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Tuesday, 18 June 2019
Agent Resource Center
This Old House - Do-it-Yourself

How Property Developers Get Started in Australia

Written by Posted On Tuesday, 11 June 2019 22:50

Property development is booming thanks to tight housing inventory and soaring prices. The property development process, especially in smaller cities, has led to new, expensive homes hitting the market.

Real estate developers aim to build homes that are 20% below market value in cost, profiting at least 20% from each home.

Developments can often receive property development finance that allows builders to borrow up to 80% of the property value. Value is much different than cost, so a developer that understands the building process, can often build a home for less than the property value – financing the entire process.

Building the Right Team

Financing is a must, but you also need to have a team behind you to get started. You may need one or many of the following team members:

  • Architects
  • Accountants
  • Contractors
  • Engineers
  • Surveyors
  • Strategists

Managers will also be key in the process, and there are many manager types: project managers, development managers and construction managers.

Understanding the Development Cycle

All property developers need to understand the development cycle. Property development will go through a series of stages, including:

  • Pre-acquisition: A complete overview of the property, including details on every aspect of the property, managed by the team. The property needs to be buildable and make sense before concept.
  • Concept. The concept needs to be drawn up and will be key in receiving financing. Once a concept is finalized, it’s time to ensure that the property will gain approval.
  • Approvals. All necessary permits and approvals will need to be obtained. These approvals will need to go through local authorities.
  • Marketing. Seasoned developers will market the concept to potential buyers and also make pre-sales prior to the construction process. This can help with generating capital for the project and helping with financing.
  • Financing. Before construction begins, financing will be secured. Concepts, approvals and even marketing plus forecasts will be helpful when obtaining financing.
  • Construction. The next step is the construction phase.

The end of the lifecycle is called settlement, and this is when you’re finishing your project and selling off the properties.

Projects must start with feasibility. How fast will the project be completed? What risks are involved? Will the units sell for a price that covers cost? Project costs will include:

  • Acquistion costs
  • Authority fees
  • Construction
  • Marketing
  • Legal costs
  • Taxes and cost of land

Project managers will come up with a forecast of all costs to help ensure that a project is feasible and profitable. The goal is to ensure that the project doesn’t have too many risks. If a project is too risky, obtaining financing will be too difficult.

Due diligence will be an important part of the process, and due diligence occurs before purchasing the property.

Lawyers will also need to overlook any constraints, planning issues or easements that may be of concern. The entire development process is tedious, and there will be a list of professionals and consultants that should be brought onboard to make sure that the process goes smoothly.

Team members must be selected strategically to help deliver the best outcome for the project.

 

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James Stevenson

Hi, My name is James and I've been involved in the property and real estate industry for 10 years now. I hope people will like to read about my thoughts and experiences in the industry and please contact me if you want to discuss my articles further!

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