Developers when did you start?

When did you start developing?

After building a portfolio and letting prices rise?


Instantly? Had money from something other than property and started developing?

Would like to hear of everyone's journey and future goals

 

Saved up a substantial deposit to buy a PPR... then decided it was a better long term call to buy an IP and rent... then decided if I was going to buy an IP I may as well get the most bang for my buck and do a duplex development.

Now looking at my second project, still happily renting and no sign of turning back.

 

We started to build a portfolio many years ago to build wealth, acquiring equity along the way. When we reached a point that we felt we had enough equity and basic knowledge of property investing we wanted to take it to the next level. We met a business partner through some associates of ours at around that time who was experienced with development and we started to do some deals together. We had a very passive involvement at that time and it suited all parties involved. Over the last few years we decided to amicably end our business relationship and go our seperate ways which suited everyone, and now my partner and I take on developments in a completely active role.

For us it was a natural progressions of gaining equity, experience and realising that utilising the strategy of development had become suitable and appropriate to near us to our goal which had evolved and expanded over time, as did our risk tolerance.

Personally I think there are quite a few newbies who see development as something glamorous and just another strategy to employ anytime they feel like it. Over the years with my limited experience and knowledge I have come to the conclusion that property development is anything but glamorous and should never be approached in an insouciant manner.

In my opinion and from some of my observations;

1. It usually takes more equity than you realise.
2. It usually takes more massaging and trouble solving with banks than you have prepared for.
3. It requires some good business sense, negotiating ability and ability to build and maintain relationships during the project with key consultants.
4. Requires a good understanding of how to conduct development due diligence, product feasibility and risk management.

For all those reasons alone, property development is not just another strategy like B&H etc and carries with it a much higher level of risk and skills needed. Personally I wouldn't attempt it unless I knew I had enough equity/serviceability, general property investment experience and at least some development knowledge and/or contacts to help me on my first one.

 

5.

 

I've got a strong Engineering Background ( unrelated field ) and my PPOR was a custom build so using that as a base of experience. I have good real estate contacts and that has been a help with some starting points for rental/valuation estimates.

Main thing I need to do is build more equity and funds to get started. Plan is to extract some equity from my PPOR and an IP next year.

@Leo2413's point 3 and 4 should fall into place with the selection of the right town planner and designer.

Last thing I need is for the local / state govts to progress their plans for the area to the next stage ( commit remaining funds ).

 

@wombat777 I envy your engineering background/brain mate... It's still mostly all Japanese to me.

 

Had two IPs for a short period of time, sold both + cash injection and continue to happily rent (in a suburb which would tie up 60-70% equity) while I approach my third development. Happy days!

 

There is no substitute for finding a great development site, in a good location on the cheap.

Either it's been missed by the market as other developers can't see what you can see regarding future potential OR you buy a large property/site and put it into your land bank and wait for the area around it to catch up or if you're lucky be rezoned.

Once the area around it catches up the 'on completion' valuation of the potential new dwellings make your development viable and the bank will want to partner with you.

Either way both are long term strategies and there is NO WAY to speed things up. Either you have the equity and profit margin to make the development work or you don't.

I've found time and time again that patience and time are a developers best friend.

 

Too early
My foray into development was well documented on Somersoft - here in case you missed it Life - It's not all Beer & Skittles (Old SS thread)

Basically as a young and enthusiastic risk taker with little idea of what I was doing or what I was about to face, lauched myself head first into a fairly decent size development project.

Things didnt go any where near as planned. It almost sunk me financially and crippled my confidence. It took the best part of 5years to get through all for a break even amount.

Ive managed to come through it ok, and have even ventured into a JV project with @Westminster (again well documented here - Mindarie WA: Blackminster Joint Venture 4 apartments)

Blacky

 

Thanks for the honesty

 

I kinda feel liked newbies on here get put in a box in relation to developing.
I'm 24, have 2 properties and building one currently all of which I have earn't myself utilising my own income/savings. If your passionate and determined about it.. anything is possible gotta start from somewhere ! plus I don't think newbies should be deterred by risk or failure, it's all about the growth process and pursuing the end goal regardless of the obstacles (well IMO). This is forum is the best kept secret, because everyone is so honest and knowledgeable

 

What 'box' would that be?

 

Hmm just from reading posts throughout the years, its as though the impression is that newbies don't have what it takes to handle the pressures of developing. Which i understand, there is alot to consider and be mentally/financially prepared for. But i dont think anyone should underestimate a newbie on ther potential to be succesful in developing. All feedback good or bad is helpful anyhow

 

From my point of view, most newbies find the learning curve of just trying to buy an IP challenging. Developing is well and truly in another realm altogether imo. It's not that newbies can't 'handle' it, but I think they should not underestimate the risks involved and also importantly, it needs to fit into into their risk profile and overall strategy for their portfolio. There are many experienced property investors who also choose to not develop because they know it doesn't fit into their overall strategy/risk tolerance. To not approach it in this manner is just greatly increasing the risk of what is already quite a risky undertaking.

Just my opinion.

 

While I dont disagree Im also not sure that a lot of newbie developers have any idea of what they are getting themselves into. I know I certainly didnt.
I looked at the numbers and though "how hard can it be?" and jumped in head first. It was far harder and far more complex than I imagined.
Yet far more addictive and exciting than I could have imagined also.

Im not saying dont do it. Im just saying be prepared. I hope my "beer and skittles" thread highlighted just a few of the challenges.
Im pretty sure MichaelW also had a lot of challenges on his first development.

Blacky

 

Damn - you beat me to my post by about 3mins.
Anyway - essentially saying the same thing.

 

@Blacky there hasn't been a development that I have been involved in where I hadn't shed tears at least once at some point due to immense pressure and uncertainty. I never felt that when buying an ip.

 

Certainly a lot of lost sleep, and some appologies to individuals who happened to be in the wrong place at the wrong time who copped the back end of my stress attack.

And yet, I just cant get enough of it...

Blacky

 

There is something about seeing a project from concept to built product that creates a great sense of pride. Also seeing the bank balance shoot up at the end doesn't hurt either

 

Just taking my first steps...