Property Development Project
When people are looking for a property strategy that can bring transformational change in their lives – the “game-changer”- they often ask this simple question. But what if knowing what property development is isn’t as important as knowing if it is for you?
Preparation for your first property development project begins well before you have formulated a vision for your first site. Before you go out there, looking for the right deal, take a moment to look in, and consider if this is your true calling.
But before we get carried away, let’s look at the current landscape of property development. Starting with a simple answer to the question…
What Is Property Development?
Wikipedia defines “Property Development or Real-Estate Development as is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of developed land or parcels to others. Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real property”.
What’s attractive about it is that it can lead to a high return on investment. The ROI in these projects is a large part of their appeal to people looking to change their life for the better. What’s more, the return also means that a developer can build their property portfolio irrespective of property cycles and a lot quicker.
Because while there are a litany of books, seminars, and courses out there, the truth is that the first step towards a successful career in property development begins with understanding not what it is, but if you have the right mindset for it. Because it the number one underlying factor that determines your success in this industry.
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Your First Property Development Project
Somewhere along the way, the arena of property development became saturated with teachers and gurus. Simply typing ‘property development courses’ into Google will bring with it tens of millions of results, with everyone trying to get you to buy into their idea of property development.
Ironically, the message of these teachers is very similar. They talk about market property development as the slick, savvy business in which you can get rich with minimal effort. In truth, many of these courses tend to focus on selling the idea.
It’s not so much about discussing the market of property development, but rather, marketing property development.
But here is the thing. Property development isn’t simple. It’s not easy, and it certainly is not a get rich quick scheme. Property development requires work. It requires forethought, and above all, it requires commitment.
So let’s break down the mindset required for property development a little, to see if it still appeals to you.
Are You Committed to Bring Home Your First Property Development Project?
Are ready to change your life in a significant way? Are you willing to put the time, money, and effort towards your goals? Are you ready to take on, assess, and manage risk? Feel comfortable with a certain degree of uncertainty, and push forward no matter what? These are confronting questions. But they illustrate the beginnings of what you might experience, on the road towards high reward.
This is the mindset that can, in under 5 years, develop 7 projects worth a combined 35.9 million dollars. It requires incredible discipline. Something that is expanded in My Quick Start Free Development Course.
Even dealing with figures this large can cause anxiety in people. It requires an awareness of how we assess risk, an understanding of uncertainty and how we navigate these waters intelligently. It even requires an awareness of the traps that even professional property developers can fall into. But what needs to be understood is that the commitment is not a small one. Property Development is a “big picture” change that requires wholehearted commitment.
When looking at yourself, consider if your mindset aligns with these ideas, or if they can be trained to do so. If you’re still not sure, consider what makes a successful property developer.
Knowledge Is Power
From the art of finding the right deals to doing your due diligence. Accumulating knowledge is key to placing yourself in a position of strength. This includes being aware of the property clock and cycles, understanding finance, as well as being able to effectively do financial feasibilities on projects.
But don’t worry. You don’t have to know these things yet, but you do have to spend the time to learn them.
Some important lessons you will need to understand for your first property development project include:
- Finding the Right Site
- Due Diligence
- Preliminary Financial Feasibility
- Feasibility Study & Feasibility Software
- Understanding Development Finance
- Site Acquisition
- Obtaining Permits & or Development Approval
- Promoting Marketing & Selling your Developments
- Managing Construction Contracts
- Preparing for Settlement
The more knowledge you can obtain before getting into a project, the better off you will be with your ability to assess risks and manage the development process. Checkout our Guide To Getting Started In Property Development. With knowledge, numbers, and data, backed by extensive research, you can create the foundations of your property development project, and subsequently your property portfolio.
Knowledge is useless if it is never applied, so is knowledge applied poorly. This leads to diminished profits and in certain instances dire consequences, especially in property development.
Property Development System is the primary tool used to create your very own Automatic Property Acquisition Machine (APAM). APAM installs a process of how to channel profits and equity from one project to another. It also allows for higher speed in property acquisition and continued movement towards more property projects.
