the thrilling ride.

By prioritising meticulous planning, continuous learning, and embracing resilience, you’re well on your way to becoming a property development superstar. 

Remember, this adventure isn’t just about achieving financial goals; it’s about creating value, contributing to your community, and making your mark in the world.

Stay tuned for next week’s email, where we’ll uncover even more top property development tips. But until then, embrace the excitement, enjoy the journey, and let the fun of property development light up your path!

If you have any questions, please reach out to us via email: admin@propertymastermind.com.au 

I wanted to drop in and explain something that we hear a lot:

“I don’t have enough time to do a property development project.”

If this is you, keep reading..

Below is a breakdown of the hours it will take each week on average over a project, and where you can find these hours in your schedule.

Firstly, I want to let you in on an analysis I did recently of the time spent on a four-townhouse project. In this case the townhouses sold for an average of $820,000 each. I did this same analysis on another project three years ago and the numbers this time were consistent with the previous result. We log our time on projects, so it is not hard to work out.

See the table below.

Based on the total profit of $546,000 and the time spent of 219 hours the amount earned per hour is $546,000 / 219 = $2,490.

Let’s say you’re 20% slower than I am, and it takes you 263 hours. So, 263 hours over 2 years equals 2.5 hours per week average. Dividing the profit of $546,000 by the 263 hours worked and you have a rate of $2,076 per hour.

Even if you have little or no money of your own, you could use one of the creative finance strategies we teach and make $1,000 per hour.

So, do you have 2.5 hours per week to spare?

– Could you wake up 30 minutes earlier for 5 days of the week?
– Could you stop scrolling on your phone for 2.5 hours or watch TV for 2.5 hours less?
– Could you even spend more than 2.5 hours per week and get results faster?

I don’t know about you, but with an hourly rate of over $2,000 I would (and did) move a lot of my less effective and profitable time to Property Development.

I encourage you to stop what you’re doing, take 5 minutes and take a birds’ eye view of your life.

Ask yourself these 2 questions:
– Where is it that you want to go?
– How are you going to get there?

If successfully completing a property development project is on your radar, then education is what you need. We invite you to join us at our upcoming 3-day workshop.

3 DAY WORKSHOP – 2 FOR 1 DEAL

**By attending our online workshop this May, you’re also eligible for our Gold Coast event in November!**

Or, if you know you can find the 2.5 hours average per week and want to get started right now on your Property Development journey, look at how we can help!

PROPERTY MASTERMIND MENTORING PROGRAM

I look forward to seeing many of you soon.

Regardless of the market situation, a financial feasibility showing a realistic rate of return can help you make certain that you can make money in property development.

In planning your property development project, the bottom line must show a suitable return for the money and effort you put into it as a developer. The ideal profit margin is between 16 and 20% on development costs. This refers to your profit as a percentage of your total cost. We call that margin on costs or return on costs.

By way of example let’s say you develop a three-townhouse project and each townhouse is worth $720,000 on completion. We call that a $2,160,000 project ($720,000 x 3).

Let’s say the total cost of the project is $1,800,000. The profit would therefore be $360,000 ($2,160,000 – 1,800,000).

The margin on cost would therefore be 20% (360,000 / 1,800,000 x 100).

Why should you aim for at least 16% net return?

You can gain a higher profit margin if the property market rises during the development period. Conversely, if the market retracts you have a good safety buffer.

A 16 – 20% margin is considered the sweet spot between providing a safety net in case of abrupt changes in the market and still making a decent profit in this business. By working on a 16 – 20% margin, you can make enough money if the market is bad and good money if the market is good.

On large subdivisions and apartment blocks banks often lift their requirement to 20% – 25% margin

Banks are also using the 16% rule

 A 16% margin is a conservative figure and is often the minimum return a bank would expect when offering a developer a commercial finance package. That said, your success with the bank rises when you approach 20%.

On small projects say up to three townhouses you could use normal retail finance rather than commercial finance which is more expensive. With retail finance, providing you can show suitable serviceability, the margin is often overlooked as the bank basically lends you a percentage of costs or a percentage of end value.

While this means you can do lower margin deals, for your own sake you should avoid any projects, however small, showing less than 10 – 12% margin.

When lending against costs, retail banks often don’t include all costs. They’re more likely to lend against what they call ‘hard costs’ which is the land at valuation plus the construction contract sum. Soft costs like council fees, consultant costs, marketing etc. are left to the borrower to fund 100%.

When lending against end value they tend to base that value before separate titles are issued – called ‘in one line’. With our theoretical three townhouse project, the end value would be based on when the townhouses are completed but still on one title, before the subdivision into three titles. The discount for ‘in one line’ value might be in the range of 10% – 20% lower than for separate titles.

Always work on your feasibility plan first

To minimise risks, it is crucial that you conduct a feasibility study on a potential development site. This is one of the first things you must do.

Sadly, I have seen newcomers to property development make costly and avoidable mistakes because they have never invested in learning how to do an accurate feasibility. By not knowing the costs or undervaluing them you can make a bad deal look good.

Sooner or later that mistake will catch up with you. It might be down the track when you have a development approval and need to get the site valued to get finance to complete the project. It’s too late at that point to find out you originally paid too much for the site because you neglected to conduct an accurate financial feasibility.

Completing a financial feasibility is one of the crucial steps in property development, which is also a big challenge for beginners in this field. A financial feasibility is not only a requirement that you need to submit to your lenders but also a significant tool to determine if you can really make money from a particular property project.

If you want to be more confident in property development and not make costly mistakes, consider starting a journey with us by signing up for our free video series here.

If you have any burning questions you can always call Property Mastermind on 1300 729 550 or send email to admin@propertymastermind.com.au.