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When the land owner hasn’t accept a lower price we’ve found that we’ve been able to negotiate much better terms.
Sometimes the terms can be much more attractive than the actual asking price.
Also you may want to consider a joint venture with the land owner if he won’t budge on the price.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comOUR 8 TOP TIPS FOR GETTING STARTED IN REAL ESTATE DEVELOPMENT
We’re often asked about how we first got started in Real Estate Investing and Property Development and what did we do in the beginning and so we thought it would be a great idea to put together some handy tips of what we did that may also help you to get started on your own Real Estate Development journey.
Here are our 8 top Real Estate Development Tips to help you get started:
– Develop a Rich Mindset – Learn to think and act like a Property Developer and always start with the end in mind.
-Invest in your knowledge first – Learn as much as you can about Real Estate Investing and Property Development.
-Avoid “Analysis Paralysis” – its great to learn from the property books and programs but eventually you have to Take Action and have a go to get results. Realise that Property Developers generally learn the most and make the most mistakes during their first real estate development projects.
-Find a strategy that’s a good fit for you – Real Estate Development is not for everyone – there are significant risks involved if you don’t know what you’re doing.
-Make sure you enjoy Real Estate Development – If you are passionate about what you’re doing then you won’t mind putting in the time and effort property development requires.
-Seek proper advice – Build a good real estate team and find great property mentors you can emulate – by that we mean people who aren’t just talking the talk, but are currently involved with Real Estate Development.
-Start small while you’re learning and then grow as your knowledge and experience grows. Starting small can avoid costly mistakes later. Alternatively you may want to pay a project manager – but you’ll still need to know the mechanics of Real Estate Development.
-Have faith in yourself and don’t be afraid of making mistakes because everybody makes them just try to learn how to avoid costly mistakes. Remember mistakes aren’t mistake if you can learn from them. As James Joyce said “A man’s errors are his portals of discovery”, and Winston Churchill “All men make mistakes, but only wise men learn from their mistakes”!
Adrian and Amber
http://www.RealEstateDevelopmentClub.comEach Joint Venture will be different depending on what the deal is at the time. For instance if we’re contemplating a Joint Venture with a Land Owner. Typically, the Owner may agree to exchange his land for housing unit(s). An independent Valuer/Appraiser is normally engaged to determine both the land value and the new housing unit value and if necessary monetary funds are exchanged if they are not of equal value.
We find Joint Ventures are a great way for newcomers especially, to get started as it allows you to share part of the profits while sharing the risk.
To help us understand property Joint Ventures more, we used ‘Joint Ventures Made Simple’. It showed us how people of like minds and different skill sets can join together and joint venture real estate deals. It also includes a property Joint Venture Sample Agreement.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comWe’re not sure if you’ve done a development project like this before but from our experience most joint venture partners will want to see some type of formal written proposal with a market and financial feasibility study plus any previous projects and the profit margins that you managed to achieve.
We consider the Financial Feasibility Study to be one of our main methods of minimising the risk inherent in real estate development. It’s an invaluable tool for evaluating the financial viability of the proposed project – its creation, construction and operation – by analysing the development costs against the probable income. It provides an answer to the most critical question of all for a property developer – “Will my proposed development be profitable?”
A competently produced feasibility analysis will also be necessary to include in your ‘Application For Finance’ We include it with the Finance Application to show the profitability of our proposed development to the banks or other lenders. After all, their primary concern is that they don’t lose the money that they will lend and they need to be convinced that this is unlikely to happen.
We also find that the financial feasibility study is invaluable when putting together a ‘JV Application Proposal’ as other investors can instantly see whether our project will be successful and the level of risk involved. It is essential in real estate development to constantly look at ways to reduce risk.
Not every newbie developer (we’re not saying you’re a newbie as we don’t know your experience) realises that the cost of a development project can easily be underestimated (especially at the initial feasibility) or can escalate due to unforeseen problems or occurrences that may take place during the development process. So make sure you have an adequate contingency allowance.
Unfortunately, surprises can happen! As an essential element of the development feasibility, and certainly before proceeding with the project, we know that it’s important to identify a series of strategies that will allow us an acceptable exit from a project throughout the development process. It’s an important and vital element of our risk management process.
Good luck with your project.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comWe like to purchase in good locations with consistently good growth and even though some states are experiencing flat markets there are still suburbs that are doing well.
Plus we look at increasing our cash flow and creating our own equity through renovations or real estate development.
You need to have a clear investment strategy that’s a good fit for you and start with the end in mind.
We suspect your decision will ultimately come down to what your own personal comfort levels are regarding debt.
