19 May Wealth Creation Through Property Development
We see it time and time again, in every property boom we see the ‘gold rush’ for development sites. Every man and his architect buying duplexes and triplexes at whatever price the agent said the site was worth. Hopeful buyers investing their life’s savings, or even worse, borrowing money from banks and second tier lenders to subdivide and build the houses praying for a return on investment. And time and time again we see the same people lose everything when the market turns.
Property development is responsible for plenty of wealth creation over the decades. But what is the ‘secret sauce’? Why is it that most fail and only few ‘make it’ in this game? We have listed our thoughts on the topic below…
- Paying too much
A smart business person once said,
‘In property, you make money when you buy, not when you sell.’
Most first time developers get caught up in the excitement of a good market and pay top price for a subdividable block. They end up relying on the continuation of the market boom for them to realise any profit. However, the preferable way to go about it is to find the opportunity first, set a price limit for yourself and stick to the numbers. Don’t factor in emotions when making financial decisions.
- The team of experts
A ‘developer’ is the person who brings together a team of experts to play their part in manufacturing new properties. These experts consist of plumbers, designers, engineers, electricians, earth workers, architects, real estate agents, marketing experts and even fencing guys and demolition experts. Knowing the process, understanding the costs involved, and having the right team behind you can turn the most mediocre opportunity into a brilliant success by utilising the knowledge of industry experts. A developer is only as good as the team behind them. Choose your team wisely!
- Get-rich-quick schemes
With the rise of Instagram influencers flaunting their apparent wealth on social media, the younger generation have developed a tendency to look for get-rich-quick schemes. At face value, property development may seem like it could result in being able to buy luxury items in a matter of months instead of years. This perception is further portrayed by spruikers selling their multi-thousand-dollar courses at dodgy seminars with a poor pulpit of believers handing over their hard-earned cash in the hopes of becoming an overnight success. Becoming an expert, let alone successful in any field is difficult. It is a journey with inevitable failures and lessons learned. There is no shortcut to property development success. The calculated and persistent developer who develops an eye for the right opportunities is the one who succeeds at the game.
- Magic of cashflow
We see it again and again when people give up their day jobs to chase the smallest success in property development and then end up relying on the profits of their developments to fund their lifestyle. Developments are cash-intensive ventures and require you to reinvest most of your profits to grow your working capital for many years. So stick to whatever is already paying the bills until the developments are large enough to be able to fund your lifestyle.
At Nicheliving we have been developing properties for over 20 years and we believe we have created the formula for success by nurturing relationships with industry experts, employing the best talent in all segments of our business and developing a keen eye to spot opportunities within the marketplace. We are proudly WA based and our Total Development Solutions arm allows developers to leverage our existing infrastructure to turn their project into success.