Do you know how to market property development sites? Australia’s Billion Dollar Property Developer, Bob Andersen, shares his expert tips.
Hi, Bob Andersen back again.
In this episode, I’d like to talk to you about marketing property development sites.
When you market your property development site, you’ve got two choices as a developer.
First, you can develop some property and keep it as a long-term investment. That’s how you build long-term wealth. Of course, you’re getting it at raw cost price, which is fantastic.
Second, you can sell your finished product. In which case, you get a great chunk of cash – that’s cash flow. That could give you your lifestyle, pay all your bills, give you the toys, the house, the cars, whatever it is from the cash payment.
There’s great flexibility whether you want to hold or to sell.
WHAT ARE THE THREE TYPES OF DEVELOPMENT SITE SELLERS
Who’s going to do the selling for us? There’s basically three types of people.
#1 Real Estate Agents
If you’re doing small projects (2-5 projects), you’ll probably use real estate agents. In this case, you need to find a local real estate agent with a good track record. You can contact them, and you can interview them. You need to build relationships fairly early in the phase.
#2 Project Marketers
Project marketers specialise in selling new projects. They tend to have a very good database of people but they tend to be better at selling to investors. Because they need economies of scale, they generally won’t sell small projects.
#3 Hard Marketers
Hard marketers charge more. They’re very good at selling off the plan, and they’re very good in selling at a hard market. But once again, they tend to want larger projects – something they can get their teeth into.
CAN YOU PRE-SELL A DEVELOPMENT SITE?
Yes, you can, but there’s no golden rule with pre-sales. It can vary from bank to bank. The pre-sale requirements may vary depending on the state of the market and on where you’re going with your finance.
But there are also non-bank finances. These are financiers who do not require pre-sales. Whether you need them or not depends on your own strength financially. If you’re quite strong financially, you can get by with no pre-sales.
TYPES OF PRE-SALES
Pre-sale means selling the property before you have the titles. There’s two types of that.
#1 Pre-sale Before Construction
In other words, you’re trying to get a pre-sale or two on what will be eventually built on a block of land.
#2 Pre-sale During Construction
This type of pre-sale is a bit easier than the one where nothing started. That’s because while a property development it’s being built, you can already sell it.
THE CASE STUDY
In the townhouse case study that I’m talking to you about, Luke and I made some specific decisions. We’ve seen a movement where there’s more owner-occupiers coming into the market. So we’ve decided to target particularly owner-occupiers.
WHY TARGET OWNER-OCCUPIERS?
One thing about owner-occupiers is they prefer to buy a product that’s finished. And they do so with more with emotion rather than intellect. Owner-occupiers also love to see what they’re buying.
In opposite, investors buy with intellect and analysis. They’re interested in “What’s the rent?” “What’s the rental yield?” “What’s the vacancy factor?” “How close to transport?” Those sorts of things. These are the decisions that investors make, they’re very legal.
WHAT DO YOU DO WHEN YOU TARGET OWNER-OCCUPIERS?
Then, what we do is to stage it. We hire furniture through an Interior Designer so the place is going to look absolutely a million dollars. When that’s done, then we offer it to the market. That’s what we’re doing. As a result: top value, top price.
So we’re going to get owner-occupiers, they’re going to see it in its absolute best, and that’s how we get our maximum return. Owner-occupiers will get maximum returns as well, once it’s finished and once it looks fantastic.
We want to squeeze every dollar out of this project; that’s the idea there. We don’t always do that, we don’t always target owner-occupiers, and we don’t always stage, and we don’t always wait until completion. There’s only 4 townhouses, they’re going to look fantastic. So that’s a slightly different twist on marketing.
I look forward to seeing you again soon.
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