Mistakes Wannabe Property Developers Make

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

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The best trust to use many even be a super fund.
     
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  2. Cactus

    Cactus Well-Known Member

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    So true. I take more interest in the headline Profit figure than the IRR. Or if using IRR for evaluation it can be good to still consider the seed capital required as project capital even if it's borrowed from a different facility or offset.
     
  3. Blacky

    Blacky Well-Known Member

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    Analysis paralysis
    Spending days, weeks, months, years reviewing, analysing and breaking down in enth degree every possible outcome without taking any real action. Too scared to pull the trigger and learn in real life.
    Start small and bite off only what you can chew (then chew like fck). It's easy to sit here and read about other people projects and think 'what if' or 'if only' at the end of the day there will always be someone with more of everything than you. More experience, more time, more resource...just... more...

    Use what ever profit measure you think is right. A fairly standard measure is 20%+ of total cost. But that's not always the case.
    I've developed in my own name, and in a straight up pty ltd (which had share holders of a trust and a company - which was owned by a trust which has a corporate trustee). There is no 'right' answer but lots of wrong ones.

    Blacky
     
  4. MTR

    MTR Well-Known Member

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    Best way to learn is basically by getting your hands dirty, I know more today than yesterday and I have made plenty of mistakes along the way

    I don't really know much about structures I just work with my accountant because he advices me on the various options and I am actually learning along the way. As far as what other investors should do, I don't know because our situation could be very different. Once again investors should make sure they do not ignore this one as it could have massive impact on profits

    MTR:)
     
  5. M-THIS

    M-THIS Well-Known Member

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    I hear this quite a bit. Is this total cost including or excluding interest?
     
  6. Blacky

    Blacky Well-Known Member

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    Total cost = every $ spent.

    No point in making $200k profit excluding interest. If interest cost was $210k.

    Blacky
     
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  7. Johnny Cashflow

    Johnny Cashflow Well-Known Member

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    Probably wants to tell people he is a developer
     
  8. Rockstar

    Rockstar Well-Known Member

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    Don't be selfish or ruthless. ie: balance what you are receiving with what you are giving and don't neglect building respectful relationships with your development team. We are providing much needed extra housing and employment to our towns and cities. It is important that the quality of the product and relationships are maintained to ensure your long term reputation is nurtured and maintained. Be honest and sincere but always ensure you are being very well remunerated for your efforts.
    Go in with a 'long term' attitude rather than a 'one off' venture to make some extra money on the side.
     
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  9. wombat777

    wombat777 Well-Known Member

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    Great post! Does that reflect some negative experiences or projects you've observed going sour?
     
  10. Rockstar

    Rockstar Well-Known Member

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    Yes Wombat, though it could easily reflect the outcomes of life in general for human beings. Life goes sour for varying reasons and usually they are caused by our own conditioned selfish and negative attitudes and reactions.
    I know I am not free of selfishness and it is important to keep reminding myself of the short opportunity we have on this planet to grow into someone who is more helpful, grateful, humble and considerate when interacting with fellow humans. I strongly believe this is the way to deeper contentment and peace of mind amidst the work and life challenges we all face.
     
  11. MTR

    MTR Well-Known Member

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    I agree and it would be foolish to ignore this as you will only be shooting yourself in the foot.
     
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  12. Perthguy

    Perthguy Well-Known Member

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    I think this is good advice and it is something I am trying to do with my first development. I am building up a team of trusted people I have been building relationships with for some time. I am hoping out selected builder will become part of the team.

    For investment properties, our goal is to create homes for people to live in, not just another generic budget rental. So far this strategy has been working with our properties consistently achieving higher than market rent for the area.
     
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  13. MTR

    MTR Well-Known Member

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    Need more than 1 builder on board, good idea to tender it out.

    What I have noticed is that when the markets are hot the building prices continue to rise no surprises, same as what happened in Perth when market moved and this is exactly what is happening in Melbourne today. Builders can pick and choose. I am currently seeing building costs in Melb anywhere from $1100 to $1600 per sqm. Need to be very selective.
     
  14. Perthguy

    Perthguy Well-Known Member

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    This is Perth. It depends if you are looking for a quality finish. For this job I interviewed 6 builders. I went to check out finished homes of all 6. 4 were rubbish, one was acceptable, only one was good.
     
  15. MTR

    MTR Well-Known Member

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    Really that is not good, I would have thought in Perth market it would be relatively easy to source a builder??
    Mind you I have not been playing in Perth market for over 2 years now.
     
  16. Blacky

    Blacky Well-Known Member

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    Who?
     
  17. Perthguy

    Perthguy Well-Known Member

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    It's easy to source a builder. It's more difficult to source a builder who does a decent job ;)
     
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  18. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    The term given to describe a failed developer is a bankrupt.
     
  19. MTR

    MTR Well-Known Member

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    Will now add a few more.....

    Picking the wrong the professionals ie architect, town planner etc.

    Now allowing enough timeframe

    Not allowing enough of a cash buffer

    Penny pinching, not getting the correct tax advice

    Developing at rear of an older property which could devalue your new build? Comes down to the area/suburb and what buyers want... homework
     
  20. LifesGood

    LifesGood Well-Known Member

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    Hey @MTR can you explain this one? Not sure what you mean?
     

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