Planning to build family wealth through property development…opportunities and pitfalls.
Property investment has long been recognised as a way to build wealth, whether via a direct purchase, a real estate trust or development and sale.
There are many famous names in global real estate, but aspiring billionaires or not, many Australians have identified property development as the key to their future fortunes.
If you are a first time or early career developer who has set your sights on wealth creation via property, getting good advice is the single most critical factor which will influence your success, according to DMA’s development advisors.
It seems simple but getting advice which is absolutely right for your specific goals and your unique development objectives is the one thing that differentiates a project which flies and one which fails.
The property history books are littered with tales of new developers who saw great opportunities which didn’t reach their potential.
The primary enemies of successful development are TIME and TIMING. The ability of a developer, and the project concept, to meet the needs of the market at a very specific time is key.
Markets move quickly. Consumer sentiment can turn on a dime. Going around in circles without a strategy for tenant engagement, customer experience, finance and procurement is seriously about as useful as throwing darts blindfolded.
There are a lot of highly successful property owners and developers who started their journeys in other fields of endeavour – even as diverse as medicine, trucking and agribusiness – but the one thing that they have in common is that they knew how to build a good team around them and the need to commit to an evidence-based development strategy.
In assembling a quality team you reduce risk, improve returns and lower the stress levels associated with the development for all involved.
DMA’s three top tips for first time developers are:
- Start with a strategy – Be very clear about what your objective is and the path to get there.
Consultants will do the job you ask them to do. If you ask them to create a 5-storey residential building or 20-storey mixed-use building they will do it. They might both fit on your site but:
- What are the tenant and buyer attitudes?
- What will sell?
- What facilities and contractual frameworks are favoured by high value tenants?
- Will the project be supported by a valuer and a financier?
Resist the temptation to start designing without a strategy and redirect that energy and budget to research, feasibility exploration and options assessment. The design team will deliver you far quicker and more effective results with a clear strategy to guide them.
- Allocate the time, and budget, to “truth-up” your concept.
Market test your concept with people who can constructively contribute.
Will your concept easily meet regulatory guidelines or will you need to set aside more time and money to convince planning authorities of the virtues of your vision?
If you’re building retail, consider the new landscape…we’re dealing with online shopping trends, click and collect, social distancing…will your concept meet the needs of new retailing science?
- Get a solid team beside you – Design is important but so is finance, valuation, project management and procurement.
Having the right people around you and getting good advice is critical.
A quality development project manager can build a cohesive team and you should expect that firm or person to bring good relationships to the table – financiers, planners and others whose advice will be vital in making sure the project not only stacks up but who can manage risk and cost along the way.
Make the investment to bring your team together early to share the vision and de-risk for the months and years ahead.
Look for experience but also look for people who will speak to what your consultant delivers but also HOW they work…development is an intimate process and relationships are priceless.
