Join Australia's most dynamic and respected property investment community

Mistakes Wannabe Property Developers Make

Discussion in 'Development' started by MTR, 16th Oct, 2016.

  1. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,293
    Location:
    Perth, Melbourne, USA
    From my limited experience as a relatively new property developer thought I would put together some common mistakes that I see happening with wannabe developers.

    Feel free to add of course.

    Buying in the wrong area
    Secondary location ie busy roads?? dependent on what you are building
    Areas with poor infrastructure/transport links.

    Paying too much for Finance
    Not sourcing correct loan can be a costly one.

    Structure
    Not buying in the right structure to minimise/reduce tax. Trying to save money and not employing the correct professionals.

    Building the wrong product
    Not building what a specific area demands, for example if the demographics are baby boomers, and you are building town houses, make sure the master bedroom and ensuite is downstairs.

    Building Costs
    Paying too much for building costs, there are huge discrepancies with this one especially in a rising market. Important to shop it and compare apples with apples.

    Cost Cutting on quality/specifications
    Even if your budget is small, you need to get the specifications right, in other words what buyers want in this area/suburb.

    Going overboard
    On the flip side.....don't over design and over specify, it will cost you dearly and you wont get the money back at the end.

    Getting way too personal
    Inflicting your taste on a project alienates buyers. Neutral does not mean boring, don't reinvent the wheel, find out what the successful developers are doing in the area/suburb and copy their model

    Market Conditions
    Developing in strong markets/rising markets will be far easier to make money and reduce risk.

    Greed
    If selling development, be realistic with prices, market dictates value of the property not you. This is one easy way to shoot yourself in the foot.
     
    Last edited: 16th Oct, 2016
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,542
    Location:
    Sydney or NSW or Australia
    You missed the most important one:

    Paying too much for the site.

    It goes without saying that if you overpay for the site, you are carrying this cost and holding costs for the entire project duration.

    Overpaying has the greatest effect on profitability as buyers are not going to compensate you for this mistake and will only pay what the market dictates.
     
    Jezzalinko, Brady, PacMan and 4 others like this.
  3. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,293
    Location:
    Perth, Melbourne, USA
    Just another I left out

    Getting the feasibility wrong and over estimating end values
     
    PacMan, Agent30yrs. and samiam like this.
  4. samiam

    samiam Well-Known Member

    Joined:
    5th Sep, 2015
    Posts:
    522
    Location:
    on my way
    Super liking this thread!
     
    Colin Rice likes this.
  5. LifesGood

    LifesGood Home Building & Development Consultant Business Member

    Joined:
    26th Jun, 2015
    Posts:
    639
    Location:
    Perth WA
    I don't think these mistakes are only isolated to "wannabe" developers!
     
    Cactus, Colin Rice, MTR and 1 other person like this.
  6. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,293
    Location:
    Perth, Melbourne, USA
    Your right, but I guess with experience hopefully you get better at it
     
    LifesGood likes this.
  7. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

    Joined:
    9th Jul, 2015
    Posts:
    1,078
    Location:
    Perth
    Or being ultra conservative and getting it to low therefore not proceeding! Probably my achillies heal haha.

    This is the best teacher so hopefully you dont get to cained. Dont go it alone on your first one or perhaps ever. Get a team to help you or plug into some one elses.

    I cant talk as the first development I ever did was "theres a block I can subdivide. I have always made money from property so I will make $$$s from this" and that was it. No feaso, no end values just followed my nose and still made a profit. Please dont do this though as it can be dangerous :eek:
     
    Westminster, PacMan, samiam and 3 others like this.
  8. bob shovel

    bob shovel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,373
    Location:
    Somewhere in the land of Oz
    I stopped reading before this bit! :D sounds easy!
    Not starting is probably a biggie too
     
    Tufan Chakir, PacMan, hammer and 2 others like this.
  9. MTR

    MTR Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    7,293
    Location:
    Perth, Melbourne, USA

    I know some talk about going on property deve workshops, but best way to learn is get your hands dirty IMO, of course you make mistakes but learn along the way

    I also have an issue with regards to these workshops they do not provide information on where to buy most important element
     
    charttv and wombat777 like this.
  10. Agent30yrs.

    Agent30yrs. Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    153
    Location:
    Brisbane
    Under Estimating Marketing Budget
     
    MTR likes this.
  11. LifesGood

    LifesGood Home Building & Development Consultant Business Member

    Joined:
    26th Jun, 2015
    Posts:
    639
    Location:
    Perth WA
    Spending a fortune on investment clubs/mentors/programs thinking they'll learn the secrets to property millions
     
    charttv and Perthguy like this.
  12. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,713
    Location:
    Sydney
    Buying a dud DA approved site and thinking you bagged a deal just cos it's DA approved. Then the nightmare on DA street starts.
     
  13. Turbo_C

    Turbo_C Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    51
    Location:
    Mackay
    Getting new infrastructure installed before final survey is done and pegged out... and then consequently having to move said infrastructure :mad:
     
  14. Raydar

    Raydar Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
    306
    Location:
    Newcastle NSW
    I'm curious as to what a dud DA site would be,
     
    Elives likes this.
  15. Leo2413

    Leo2413 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    5,713
    Location:
    Sydney
    DA approved site where the feasibility doesn't stack up so no margin for the developer.

    I got a better one. DA approved site where the engineering is so convoluted it will cost you an arm and a leg to get built so you have to get all the engineering done again. I know a fellow who was in this situation awhile back and cost him a packet to get it redone. He was no more smiling when the bill came.
     
    Raydar likes this.
  16. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,411
    Location:
    33°41'24.7"S 150°55'34.3"E
    I would think not profitable to construct at the required price point or an end product that doesn't suit the market ( difficult to sell ).

    Edit - or lease, if find you are intending to hold them.
     
    Last edited: 17th Oct, 2016
    Perthguy and Leo2413 like this.
  17. WattleIdo

    WattleIdo renovating Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,809
    Location:
    Central West NSW
    What a gorgeous photo you have as your avatar. You both have the exact same expression and look very alike. ;)
     
    Raydar likes this.
  18. Raydar

    Raydar Well-Known Member

    Joined:
    6th Jul, 2015
    Posts:
    306
    Location:
    Newcastle NSW
    Thanks @WattleIdo! My daughter Audrey, 2 and a half. Bundle of joy... except at bedtime.
     
    samiam and WattleIdo like this.
  19. WattleIdo

    WattleIdo renovating Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,809
    Location:
    Central West NSW
    I really love that name, too.
     
    Raydar likes this.
  20. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    1,391
    Location:
    Mt Druuiitt
    [​IMG]


    Don't take development advice off this man^^^^^

    botox maybe.

    lol.
     
    Perthguy and MTR like this.