Hi folks, I wonder if any of you fine people can give me advice on how to become a developer. I am joining forces with a friend/ex colleague to begin a project in 12 months. We're in Melbourne, ex real estate agents, young guys without access to massive runway cash but we believe we can round up a decent outlay from family and some fundraising. I definitely have a fair idea of what's involved given we've worked alongside developers may times in the past in an agent capacity however I'd welcome any advice you may have regarding the lending environment (not something we're familiar in the development world), noteworthy legislation (things are changing?), time frames, dealing with contractors, running the numbers, anything you think may help... Our first project could potentially be 4 townhouses in the North. Sell one each, keep one each as investments to keep borrowing against later. The macro stuff looks pretty good, Melbourne is set to double in size over the next 30 years, plenty of opportunities. Melbourne is flooding with stock currently though. 50k apartments set to enter the market over the next 5 years by way of huge development operators. How do we compete with the big players like that? I'm looking forward to any advice you may have! Thank you kindly.
Brilliant If interested I posted my 4 townhouse development in North, Thomastown. 4 Townhouses development - Melbourne All the best
Developing is hard Developing with a JV partner is harder Developing with a JV partner when neither of you have a lot of cash is really really hard. Developments require huge levels of cash. Both upfront and throughout the life of the project, esspecially at the end of the project, when your debt is at peak and you have no cashflow coming in. You will need near on 30% of your total development cost is cash &/or equity (cash is better). And that is assuming an 80% lend. If you go commercial (eg anything over 3-4 units depending on the lender) you will need an extra 10%. Understand what you can/cant finance. Cashflow during the development will keep you a float when there are delays. Dont rely on funding for interest - delays will chew through this very quickly. Make sure you document the JV agreement upfront. Esspecially exit clauses. Blacky
I would say "expert" developers are building companies who that is their full time job and they keep are team of trades also employed by all the work they have no matter what the market is doing. Most likely not on this forum.
Developers are not always builders but builders can be developers. Very few builders employ their own trades - most simply subcontract out the work. Building is risky, developing is riskier. There are plenty on the forum who are developers some may even be builders.
Mate I realise this obvs... What im saying is an "expert " developer is not someone who's done 4 small townhouse developments and is reliant on market conditions. They are doing them everyday and have been for the last 10 years. Through this of course they subcontract and keep lots of trades in work.
@lightbulbmoment - just because they do it everyday doesn't make them a developer. They're engaging subbies so they're a builder. The developer sits in another entity so if the builder goes bust it won't take the developer with them. The developer doesn't care who he keeps in work. There's always something cheaper
I m talking about companies where the builder is the developer. Usually has employed a team of supervisors who run the job and coordinate all the other trades eg plumbers and electricians. As long as the developer has work then all these other trades will aswell and if there any good he will take them from job to job. These guys are at the top of the rung as have access to all the resources.
Welcome to the forum. You'll find a number of small developers on this site who have done similar sized projects and there are some threads on those which require popcorn, a box of kleenex and some time. There are also some good threads still on the Somersoft forum which outline some journeys as well. Make sure you find @Blacky thread "it's not all Beer and Skittles" Working alongside developers in an agent position (can I assume you are a REA?) is very different to knowing what a developer goes through. Most of the tears of joy and anguish are before even a brick is on the site - there is months of setting up the structure/entity, finding the site, being successful buying the site, getting the design right, finding the Council hate your design, redesigining with better professionals with backup reports why the design should be allowed, going to VCAT, thinking "bugger this let's sell if we get permits", then perservering and getting DA. Then selection of builders (you know a few but going to tender will ensure competitive quotes) and finally things actually start to happen when you pay gobs of money to the builder and they gin around and throw mud around your site. If you have a macro look at any city in Australia over 30 years they all look great but if you want to sell on completion (and keep half) then you want micro due diligence about where you can make money. #1 rule be conservative with your end valuations #2 rule allow a 10% construction cost contingency line item #3 aim for 20% gross profit With a JV then the golden rules are #1 work out the most tax effective, legally effective and finance effective entity and structure #2 work out how to partition the ownership of each plot early on if possible so instead of own 50% of 4 lots you own 100% of 2 lots #3 write down as many decisions as possible an agree to them before anything happens There are lots of JV questions on the forum - go read them all. Then read all the structure questions. Then get a bloody good accountant and lawyer and broker. Then read all the development threads. Good luck!
Yea I agree. Most aren't making any after all expenses such as stampduty, gst, etc. Better off dealing with a consummate professional like Westy above.
Oh sure they are @D.T. Just read the threads. There's bazillions to me made developing. Just buy any old site - chuck up a duplex, or tiplex (dont do four or more though cos you need commercial fianance) - then drop off a couple of the bigger cost items. $Kaching$ I mean... its just developing... how hard can it be? Blacky
I think it was @MichaelW who also had a great SS thread on his monavale project. It was 'edge-of-the-seat' stuff for a while, but he came through it strongly. And you yourself @Westminster have numerous threads which brings a tear to the eye. Blacky
