How To Become A Property Developer
This is a contributed post from Ellie Jo on Real Estate.
We all know that there is money to be made with real estate. It could be investing in a single property and enjoying the rental income or running a real estate company . Or you might be dreaming a little bigger and thinking about launching your own property development company.
When it comes to property development, you don’t need qualifications in most places to get started. The steps to get started are relatively straightforward.
Table of Contents
Understanding property development
Real estate development and real estate developments are one and the same. It involves four pillars: land, labor, entrepreneurship, and capital.
The developer will need to use their entrepreneurial skills to combine land, labor, and capital to produce something that is worth more than the sum of the parts.
So how can you get started?
One of the key considerations about how you will move forward is how you brand yourself. Most property developers have very robust and well-known brands, and you need to ensure that you and your property development company are both going to make an impact.
Ahead of starting to make any in-roads with construction companies or other interested parties, you will have a firm understanding of your borrowing capacity. Of course, if you have additional assets, you are much more desirable to financial investors.
Development loan rates are subject to fluctuations, but you need to grasp them well ahead of any applications.
You will have more than one conversation about your financial position and what you are bringing to the table. Here are a couple of questions to consider:
- What is my borrowing capacity? (consider your current debts)
- How much money can I invest myself in?
- How much equity do I have?
There are also the options to become part of a property syndicate, but you’ll need to factor in the compliances in your country.
For your first property development project, you shouldn’t be looking to go too big. There is a lot to be learned, and most property developers learn as they go. You might also spend some time considering if you would prefer to do commercial development or residential.
The chances are that the amount of capital you have and the other interested parties will have most of the impact on the scale of the project.
It will also be the deciding factor on whether you are able to develop in an up-market location or a low-income area.
Not all land is created equal. Understand he difference between a piece of land that comes with approval and permits and those that don’t. Zoning maps can provide much of this information and allow you to make intelligent decisions straight away.
The development potential will be dictated by the following:
- Local employment and unemployment
- Zoning and overlays
- Other similar properties in the area
- Industrial, commercial or residential
The local government will have determined the zoning already. You can access and study the regional town planning to see what opportunities are available. Look for areas with the highest opportunity and the best use of the development that you have in mind.
As your plans begin to firm up, you need a strong network of agents in the location. Agents will be able to give you detailed information on the properties you are considering for development.
Agents can offer you invaluable insight into your plans since they will understand who buys what. They also know the best times of yea, and if your development will fill a gap in the market – or oversaturate it.
During your networking, you should make a point of visiting all of the other buildings or developments that will be similar to yours. This gives you a chance to see the quality and the price of other developments. You can also get a good idea of the interest in the area and the type of development.
Talking with the agent who is selling/renting out the unit will also give you some pointers for the features, colors, location preferences, and floor layouts that sell best.
All of the information you gather while you are networking should be something you can use within your development.
There are two market strategies that are going to be used when you are looking for potential development sites. One is on-market, and the other is off-market.
Starting with on-market:
On-market strategies are when these development sites go on the market and are snapped up. The con to this is that you will be in direct competition with other new developers or developers with a lot of cash who can offer a bid price. Anything public listed will be hard-won in most cases. The pro is that there will be plenty of information about the plot available.
Once you have contacts in the area (from your networking efforts), you should know some flippers, architects, agents, and more. Talk to them about your plans and see if they have any suggestions that are not yet publicly listed.
While you don’t need to have a degree or any other formal qualifications, it can be beneficial for you to take some short courses. It wouldn’t need to be in property development, but financial management, people skills, negotiation, and project management would be beneficial.
Learning should be part of any business you choose to run and can give you the edge over your competitors.
Greg is a Chartered Financial Analyst (CFA) with 22+ years experience in Financial Services. He has held numerous FINRA Securities licenses (series 7, 63, 65, and 66), and is an expert on Investment Products and Financial Planning. Greg has 22+ years experience as a real estate investor and degrees in Psychology and Philosophy.
Greg has been quoted/interviewed in Yahoo Money, Yahoo Finance, USA Today, Authority Magazine, Realtor.com, Business Insider, and others.
Greg is an avid runner, and the father to identical twin girls and their awesome brother. His love of budgeting and his kids led him to join The Great Resignation in 2021.
Disclaimer: Any Financial Tips on ChaChingQueen are general and informational. Speak with a professional about your specific situation.