The PROFITable Australian Property Development Process: P
Australia’s Billion Dollar Property Developer, Bob Andersen, reveals the process of profitable property development.
PART 1 OF 6: POSITIONING YOUR PROPERTY DEVELOPMENT
In the recent installment of the PROFITable Property Process Series, I discussed the two key skills you need to become a property developer. Do you remember what they were? Coordinate people and subsequently coordinate the process. The process is very simple. In fact, we’ll go through the exact process that you need to go through a successful development. I actually have a name for my process. It’s called the PROFITable Property Process (PPS).
So let’s look at those letters. The key word here is ‘PROFIT’. That’s what we want to make. Let’s go through those keywords. P for position; R for research; O obtaining approvals; F is about finance; I is about the improvements we make to the site; and T is the most important one: taking your profit.
For this installment, let’s focus on P for Position.
P FOR POSITION
When I talk about position, I’m not talking about location. I’m talking about positioning your property development upfront before you get going. Now there’s three parts to doing that:
Positioning the structure
Getting your core team together
Choosing your patch
Let’s go through those.
It’s very important that you get your development structured correctly. To get this information, you need to talk to a good property accountant who will therefore give you the right structure. Structures can vary depending on what action you take. It could be a company, it could often be a trust, it could be a trust with you as a trustee, it could be a trust with corporate trust, or it could be as simple as a partnership.
There are different structures for different purposes.
Getting Your Core Team Together
The next one is choosing your core team. Who are they? If the development is something simple like a subdivision, keep it simple. Your core team can be one person.
Most of the time that can be a consulting surveyor. If your development is for townhouses, there’s two key individuals for you: an architect and a town planner. So you need to get those two people together.
Knowing what exactly you’d want to develop allows you to form the core people to comprise your development team.
Choosing Your Patch
The third part is choosing your patch. What do I mean by that? I’ll tell you what not to do. If you live in a capital city, know that there are markets within markets within markets. So you can’t expect to understand the different intricacies of all the different markets.
For instance, there are different price points, types of products, sizes of townhouses, blocks of land, and sale process. The land is of a different value.
What you need to do is to narrow your focus down. An especially relevant way you can do that is by choosing your patch. Your patch could be where you live or somewhere you’re familiar with. Find out how big it is. It could be just one local government area or one council area. It could also be two or three suburbs.
What you need to do is to become a local expert in that area. It’s not hard to do. For example, you need to understand land values in that area. How much does land sell for? How much does townhouses sell for?
You need to go into the market and see product that’s for sale in the market. Get connected to real estate agents in the area, too. This way, you’ll know when a deal’s a deal. It’s very important.
In the next installment, we’ll focus on R for Research.