Mistakes Wannabe Property Developers Make

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.

 

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.

 

Just another I left out

Getting the feasibility wrong and over estimating end values

 

Super liking this thread!

 

I don't think these mistakes are only isolated to "wannabe" developers!

 

Your right, but I guess with experience hopefully you get better at it

 

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

 

I stopped reading before this bit! sounds easy!

Not starting is probably a biggie too

 

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

 

Under Estimating Marketing Budget

 

Spending a fortune on investment clubs/mentors/programs thinking they'll learn the secrets to property millions

 

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.

 

Getting new infrastructure installed before final survey is done and pegged out... and then consequently having to move said infrastructure

 

I'm curious as to what a dud DA site would be,

 

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.

 

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.

 

What a gorgeous photo you have as your avatar. You both have the exact same expression and look very alike.

 

Thanks @WattleIdo! My daughter Audrey, 2 and a half. Bundle of joy... except at bedtime.

 

I really love that name, too.

 

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

botox maybe.

lol.