The APAM system demonstrates a mechanism for financial freedom, scalability, and a quantifiable degree of certainty.
The key benefit of installing these processes and applying knowledge is that it keeps you moving forward. Changing your mindset to acquire and using the right knowledge puts you in the best position to achieve goals and get results.
But nothing is without risk.
From land acquisition to preparation for settlement, there is a lot to plan for. And while this knowledge certainly helps to reduce risk, it is important to be aware that risk is ever-present.
Some people find it challenging to even consider risk-taking. But the fact is there will be times when it is necessary to take a risk. Prudent property developers will make sure that they do their research and check the details so that the risks are calculated, assessed, and managed.
Property Development System was born of this need. It is a system of logically reducing, mitigating, transferring, and containing the ever-present risks at every step of real estate development.
Not just risk though, uncertainty also plays a major role in property development.
The difference between risk and uncertainty is that risk is the distance between safety and hazard. Whereas uncertainty can be the unknown feeling felt between that space. Unfortunately, many people end up self-sabotaging themselves, unable to differentiate between risk and uncertainty.
A perfect example is planning permits and/or development approvals. Knowing the difference in permits, planning regulations and which consultants to use differs from council to council, state to state, not to mention country to country. And while a lot of information can be accounted for, it is unreasonable to expect to know the outcome of a Development Application (DA) with 100 percent certainty. There are nuances to permits and planning.
This is a small example. But extrapolate outward and you will find that there are nuances in many areas of the property development process. And compounded on top of each other, elements of the property development project become uncertain.
But don’t panic. Uncertainty is natural. Big things require a lot of small steps and the occasional leap of faith. But a leap of faith should be made in the knowledge that you have done as much as you can to ensure success.
You need to grow comfortable in the space of uncertainty, but never become consumed by it. Always know the end goal, but understand you can’t know everything or be prepared for every setback. Great success is born in uncertainty.
And speaking about success…
Failure Is Not The Opposite Of Success
Do not talk yourself down. Failures both great and small happen. They are inevitable. Another issue of self-sabotage is the binary thinking of success and failure.
Getting ready for construction, and losing a bit of money in trying to find the right construction contractor, isn’t an ultimate failure. Nor are all the projects that never go forward. An important lesson in property development is that failure isn’t the opposite of success.
In fact, success is paved with stones of our many failures. Because learning to overcome these challenges leads to knowledge, and knowledge to power, and power to strength. It is important to both be comfortable in uncertainty and steadfast in the face of failure.
On The Question Of Property Development Mindset
Fundamentally, the most important element of any development project that you are considering doing is having the right mindset. And in summary:
- Be committed to the big picture.
- Seek, acquire, and use as much knowledge as possible.
- Know what the risks are. Assess them all, reduce as many as you can, and manage the ones you must take.
- Understand and grow comfortable with uncertainty.
- Do not be afraid of failure.
And there is one more element to property development we have not talked about. And that is fear of success.
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Don’t Fear Success
You read that right, sometimes it’s not the fear of failure that keeps us from moving forward, it is the fear of success. Property development can lead to massive windfalls. Thinking you don’t deserve it can motivate that ultimate and erroneous notion of failure. If you fear success, you will quickly become overwhelmed with the idea that failure is inevitable. Embrace the notion that success is not just attainable, but that you are worthy of it.
Incorporating all these factors into your mindset means your potential knows no boundaries. Success has no limit. Failure is no longer a dead end but a challenge along the way. What is uncertain is no longer a threat and risks are manageable. Being empowered by knowledge and strengthened by knowing how to use it leads to being committed to a bigger picture than ever before. So now a new question must be asked….
Making sure your first or next property development project is a success
Property development is unquestionably one of the most complicated industries, and the key to a successful real estate project is competent and responsible management, particularly of the people involved.
The construction business employs a broad group of people, from specialists to government bureaucrats and contractors to building material suppliers.
A property developer is always surrounded by people from all walks of life with whom he must interact daily. The official from the council's building department to the carpet-layer on the construction site are all examples of these people.
