The PROFITable Australian Property Development Process Series
Part 6 of 6: Taking The Profit
A property development education series in 6 parts by Billion Dollar Property Developer, Bob Andersen.
So we’ve been going through our PROFITable Development Process. Remember the keyword again? PROFIT. P-R-O-F-I – we’ve done those in the previous installments. Now, we’re down to T, the last one. This is a good one. In fact, I like this one: it’s T for Take Your Profit. That’s it, beautiful!
T FOR TAKING THE PROFIT
Did you know that you can actually take some of your profit on the way through; I don’t know if you knew that?
You can actually pay yourself a project management fee on the way through. So what you’re really doing is taking a bit of profit in advance. But the big chunk is at the end when you sell. You know there’s something really special about having 6-figure amounts of money go into your bank account. You know might like to see $100 or maybe or $1000 but what about when you’ve got hundreds of thousands going in there?
You know you might have a 3-townhouse project and your profit could be $300,000! I’ll tell you what: it looks pretty good in your account. So this is taking the profit.
So what are we going to do there?
We need to settle our sales, so what we need is separate titles. Now let’s take an example of a 3-townhouse project. We started off with 1 parcel of land and built 3 townhouses on it. 3 people have decided to buy those. So we’ve signed up contracts on those 3. But remember that they can’t settle until you have 3 separate titles. So how do you go about this?
The answer is that there’s always an expert that can do this for you. Like all parts of property development, there’s always an expert to do the work for you.
So getting the titles out first is very important, and then really it’s up to you. What are you going to do? Are you going to sell them or keep them? Well, it’s a 3-townhouse project so you have the option to sell 1, 2 or all of them, or to keep 1, 2 , or all of them.
So let’s say that the townhouse is worth $500,000 and it would have cost you around $400,000 as a developer. You’ve got about $100,000 of built-in profit or equity that you can use to finance at the other end. So you’re going to keep this one for long-term capital growth, and the other 2 you’re going to sell.
So, $100,000 each or $200,000. That’s what you get. Well, you pay tax, sorry about that. Still, you get a big chunk of cash. So take your profit and take it however you like. It’s fantastic!
In another new series, Bob Andersen will take you through some of the creative strategies involved in property development. This is going to be exciting! Watch out!