The benefits of becoming a Property Developer
13/03/2019 Jon Archer, Marketing Manager
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.
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.
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.
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.
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.
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.
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.
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