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Getting Started in Property Development
The dreams of a steady passive income, financial stability and a lavish retirement draw a lot of people to property investment and property development. Whether this comes in the form of subdividing the family block; purchasing an existing home and replacing it with units; or developing a multi-story apartment complex, property development can be lucrative if executed correctly. But as with any journey in life, sometimes the hardest step to take is the first, so it’s crucial that you have the right approach in place before you put any money down. Read on to discover the preparation strategy required to give yourself a solid foundation in property development.
Do your research
Perhaps the most obvious starting point before launching head-first into property development is to be well-informed. Securing the right property is the first step, and generally involves looking at the different development restrictions place in some areas. It is crucial to get up-to-date information on this, as existing developments may have been established under previous regulations and are therefore not an accurate indication of what’s possible now. Consider things such as: how many units can be put on a property; how big they can be; what restrictions exist; and whether or not there are any easements or other things that may restrict its development potential. Of course with any property purchase, location is a critical factor in your development’s success. Although you may pay that little bit more in order to secure land in a prime location, the profit margins you’ll likely receive tend to make that extra investment worthwhile.
Explore your options
While searching for that perfect property to develop, start looking at your options in terms of borrowing, property types, and builders. In terms of borrowing power, you can view a snapshot by using our Borrowing Power Calculator. Using your income (single or joint); expenses; and loan details, you can see approximately how much you’d be able to borrow – often the more valuable assets you have and lower debt levels, the greater your borrowing power will be (and vice-versa). As far as the actual property goes, once you’ve established any restrictions on the property you’re looking to buy, and you know what’s allowed, consider what types of buildings you may be able to put on the block. This could be a subdivision; a couple of units; or even an apartment complex. This is also the stage where you can look at the building companies around who could take your project on. Not all builders necessarily have the same range of experience when it comes to development, so your vetting process should include a look at their reputation in developments. A thorough background check is critical to ensure you get the best deal and everything runs smoothly.
Get a team behind you
Even after all your research and exploration, it’s okay not to have all the knowledge and skills to get the ball rolling on your property development project. It’s important to ensure that your ownership structures are appropriate for your needs – an accountant is useful for establishing these. Development experts and consultants can also offer guidance and advice throughout the buying process, and their knowledge may prove incredibly significant down the line, particularly as markets fluctuate over time. Also consider the services of a finance broker – for no upfront costs to you they will present you with the best finance options for your project, and help arrange it once you come to a decision. Having this support system in your corner from start to finish means not only is your property development project more likely to turn a profit; but it’ll also be a far less stressful experience for all involved.
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