Experienced developers recognise that it is nearly impossible for one individual to simultaneously manage all of these people. As a result, they have mastered the art of delegation and effective management and leadership abilities.
If you lack the necessary abilities or personal time to run the project, you should employ an experienced development manager or project manager to take over management responsibilities.
Accept the responsibility and become a dynamo in the property development sector if, on the other hand, you believe you could thrive in this position.
Responsibilities of a Property Developer
In all successful property developments, the development manager's position is critical. Any inefficiency on his side, or failure to follow basic management principles, can result in unnecessary financial losses.
You need to ensure that everyone is on the same page, that decisions are made quickly to keep the project on schedule, and that spending is kept under control to stay under budget. Ensure to retain all written documents of all agreements affecting the construction contract in a secure file system at all times.
Managing & dealing with people
As a developer, you must manage and communicate with diverse employees to succeed in your project. Here are some points on how to do so.
Delegation requires a high level of competence, self-control, and discernment. Nobody can adequately delegate without first grasping the concept that you don't get a dog and then do all the barking yourself. As a result, when instructing someone to perform a task, you must make sure that you:
- Clearly define the job.
- Inquire about the person's plan for completing the work.
- Allow the person to complete the task at hand and report to you regularly.
Negotiation is the process of communicating with others to get what you want from them. The primary purpose of negotiation in a successful property development project is to obtain an agreement where both parties feel they have gained something. Three factors must be present in any negotiation, and the effective negotiator will always employ them. These are the following:
- Information - acquiring facts about the other party or subject.
- Time - how to deal with time restrictions
- Control - maintaining emotional control while focusing on the bottom line.
There are a few things to keep in mind when you're bargaining. I've included a few of them below.
Seek a win-win situation
In any negotiation, the most significant outcome is when both sides believe they have achieved their goal while maintaining dignity and integrity.
The key to grasping the win-win concept is determining what motivates the other party. This demonstrates the importance of having information.
Price isn't always the most significant factor
Many negotiating agreements fall apart because both sides expect the lowest price to seal the deal. Examine the contract's terms and conditions to see if any mitigating circumstances could alter the price in the long run.
A third party would be beneficial
There may be instances during a face-to-face negotiation when you are placed into a position where you cannot compromise. As a result, having an absent third party, such as a business partner, a board of directors, or a consultant, to utilize as a negotiating lever is always preferable.
This will allow you to postpone your decision without jeopardizing your position or embarrassing one of the parties.
Consider all of your possibilities
During a negotiation, one party is frequently concerned with one subject at the expense of others. It is human nature to desire to win, but the more options one has on the negotiation table, the better it is for everyone involved.
Keep your emotions under control
When the stakes are high, emotions can play a role in the bargaining process. During this time, neither party's egos should get in the way of closing the sale. When this happens, it's better to take a break and analyze the situation or design new solutions.
Divide the difference
When all other options have been exhausted, splitting the difference is one of the best options. This isn't always determined just by price, as other factors can impact the outcome of a negotiation.
Remember that the art of compromise requires you to give up one point to achieve a more valuable one.
If you're not happy with negotiations and the other side isn't willing to budge, walk away from the deal. There will always be another opportunity around the corner.
Principles of Development Management
There are many good management books out there, and it's a good idea to read them and, if necessary, take a quick course on the subject to ensure success in your first property development project. The following are the most critical development management principles that apply to property development:
- Concentrate on the result, that is, what you want to achieve and how you'll get there in a certain amount of time.
- Always keep an eye on what's going on with your project, especially difficulties, even if they're minor. It is preferable to fix a problem before it becomes a severe problem that causes delays and wastes money.
- Make timely and effective decisions. Every individual under your care is looking for your guidance on the next step in the process. If you're new to this and don't know much about technical concerns, it's sometimes preferable to ask the people involved for advice and choose the best option.
- Ensure that all records, minutes, letters, and invoices are kept and filed in an organized manner by you or your personnel.
- If you're unsure about something, read the fine print in every document and ask questions.
