If you’re struggling to get your numbers to stack up with confidence and you’re starting to ask yourself how to make money in property development then stick around.
In this article I’m going to share with you five areas experienced townhouse property developers exploit to squeeze maximum profits from their projects.
It’s not uncommon for new or aspiring residential property developers to struggle to make their numbers stack up when running a townhouse feasibility study on a potential site.
On the flip-side, the untrained could be forgiven for thinking it was easy.
You can price yourself into or out of a project very easily if you don’t know what you are doing. If you don’t have the IP and experience required.
Getting your numbers to stack up is one thing. To get them to stack up where they end up being accurate is another. The margin for error is extremely small.
On a side note, here I share how property developers in Melbourne’s South East make their money.
Here are five ways experienced townhouse property developers squeeze profits out of their projects and make money.
1. Getting Access to the Right Opportunities
The first thing you need to get right when learning how to make money in property development It’s how to identify the perfect development site. This is an art in itself.
Side note – here are four mistakes you need to avoid when identifying a residential development site.
When you get further into your journey as a boutique developer you will start to build relationships with agents and other developers in your area.
As a natural course of progression, you’ll also start to see high-value off-market opportunities.
As a general rule for us here at Little Fish. If an agent tips us into a site and we can secure that site not under competition.
When it comes to selling the new dwellings, we would give them to the agent that helped us to sell.
On the flip-side.
If we have to purchase any site under competition then we will appoint whichever agent we like when the time comes.
As you start to build your relationships with the various agents around the areas you are looking to develop, you’ll start getting access to the better opportunities earlier.
Being efficient is all about getting things done timely.
At Little Fish, we understand that every day has a dollar amount attached to it.
So we’ve worked hard over our journey to build systems and processes to ensure the highest level of efficiency possible is achieved on every project.
In-fact we believe efficiency is that important to a projects bottom line that we have refined our systems and processes down to a fine art.
We broke down the real estate development process into six stages. And detailed every actionable step required to complete each stage.
Meaning we always know exactly what we need to be doing and at exactly what point in the project. For any given project at any given time. No matter how many projects we have on the go.
Nothing gets missed EVER.
Meaning every project we run is ran as efficiently as practically possible. Also meaning we squeeze every dollar possible from every project.
So, when you are starting your journey working through your first projects.
Be mindful of building out your own systems and process that will help you maximise your profits through efficient property development management.
Building out a network of solid and trusted relationships is pivotal to how property developers make money.
The better and more trusted the relationships you have. The more confident you will become with how much you are paying for a particular service.
And the more people you’ll have at your disposal to bounce ideas and thoughts off.
Relationships can increase your bottom line in many ways. Some obvious and clear and others not so much.
So put time into building nurturing trusted relationships with the people around you.
Trusted relationships will become the gift that keeps giving if you put time and effort in and get it right.
If you are enjoying these how to make money in property development tips then make sure you check out these property development tips.
4. Continuity of Work
The fourth way experienced multi-unit property developers maximise their returns and make money.
This is something that’s obviously not possible when starting out your journey as a developer. It’s definitely something you need to mindful off and strive for moving forward.
Over time as you begin to take on more projects.
You’ll get the opportunity to strengthen some of your key relationships purely through working together.
Once you find yourself in a position where you can begin to feed your builders (or any provider or supplier) consistent work.
You’ll start to notice a spike in their service and their prices will start to come down.
Providers will start to put a value on the continuity of work you can provide. And they’ll also hopefully begin to put a value on how organised you are.
Ultimately making their life easier and your bottom line juicier.
When you’re talking about making money as a developer time is a massive one.
Every day has a dollar value attached to it. That statement as a developer is something you need to understand and respect.
How quickly time can get away from you at times can be scary.
After you have submitted your application for approval the waiting game begins. But there are still plenty of things you can and should be doing.
The main take away to kill your time is to know what you need to be doing and exactly when. And ensure sure nothing is missed.
It’s not uncommon for something that might seem insignificant that is missed to have a domino effect on your project.
And end up costing you a lot of money.
One Final Tip
One final tip on time is to set or schedule reminders to follow up. Then follow up the follow-up and keep following up.
So take no prisoners with your days. Take no prisoners with your hours. Take no prisoners with your project.
So, how do you make money in property development?
I can tell you that it’s definitely not rocket science.
It all comes down to highly detailed and refined systems and processes that are executed with precision.
In this article, I’ve provided only five examples of areas where property developers maximise their ability to make money.
In truth, all aspects of your project need to be broken down, considered, systemised and continually refined.
If you get this right it will minimise your risk, maximises your profits and the best part. You’ll see your profits sooner.
And of course, once you make some profits you need to consider capital gains tax on your development. But don’t stress, it means you are making money which is the name of the game.
Got a development site that you need help with? Want to learn how to become a property developer?
Don’t hesitate to give us a call anytime at 1300 799 277.