All the buildings we see at our residences have made our lives easy in several ways. Having a place to live, a school, a hospital, and an office is an underestimated blessing. But have you stopped to appreciate all the work that goes into putting that property up? Property developers no doubt work overtime to help us see those spectacular buildings in Gold Coat and the whole of Australia.
Property development is not just something you’ll wake up one day and start doing. It takes careful planning, understanding of the market, and financial preparation. Whether it’s a residential, commercial, or industrial property, there is a lot of work to it. You’re going to work with a team of professionals and do a lot of market research to bring your project to light.
So, what really goes into property development? This guide explains the art of property development and reveals some insider secrets every aspiring property developer should know.
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Who Can Become a Property Developer?
The Elements of Property Development
How to Become a Property Developer in Australia
Understand the Rules and Regulations
Understand the Property Market
What Is Property Development?
Property development is the process of developing buildings or empty land to improve their value. Developers develop and create properties to make them usable for commercial or residential purposes. Developing a property can also involve raising the value of an old, existing property to a desirable state that can earn profit for the developer.
There are three ways to develop a property:
- Building on empty land: Property developers buy unused land and build a property from the ground.
- Renovation or refurbishing: It involves developing an old building by renovating or refurbishing it. You can add new fixtures and change outdated parts to modern ones so that you increase their value.
- Converting property: When a property is no longer useful in its current state, you can convert it into a more useful state. For example, you can convert a residential building to a commercial one and improve its value.
Who Can Become a Property Developer?
Anyone with the desire, skills, and experience can become a property developer. Many developers are entrepreneurs who do property development for-profit purposes. Once you become a professional developer, you can take on all kinds of projects, both big and small.
Property development is all about adding value to a property and making a profit. To get their return on investment, you need to work within a set budget and schedule.
In some instances, property development Australia may not be for profit purposes. It may involve community improvement projects such as building a health centre or a park. It can be charity work that involves giving back to the community.
To make a profit, Australian property developers look for affordable land and properties to develop. The money that comes from the sale of the building should be enough to bring a return on investment. Experienced developers make a lot of profit from property development and run lucrative businesses.
On the downside, developers are not immune to risks. They often experience uncertain market conditions that result in huge losses. Small mistakes and errors can also result in losses.
The Elements of Property Development
To completely develop a property, every property developer must understand that it will involve different stages. Every stage involves different people; hence, it’s impossible to carry out the entire project yourself. Some of the property strategists involved in different aspects of property development include:
- Surveyor
- Architect
- Accountant
- Financial Advisor
- Legal advisor
- A contractor
- An agent
All these people are not involved in property development Australia from the beginning to the end. They come in at different stages to carry out their roles, which are all essential to get the project going. Some of the essential elements of property development include:
Construction
The construction stage in property development begins with getting the land and preparing all the paperwork needed. When buying land, you must first get it verified by your legal advisor and carry out all the legal procedures. Also, ensure you understand the local laws of the area, the market conditions, and all other planning aspects.
Before you commence with the construction, make sure you’re one hundred percent sure that the kind of building you plan to put up will give you a return on investment. If you plan on building a residential property, find out if that area is viable. Understand the market rate. You should also decide whether you will sell the property after completing it or rent it out.
Another thing to consider is the amount you can afford to spend on that particular project. Understand the trades involved, some features that might add value, and anything you can drop to save the cost without affecting the value.
Financing
Every stage of your property development project is going to need financing. If you’re not well-prepared, your project may end up stalling mid-way, and you don’t want that. So, before you start, you should plan yourself well financially.
If you need financing from external sources, you must ensure you choose a reliable funding vehicle. You can consider traditional forms of funding, such as mortgages or crowdfunding. You can also go for short-term financing options such as mezzanine finance. With a mezzanine, you must be sure that the project will start generating revenue as soon as you complete it because you need to start paying back the money.
When acquiring any financing for your project, involve your financial advisor. Financing a construction project is usually very complex, and you will need to make big decisions. Any wrong move can ruin everything and throw you into a debt trap. So, think carefully before you make a move.
Project Management
The success of your property development project depends on how well you manage it. You might get everything going smoothly right from when you acquire the construction land to the financing. However, any wrong move in management can reshuffle everything, and you find yourself with unimaginable losses.
You need a well-laid-down management plan for the construction process and the financial management. You can have different property strategists foresee these two parts of the project.
If you want to manage everything yourself, keep your eyes open on your budget and the deadline. Whether buying materials or paying labour costs, always remain within the budget. When it comes to deadlines, ensure you work within the stipulated schedule so that one project doesn’t interfere with all the others.
Successful project management needs you to make critical decisions that might be hard on you. Remember, you need to manage yourself as well as all the people working with you. And it doesn’t end when you finish the construction. You’ll need to find buyers or tenants for your building, and that still needs a lot of your input.
