By Carly Crutchfield & Tom Parkisnon
In the last few issues I have talked about a few different strategies for getting involved in property development and the fact that this market is ripe for property developers. So I thought it was time to lay out step-by-step what is involved and how you can immerse yourself.
Property development can be broken down into seven basic stages. If you can grasp each stage and understand the basics then you can avail yourself of this fantastic wealth creation strategy called property development.
In this issue we are going to start right at the beginning with stage one and look at how to find a site that is worth developing.
It can sometimes be difficult to know where to start when first trying to get into property development and where to start looking for sites that may be profitable. There are many bargains to be taken advantage of in today's economic climate; you just need to know where to look.
I have learnt that great development sites can come from just about anywhere, so the bigger your network the better. To start building a network and finding sites you can look on the Internet, in your local paper as well as your State newspaper and also your local real estate agents. These will display all the properties on the market. However there is another way to look for properties that are actually 'off market'.
A lot of development sites are actually sold before they ever officially come 'on the market'. To find these sites you need to build a relationship with a development agent.
The development agent is similar to a real estate agent but generally only deals in properties where you can value-add through development. If you look under the business section of the paper, under commercial and investment properties, you will find sites that are suitable for developing but you will also find the contacts of development agents: call these agents and ask to be on their contact list. They will then email you periodically with potential development sites that are not available to the open market.
Another great way to find potential deals is by driving through an area and looking for abandoned development sites. These present great bargains as usually construction will have come to a halt due to lack of funding and the vendor will be looking for a quick sale. The vendor or developer may need to sell at below current market value and there's a high chance that there will be an option to get creative when doing a deal as the vendor will be prepared to take extra measures due to their situation.
You can often negotiate something that is win-win for you both and it might even mean you don't have to invest any of your own money (more on that in Stage 4, when I'll tell you about no money down deals).
There are also many opportunities to create business partnerships in these situations. When getting involved in properties that have already started construction, be careful to do your research in regards to what has been done, what hasn't been done and why construction halted. This will save you time and money in the long run.
When looking for a site, research is very important. You really need to know the area that you are looking at developing in as you will need to pick an area that allows for the type of development you wish to do. The local council website includes a lot of information, so browse through it and familiarise yourself with the content. If there is something you don't understand you can call the council and talk to someone, usually the town planner, as they are generally happy to help and advise. What the council wants to see in the area is a key factor. It is advisable to build up good rapport with the local council.
If you come across words that you do not understand while browsing through the council website, look them up or ask the council what they mean. This is quite important because if you do not understand the content you will start to feel lost and won't be able to make sense of what you are reading/looking at. Familiarise yourself with the council and city maps such as the Zoning Maps and the Land Environmental Plans (LEPs).
Understanding the terminology, not just with the council, but also in other areas of property development in general, is also a key factor to being able to succeed.
Research not only involves knowing your area well, it also involves educating yourself on the property market. Factors such as housing supply and demand, price rises and falls in suburbs, whether you should be making offers above or below the current market price etc, will all affect your end result. Local real estate agents, various property websites and RP Data all supply information on these trends.
Networking is also a great way to find sites. You can start networking and building your contacts such as builders, site managers, project managers, architects, town planners and other investors involved in the property development game. You should network with anybody and everybody, friends, family, local shop owners, local real estate agents, neighbours, mortgage brokers, council, long term residents, plumbers, financial planners – let them all know what you are interested in. You want to get other people on the lookout for you too, doing the legwork and research for you where possible.
Alert local real estate agents and development agents of what your criteria is including the area you want, size of development, profit margin you are looking for, style of dwellings you wish to construct and price range etc. You may also find that you may be able to help them too.
With the right tools and knowledge at your fingertips you find yourself coming across more and more sites that may have profit potential.
If you would like to do a practical exercise, jump onto your local council website and go to the development section, click onto the zoning map for your local area and check it out. This will show you the development potential of every property in your area. A great way to research and confirm potential development site and something I have been using since I first got started in property development.
Next issue we will move onto Stage 2: Site Analysis, which is all about doing the right research on a property once you find it. In the meantime, happy property hunting!
