PROPERTY INVESTMENT

 

PROPERTY INVESTMENT

There are two pathways to consider;

  1. Being an employee in a property development company via a development management role; and
  2. Being a property developer in your own right.

The “acquisitions” DM locates sites, does feasibilities, undertakes due diligence and makes recommendations to their superiors in relation to acquisition. It is unusual for these types of DM’s to deliver the project following acquisition; instead they go looking for the next site opportunity. Meanwhile, the “delivery” DM takes the site that was acquired and runs it all the way through to completion.

Many people can’t see the value in doing so but consider this, to be able to do this successfully you have to either be very lucky or be very considered. What you want to be is considered. To buy an apartment for renovation and sale, for a profit, you have to do your diligence on all manner of things

  1. Firstly you have to know what the market is doing, what renovated apartments are selling for and what unloved apartments are selling for. Is there a difference? Is there profit potential, and if so, how much?
  2. Then you need to know what your target market needs in your fully renovated apartment (i.e. your purchaser). What do they expect your apartment to have to be able to achieve the price you need to achieve?
  3. To renovate the apartment to achieve the target market’s expectation, what cost will be incurred to undertake the renovation?
  4. How long will it take from the time of acquisition until you settle the sale transaction to the purchaser of your renovated apartment? What will be your holding costs over this period, including rates, taxes, finance costs, interest and the like?
  5. What other costs will you incur over the project period? Sales commission immediately jumps to mind. Did you allow for stamp duty on your purchase?
  6. What all this means is that you are undertaking a feasibility analysis (before you acquire the property). Assuming that it all stacks up and you go ahead with an acquisition, you have to deliver your project for the budget. Now you become critically aware of the time and cost implications of your decisions.

But for those who want to be property developers in their own right, what I have just explained above is a natural progression for you. Start small and build your experience on apartment renovations and house refurbishments, alterations and additions until you are ready to start some villas or townhouses. Yes it will take some time before you get involved in bigger developments but that’s just a risk management issue for you.