How to Become a Property Developer in Australia
You don’t need a Bachelor’s degree to become a property developer or a godfather to hold your hands. The property market is accessible to anyone as long as you understand how it works and believe you can do it. To succeed in the industry, here are some tips that should get you started.
Educate Yourself
Well, I said you don’t need a degree, but that doesn’t mean you can enter the industry with zero knowledge. You need to learn the different aspects of property development and how things work. You can consider enrolling in a course to teach yourself some basics. The good news is that there are plenty of online courses that should get you started.
While a degree is not necessary, having one is a huge plus. A degree in civil engineering, business management, or property development can help you understand some basics. There are many universities within Australia that offer undergraduate and Master’s in real estate programs.
Having a formal education can help you find employment in the industry and grow your skills. You can also acquire deeper knowledge about the industry and its regulations. Do your research to understand the qualifications and available courses based on your ambitions.
Network, Network, Network
Another important aspect of becoming a property developer is talking to other developers. Speaking to people already in the field will help you learn the practical aspects and teach you how to become a developer real estate.
Take every opportunity to meet and talk with fellow developers. It might be hard to reach the big shots in the industry, but even new developers can have a thing or two to share about the industry.
You can meet Australian property developers, investors, and other people involved in the industry through online forums, events, and chats. You can also consider joining the Urban Development Institute of Australia and interacting with developers from different places.
Understand the Rules and Regulations
One of the things you must understand if you’re learning how to become a property developer in Australia is that the industry has its own set of rules. You don’t want to get in trouble with the authorities even before you gain your footing in the industry. So, before even getting a legal advisor, learn about the real estate laws in Gold Coast and the entire Australia by yourself and have some rough ideas on how things work.
You will need to understand how your local council works. These are the people who have the authority to approve or refuse your Development Approval (DA). If you have no idea how they work, you might not get along with them.
Another thing you must understand before buying land for development is zoning regulations. Read and understand the documents that apply to the people of Gold Coast. You might want to hire a legal advisor to help you go through some of the documents, as they can be quite lengthy and complex.
Get Your Finances Ready
You’re going to need your own capital to get started as a property developer. You need strong equity in the development of the property you’re planning to buy or hold.
Usually, it’s not advisable to start your profession as a property developer in debt. You can start with the little you have and then borrow when you understand how the market works.
If you’re going to borrow money to fund a project from scratch, prepare yourself for high-interest rates. You might pay lower rates if you borrow to hold or buy a property. The interest rates in Gold Coast may vary with market conditions, but they usually range between 1% and 2%.
You must also consider the loan-to-value ratio (LVR). Banks are not very generous with new developments and may offer you up to 70% of the value of the land and 70% of the value of construction. As for well-located, ready properties, you might get up to 95% of the property value.
Be Tax Compliant
Tax compliance is a crucial aspect of property development. Understand how different taxes on the Gold Coast work and how they affect you.
The most important tax to understand is the Goods and Services Tax (GST). This is charged at the rate of 10% for all the goods and services offered in Australia. You might not need to pay GST if you’re a residential property investor. However, all Australian property developers may need to pay this tax.
Talk to tax professionals or your accountant to understand other taxes that apply to your business. Ensure you’re always tax-compliant to keep your projects going without interruptions.
Understand the Property Market
The real estate market is never constant, as things keep changing every day. To be successful in the industry, you must always be on the lookout for market trends. Understanding the market involves keeping an eye out for issues that affect the buying and selling of both residential and commercial properties.
Another crucial thing you need to understand is that the Australian economy is highly dependent on the property market. Many people invest in residential properties, with a good portion owning their own homes. The demand for residential properties, especially on the Gold Coast, is relatively high.
When entering the industry, you need to keep an eye on the opportunities with high demand. To do this, understand the property market and the factors that influence it. Understand things such as the changes in interest rates, new government policies, and economic conditions. Analyse various forms of data, such as property prices, vacancy rates, and rental yields in your area.
Bottom Line
Becoming a property developer can be an exciting and rewarding experience. It also comes with its share of challenges and risks. Before entering the industry, first learn how to become a developer in real estate and come up with a solid plan. You can start by seeking employment to gain experience or getting small projects to gain confidence.
Before choosing a property to develop, do some due diligence to determine whether it’s a good investment. When financing your project, choose an option that aligns with your goals and budget. Everything you do will need careful planning, financial analysis, and market research. Don’t be in a hurry to invest without a solid plan.
Of course, don’t forget the final step of property development, which involves reaching the buyer. You need to work with a property marketer who understands the local market well and is ready to work with you to ensure you come out successful.
The Pezet Matheson team is here to see that your projects greatly impact the market and reach the intended buyers. Contact us to learn more about how we work.
