In this third installment of the Property Development Series, Bryce walks us through the professionals you need on your side throughout your property development project.
The property development process has become more complicated over the last few years due to the increased influence of the state government, local councils and various interest groups in the town planning process.
The building process has also become more complex.
A smart developer understands that they can never know everything there is to know in order to produce a profitable property development.
In order to complete a successful project you will need to assemble a highly skilled group of people to work with, and it is your responsibility to oversee the entire process with them – to be the producer of the project.
Your team’s extent and nature will depend upon the type of project you are involved in and the local political climate in which you intend to work.
As the developer, you will make all of the final decisions based on the qualified input of your expert development team.
Financiers of your project will also need to know that your development team has what it takes to manage the project to completion and will evaluate this particular element of your project carefully and critically.
A property developer who has an experienced team on their side with a proven track record gives your backer a great level of comfort.
It is essential to have a strong, experienced and responsive team of professionals to assist in optimizing your development opportunities.
It is also important to have the right team for each of the particular projects you undertake.
For instance, it is unwise to engage an architect who may be skilled in commercial and industrial development to be involved in a residential project.
Furthermore, with the increasing complexities surrounding town planning, it is more important than ever to have an architect who is familiar with the regulations and requirements of your particular municipality.
Depending on a project’s complexity, it is likely that some or all of the following team members might be required;
- Real estate agents
- Town planners and Urban designers
- Property market researchers
- Engineers – civil, structural, traffic, acoustic, environmental specialists
- Architects, designers or draftsmen
- Landscape architects
- Interior designers
- Building contractors
- Project marketing specialists
- Development managers
- Project managers
- Construction managers
Good planning and great design actually add value rather than cost you more in the long run.
Therefore I strongly suggest that you avoid cutting corners or costs when choosing the correct team.
Competent experienced consultants can help maximise your project’s potential, decrease construction blow-outs and add to the project’s appeal and marketability.
As stated earlier, each project you undertake will require a different development team, but let’s take a closer look at the following players who will generally have a hand in most projects you complete.
You – the Property Developer
You’re the leader who puts it all on the line to invest in a development project and as such, the buck stops with you when it comes to assembling and coordinating your development team and making the entire project a success.
Development Project Manager
If you are just a beginning developer, you can leverage of the experience of a proficient project manager who will have the industry knowledge and contacts that should take much of the risk out of your development project.
Having a legal expert who is familiar with real estate development and the town planning process on your team will usually save you many times what you pay them.
Lawyers can also be responsible for preparing the various documents and contracts required during the development process.
This includes the legal structure in which development occurs as well as documentation for purchasing the property, financing the property, consultant services, construction and leases.
Your planner should be familiar with relevant State Government planning policies as well as local government regulations.
Their primary role is to ensure the proposed project complies with planning regulations and assist in obtaining the permit through the maze of the approval process.
The planner must convince the local authorities of the project’s merit in order to obtain approval for it.
With the increasing bureaucratic red tape surrounding planning permits in recent years, town planners are often required to help write the application documentation.
They should also work closely with the architects or designers of your project and warn you of any areas in which your proposed project does not comply with development regulations.
A number of different engineers may be employed on your development project. Geotechnical or soil engineers do a soil test to establish the site conditions.
The structural engineer’s role is to develop a structural design that is functional and cost effective to build and civil engineers may design the drainage systems.
You can read more about the roles of each engineer in the Team Series.
While the property developer will contribute some equity to their project, almost all projects rely on a large amount of funding from outside financiers.
Financing development projects is very different to financing homes or investment properties and you must choose a financier familiar with the development process or find a mortgage broker who understands the development process.
Your accountant will be an important part of the team and are required to ensure you are setting up the correct structure and maximising your profitability, whilst minimising your tax liabilities.
GST, and a distinction between capital and operating expenses are critical issue in financial accounting for developments and your accountant must understand the intricate accounting aspects of the development process.
The builder is obviously a critical part of the development team.
Considering the unique nature of the town planning process it is likely that your particular project has never been built before.
Therefore you will need a builder who is able to work closely with the rest of your development team.
Real estate agent
An agent who will be leasing or selling your property should be brought in as an important part of your team early in the piece.
They should give you feedback on the marketability of your project during the design phase, as well as estimates of sale prices to enable you to establish your feasibility.
You need to find an agent who is active in the area where you are going to develop your project and is experienced in and successful at selling the type of property you intend to build.
If you have a good relationship with a marketing agent you should listen to their advice.
After all, they are the ones that are at the coal face with the potential purchasers or tenants all the time.
When the agent eventually gives you a marketing proposal look for the following…
- The agencies experience in selling this type of property prior to construction
- People in the agency who will work on your project,
- Their feeling for the market in general and specifically for your project, sale values and rental values for similar properties.
Also consider their proposed marketing methods, target market and proposed fee.
In general the agent’s fee will be around 2 per cent of the sale price plus GST.
It is not advisable to be greedy with agents; you want them to work hard for you so do not try to cut their commission.
A Property Strategist will oversee the project from the pre-purchase stage all the way to completion.
Their role is to help you research, locate and negotiate the purchase of property; maximise investment returns through property investment management; and understand the finance maze.
A great place to start is with Metropole Property Strategists – where the experienced team can offer a more structured and predictable approach to property development.
Remember, the overall success of your project hinges on your ability to delegate various responsibilities to the right team of professionals.
At the end of the day, a developer, like a movie producer, is only as good as the cast he or she assembles.
In the fourth installment of the series, Bryce Yardney, Property Development Specialist at Metropole, walks us through the steps involved in the entire process.
If you want to learn more about the property development process you may be interested in How To Get Started in Property Development