Property developing can be highly profitable if you know what you’re doing.
…Unfortunately, most people just don’t.
If you go into that industry, you will have your creativity and tenacity tested many times in each of your projects.
There’s a saying that goes something like “you don’t know what you don’t know” and no matter how much you read or study property development has many pitfalls that you will only learn about through direct hand’s on experience.
Here are just a few things that I didn’t know – that I have since learned about… Maybe you can learn from my experience.
Breaking into newly released land will mean that you will often have to consider building around trees.
On the one hand keeping some trees will help keep the value of the land – people like having trees around, on the other hand, it means there are bushfires and falling branches (depending on the species) to consider.
You may have to build with higher rated fire resistant materials, and you will have other bushfire regulations to consider.
You may have to install fire hydrants and an escape plan listed with the title of your property.
Once you get to that stage, you will have to include that aspect of the property in your presales marketing and make sure the new owners are aware of the legislation that will affect their new property.
I know people who have bought development sites based on the images on a real estate website. One of the problems you may encounter will be dealing with slopes. Photos are no indication of the slope and contours on a block which can look very different from an image.
You need to make sure that you get a site survey done. It’s not uncommon for new developers to blow out their build budget because of a simple thing like not getting a site survey… finding the block has some tricky contours or a steeper slope than they thought and build costs go way over what they thought.
It might be a cost upfront, but if it saves you several hundred thousand dollars, you’ll be glad you did.
3. Flood overlays
This should be part of your basic due diligence, but it’s amazing how many people forget to ask the council about flood overlays.
As soon as you’re in a flood area what you can build will be severely restricted.
Hydraulic engineers can do detailed flood mapping and advise you on the most cost-effective way to deal with a flood-prone site, but having said that, I find it best to just move on from one of these sites, they will be more trouble than they’re worth. Some people find properties like this may be overlooking some beautiful waterway or similar and find it may be worth the extra money to develop, but that can also come with an opportunity cost. The extra time and extra money to make it happen could well be used to get straight into another project.
4. Flora and fauna
Developers are renown for running roughshod over protected flora and fauna. A few bad apples have given an entire industry of developers a bad name, but while no one wants to lose money, most developers I know are sensitive to the environment.
To make sure you can be sensitive and not lose money it can pay to hire a wildlife spotter and get a report done detailing any protected flora and fauna that you may need to consider. The worst case scenario is that the site cannot be developed at all. In less extreme cases you may need to relocate any nesting birds or other animals that are protected or leave a wildlife corridor.
That being said, most time’s there is nothing to protect and you can proceed as normal. Again, it’s a case of being informed rather than surprised. Halting earthworks or building can cost you thousands of dollars a day if you don’t do this research before you start and find yourself on the receiving end of a halt works notice.
5. The right experts for the job
I’ve regularly spoken about gathering the right team around you, yet this is the one mistake I see amateurs make time and again…
Your team of experts can make or break your project.
I once heard from another developer that his secret motto was “hire fast and fire faster”. What he meant was that there was no time to keep someone on who was not up to scratch.
The three best thing you can do is to make sure you are getting the right consultant are these:
1- Do your research on them and the kind of projects they have done.
2- Talk to their clients and find out how satisfied they were.
3- Finally, and most importantly keep in mind that they are just people and they cannot read your mind. If you want them to do it right, you need to explain what ‘right’ is for you.
There are some consultants that I’ve hired who are genuinely not much chop, but there are others who seemed not much chop, but once I trained them by explaining in detail what I wanted they turned out to be great.
Even if they don’t get it the first time – you go back and tell them “this is not what I was looking for… here are some examples of the sort of thing I’m talking about.”
Sometimes it does take time, but the way I see it, it’s an investment. Once those consultants are trained to give you what you want, they can save you time and money for years to come.