Property>Property Development

It’s certainly no secret that with the right strategy investing in property is a very sensible investment decision when building wealth for the long term.

However 40 years ago with the absence of the internet you could be excused for feeling ill-informed and scared about the prospect of purchasing property.

Fast forward to today and we are exposed to copious amounts of courses, blogs and video content to breed knowledgeable and confident property purchasers.

So now it looks like we have a new kid on the block which is generating more questions than answers, but with the right strategy will in fact generate even bigger returns. This kid is called Property Development.

Let’s be honest, you don’t need to drive very far in Melbourne’s inner suburbs until you pass a new block of townhouses or a demolished site paving the way for a new apartment high-rise.

However we are still meeting clients with the ability to add Property Development to their investment strategy but haven’t felt like they had the support or the knowledge to explore this avenue in the past.

So first off let’s dive right in and discuss the factors behind why it’s a great time to start benefiting from Property Development.

1

Becoming a Property Developer can open the door to numerous additional incentives your average property investor won’t get.

The first benefit is the 15-20% investment savings developers acquire compared to the actual market cost.

This is because you are tapping into the wholesale end of the market – potentially avoiding costs associated with developers margin, real estate agent commission, GST, marketing and other costs associated with buying property.

2

With the right strategy and the correct timing, excellent profits can be made when selling developments and this can all be achieved with short and long term strategies.

Developers who build a business model can take these profits to start their next development and scale their portfolio.

3

As a result of the profit margin you will benefit from as a developer, you won’t need to borrow as much money as you would if you were to buy two (or more) properties of the same type, as completed products. The flow on effect of this is lower interest costs, meaning you are in a more cashflow positive position at completion.

4

Owning new properties currently gives you access to years of depreciation allowances (as of 21/02/2019) which is going to significantly improve your after tax returns. You can read more about recent changes to depreciation deductions.

5

If you decide to hold on to some of your properties, you can expect a higher rental yield in the first few years as a result of the profit margin and lower interest costs we mentioned earlier.

Now let’s take a breath and revise some of the key benefits to becoming a property developer.

1. Significant investment savings, 15-20% below what the retail market are exposed to (i.e. your everyday property investor).

2. With the right strategy, substantial profits for both short and long term outlooks.

3. Developer profit margins means lower interest

4. Access to the maximum tax benefits

5. Greater rental yields in the first few years

Does any of this excite you?

If it does we want to hear from you.

With the correct strategy, the right location and various other factors we know Property Development can be the perfect investment for long term security.

We encourage you to pick up the phone and contact Michael Williams or Michael Sheppard at The Hopkins Group on 1300 726 082.

They will be happy to lock in a time to discuss your circumstances and determine if the Property Development path is right for you.

Our advisers have built an end to end solution to guide you through the development process – from financial feasibility and site acquisition, right through to townhouse build and end sale or ongoing property management.

With our experience in financial services and property investment, we can guide you through the development process to ensure a profitable financial outcome.

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Disclaimer: The information contained herein is general in nature and does not take into account individual situations, needs or goals. It should not be relied upon and persons should satisfy themselves through independent means that any decisions based on this material are appropriate. We recommend that you consult with your adviser who will be able to make a recommendation based on your specific circumstances.

Have you ever passed a property development in your neighbourhood and thought to yourself ‘I could do this’? Or perhaps one of your friends has undertaken a development and you think you’re just as capable as them? Despite popular belief, developing property is a serious endeavour; it’s not for the faint hearted. But given the right foundations, it’s an incredibly rewarding opportunity.

The first step to property development is understanding where to start. There’s preparation that needs to be done, decisions to be made, people to contact and money to spend. Fundamentally, you need to understand the different approaches you can take when it comes to developing property. It’s crucially important to kick off from a point that suits your availability, finance, abilities and experience in order to achieve your goals.

The hands-on approach

If you think the hands-on approach is up your alley, you’ll need to wrap your head around a lot more than you think. Before taking any steps, you must educate yourself on property. This includes the markets, economics, town planning, finances, marketing of real estate, construction processes and more.

You also need to recognise and understand the roles of each party involved in the development. Some of these parties include:

• Accountants
• Solicitors
• Banks and/or finance brokers
• Insurance brokers
• Real estate agents
• Project managers
• Architects
• Interior designers
• Town planners and council planning
• Arborists
• Land, geotechnical and quantity surveyors
• Neighbours
• VCAT
• Builders and building surveyors
• Project marketers/advertisers

Considering all the people you will be in contact with regularly, strong interpersonal and negotiating skills are a great asset to have.

Taking on a development endeavour on your own is not an easy process, in fact, it’s far from it. If you have little experience in property development, this is not the option for you.

Joint venture

If the hands-on approach sounds enticing, but investing alone doesn’t, entering a joint venture with one or more partners may be the option for you. Be it with family, friends or a co-worker, joint ventures allow you to split the workload, share in the risks and rewards, and combine your resources and experience.

Employ a project manager

With a project manager, you can involve yourself in the development project to the extent that suits you. That being said, you’re employing someone to rely on – they’ve got the reigns. You may or may not like that concept, but there are obvious benefits that come with a project manager; their connections, experience and understanding of the entire process.

Invest in a syndicate or managed investment scheme

If you’re interested in property development, but don’t have the funds to take on an investment alone or among friends, you might’ve looked into investing in a syndicate. Syndicates are groups of investors who need additional capital and resources to undertake their development schemes. They will manage the development and organise the requisite expertise while you sit back and share in the financial risk.

Syndicates get you into the market faster and your risk is diversified. It is more of a passive form of property development and this means you’ll have less control over the process.

Buy shares in a development company

Buying shares in a publicly listed or a private company would be considered the most passive form of property development. It’s a great way to get a peek into the world of development without investing much time into a project.

How we can help

Engaging with a company like The Hopkins Group gives you the opportunity to be involved in the property development process, with the benefit of having a trusted adviser on your side. It combines a bit of each of the methods above to give you comfort in the process.

The Hopkins Group has developed an end-to-end solution to guide you in the development journey – from financial feasibility and site acquisition, right through to build and end sale or ongoing property management.

With nearly 40 years of experience in financial services and property investment, our job is to reduce the risk of being a property developer.

The strength of working with us is that we keep it all in-house and can manage the project for you from start to finish, unlike other service providers who will tap in and out depending on their area of expertise. Our team includes advisers with experience in town planning, design, financial planning, accounting, finance and property acquisition, sub-division and construction. You can have peace of mind knowing we’ll take the stress out of the planning process and explain the details along the way.

We have broken down the complicated process of property development and simplified it into six key stages.

• Feasibility
• Design
• Planning application
• Build
• Settlement
• Return on investment

We have also developed a stringent due diligence process to ascertain whether or not a venture will provide a return on its investment. We want the best for our clients, and will only recommend purchasing a site and proceeding with a development based on certain criteria.

What’s the first step?

As professional advisers, the most important role we can play is to make sure any of your ideas or proposed ventures are financially viable. We can meet with you and discuss your goals and objectives and align them next to your current financial situation. Get in touch with our team today on 1300 726 082 to discuss your property development dreams.