Risk v Reward.Adrian and Amber
http://www.RealEstateDevelopmentClub.comWe’ve used POSH by Supertech for several years and are very happy with it. Plus they have a good support system with regular updates.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comWe personally prefer to engage good property managers to look after our real estate investments who are willing to do more than just collect the rents because, we’d rather not be woken up in the middle of the night to fix things like broken taps.
We found by leveraging other peoples time and skills we were then freed up to concentrate on our next project.
One thing that made a huge impact on us achieving our goals faster was adopting the ‘Pareto Principle’ (more commonly known as the 80/20 rule). This helped us to stay focused on the “20 percent of things that mattered” and saved us from wasting an enormous amount of time and energy on things that just weren’t necessary.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comInteresting! In downturns and flat markets we’ve found some of our best opportunities and we’ve always had an entry and exit strategy should things not go as planned.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comWe ourselves never looked for cash flow positive properties. We started out by seeing how we could add value to a property so we could increase the cash flow and create our own equity.
We began with renovations but now concentrate on real estate development because we found the financial gains were far greater.
However with larger profits there are usually bigger risks involved. If you know what you’re doing and seek professional advice, Real Estate Development can be a fantastic opportunity to increase your cash flow and fast track your wealth creation.
Some of the benefits of real estate development for us included:
-the potentially bigger profits allowed us to build a larger property portfolio a whole lot quicker
-by acquiring our properties at wholesale we saved on costs like stamp duty, legal fees, agents commissions and advertising
-we had more flexibility because we had the option to either hold stock as long-term investments or the ability to sell for quick profits if we chose to
-we could create our own capital growth and not have to rely on property cycles, in fact, with care, property downturns and flat markets created some of our best opportunities
-we would receive higher rental yields because we acquired property at wholesale prices
-we had the ability to borrow and leverage more because of the higher valuation of our portfolio
-as an added bonus we could receive some amazing depreciation and tax benefits from owning new property; and
Adrian and Amber
http://www.RealEstateDevelopmentClub.comEach local authority has different requirements regarding granny flats. Most Councils now have their planning codes on their websites and if you can’t find the answers there then I would speak with their Senior Town Planner in person.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comYou’ll also find a lot of great information at http://www.investorone.com.au
Adrian and Amber Zenere
http://www.RealEstateDevelopmentClub.comWe’ve completed several projects and find Real Estate Development is a great way to fast track your property portfolio.
While Real Estate Development isn’t without risks we find that it’s important to “Be Risk Aware NOT Risk Adverse.”
We started out with smaller development projects, this way any mistakes we made would be smaller and less costly. We figured that once we’d learnt more we could then take more calculated, knowledgeable risks and move into larger property development projects. To manage our risk we did the following:
-invested in our property education and developed the right mindset
-treated building our property portfolio as a real business and planned appropriately
-found a great team of real estate investing experts to give us sound professional advice
-always did proper research, to minimise the chance of purchasing a ‘lemon’
-started small so we didn’t overextend ourselves
-carried out a proper due diligence process so we didn’t overpay for a development site
-allowed a contingency amount for unexpected expenses and possible increased costs
-took out all the appropriate property insurances; and
-set up proper legal structures
Adrian and Amber
http://www.RealEstateDevelopmentClub.comContact your local council and if possible ask to speak to a Senior Town Planner. They will advise you if this is possible and exactly what you’ll need to do to make sure that it complies with their planning regulations.
Each local authority has different planning requirements so it’s important to check with your local council as to their specific requirements.
Adrian and Amber
http://www.RealEstateDevelopmentClub.comHi Elka
We would start by contacting the local council who should still have a copy of the original engineering drawings and architectural plans on file.
Then we would engage a structural engineer to take a look at the drawings and have him visit the site if necessary.
Between council and a qualified engineer you should find that they should answer most of your questions.
Hope this helps!
Adrian and Amber
http://www.RealEstateDevelopmentClub.comHi Tina
We haven’t purchased the Reno Toolkit but we’ve found that it’s always a good idea to become an expert in the area in which you live especially if you intend to do most of the renovation work yourself.
Once you’ve identified two or three suburbs with good consistent growth this should narrow down your search considerably so you don’t end up wasting valuable time.
The more properties you look at the better you’ll be able to spot a winner. Well located properties purchased at the right price will always hold their value.
If your budget allows, look for property that has more than one twist and if possible that has development potential. We look for corner sites that allow for easy development or land subdivision and where we can add value by renovating the existing dwelling.
We wouldn’t personally renovate in states other than which we reside mainly because the cost of employing a local project manager ends up eating into our profit margin.
Make sure you do a proper market and financial feasibility BEFORE you start any project. You want to make sure that your project will be profitable from the start.
Hope this helps!
Adrian and Amber
http://www.RealEstateDevelopmentClub.com