- Organize your daily activities on time and never be late for a meeting or appointment. It is best to inform the other party if you are running late. If you're always late, it shows that you're a slacker. It demonstrates inefficiency.
- You should confirm any verbal agreement or discussion in writing. These documents will be essential if a problem emerges throughout the development process.
- A good developer will keep track of all money, budgets, and construction projects. He will also choose competent consultants and discipline those who do not complete their assignments on time.
Managing Your Property Development Team
A developer relies mainly on the development team's knowledge and professional recommendations. How you manage them will determine how well you extract the most crucial information and motivate them to do their best work on your project.
The following are some ideas for efficiently managing this vital team and it helps you to better prepare for your first property development project:
- By being firm and fair, you may demonstrate leadership skills and earn the respect of your consultants.
- Provide direction to your team members and establish clear project objectives.
- Consultants who do not do their tasks professionally and adequately should be treated with tact.
- Maintain a positive outlook for the project you're working on. Consultants will feel more at ease in this situation, especially working in a high-risk environment.
- Be accessible and commend consultants on their hard work.
- If the consultant fails to do so, confirm the contractors' appointments.
How To Sell Your Property Development Project To Your Clients?
If you plan to sell your project, there are several aspects to consider, whether it is a speculative single-family house, a block of units to be sold to the general public, or a shopping centre to be leased to a major corporation.
You need to know several factors, including objectivity, knowledge of all relevant data and figures, and a thorough understanding of your competition. The following is a list of these factors.
Be objective when it comes to the home you're selling. Do not become emotionally attached, as this may lead to the property being overpriced at first and any negotiations being emotional.
Make sure you know what you're selling
It is critical that whoever is selling the venture has all pertinent information. Zoning, council rates, and construction specifications are all part of this. Failure to have complete information about the property may result in concessions.
Make sure you don't come out as desperate or rushed. Astute purchasers will seek a seller who is compelled to sell and hold out and target the seller's rock-bottom price.
Buyers who are challenging to deal with
Be cautious of unscrupulous buyers who send a third party to approach you to test your selling position. Once discovered, unscrupulous purchasers may employ delaying tactics to weaken your negotiation position.
Be mindful of any potential drawbacks
Expect any disadvantages to being brought up as a rationale for making bargaining concessions. Buyers may criticize things like the lack of nearby amenities or the location compared to your competitors.
Know who your competitors are
You can be one step ahead of your competitors with your marketing approach if you know what they're selling. Buyers will always use the price of competition as a negotiating tactic.
Calculate the correct price
Overpriced properties will not attract buyers; they will instead wait for the price to reduce. If you hire a real estate sales consultant to sell your home for you, you'll find that they won't actively promote it until the price falls within the appropriate market range.
You could waste a lot of time and energy if you don't filter buyers who can't get the necessary finance or don't have the capacity to act.
Most real estate transactions will necessitate a proper contingency plan; however, avoid committing to too many contingencies or conditions based on the buyer's subjective preferences. You may be at the mercy of the buyer as a result of this.
Sift through the offer
Examine all areas of a proposal to ensure that it meets your requirements. If ridiculous terms and restrictions accompany a financial offer, it is not appealing.
Maintain control of general terms and conditions associated with an offer. Your conveyancer's failure to pay attention to settlement dates and deadlines for meeting conditions may put you out of control, causing you to lose time and money.
Those who work for the developer consider him the project's figurehead. As a result, to prepare for your first development project, your management should be effective, your decision-making sound, and your leadership excellent.
Furthermore, do not take on more than you can handle, especially if you lack a responsible backup manager or cannot delegate. It's easy to get attracted by too many projects at once during a property 'boom' period.
Before taking on more than you can handle, be sure you understand your limitations. Determine whether you have the management skills or the proper management framework in place.
Whether you are working on your first, second, or third property development project, I will always be there for your help. You can join my Property Development Courses or Workshops anytime for excellent advice and guidance.
Are you prepared for your first property development project?
Before you invest in an expensive paid course, I would suggest that you take the time to go through this short course in property development. It is not fluff and offers a lot of value and can help you to decide if property development is right for you.