[Podcast] Property Development 101: The Insider’s Guide to Building Your Wealth Fast! With Greg Hankinson

In our current fragmented property markets, with some locations performing and others languishing, many investors are looking to "manufacture" capital growth by participating in property development.

While the property development process can be very lucrative, it is not without some pain and considerable risk.

When all goes well, the results are fantastic, but if things go wrong, they really go wrong.

So today, I’d like to give you some insights into getting started on property development with Greg Hankinson, my business partner in Metropole Construction and director of the Metropole Project Development division.

Building a profitable property development portfolio with Greg Hankinson

A one-hour podcast episode isn’t long enough to teach you everything you need to know about how to become a property developer.

However, my conversation with Greg today can give you some important information that you need to know to make a start.

First, take a look at 10 rules to help make your property development project a success.

1. Get Your Ducks in a Row: Start with a clear plan. Determine whether you will keep the development as a long-term investment or sell some or all of the properties. Assemble a competent team of consultants, financiers, and legal advisors to support your project.
2. Understand the Property Cycle: Recognize where you are in the property cycle to plan your development for maximum returns. Property markets are cyclical, and understanding this can help you time your projects better.
3. Do Very Careful Pre-Purchase Due Diligence: Conduct thorough due diligence on the property, including zoning laws, council regulations, site constraints, topography, and potential easements or covenants. Don’t rely solely on real estate agents' claims.
4. Get Your Budget Right: Prepare a detailed feasibility study that is realistic and includes all potential costs. Be honest in your financial projections and include contingencies for unforeseen issues.
5. Don’t Overpay: Buy development sites at the right price to ensure profitability. Avoid paying too much upfront, as it can put you at an immediate disadvantage.
6. Prioritize Having A Good Team Around You: This can include a property lawyer, accountant, finance broker, architect, real estate agent, and project manager. Remember, you shouldn’t be the strongest person on your team. Gathering experts around you who know how to handle specific areas can go a long way toward ensuring your success.
7. Be Realistic with Your Scheduling: Understand the timelines involved in property development, including planning, construction, and approvals. Factor in contingencies for unexpected delays.
8. Be Meticulous with Your Documentation: Put everything in writing, especially when dealing with consultants and contractors. This helps avoid misunderstandings and costly disputes.
9. Design with the Market in Mind: Ensure that your project suits the target market, not necessarily your personal tastes. Understand the demographics and preferences of the area to maximize profits.
10. Avoid Overconfidence: Don’t let past successes lead to overconfidence. Stick to proven strategies and avoid overextending yourself, especially in a volatile market.

Remember to treat development as a business, not a hobby. Effective planning, professional advice, and a business mindset are crucial to success.

Greg and I also talk about some mistakes to avoid so you don’t fall into the trap that many beginning developers do.

• Failing to Start with a Clear Plan: Many beginners don't define their end goals from the outset. Whether you intend to keep the development as a long-term investment or sell the units, starting with a clear objective is crucial.
• Poor Team Assembly: Neglecting to assemble a competent team of consultants, financiers, and legal advisors can lead to significant oversights.
• Relying Solely on Real Estate Agents: Trusting real estate agents' claims without conducting thorough independent research can result in purchasing unsuitable development sites.
• Overly Optimistic Feasibility Studies: Being overly optimistic in financial projections and failing to include all potential costs and contingencies for unforeseen issues can lead to financial shortfalls.
• Overpaying for Development Sites: Paying too much for the land can immediately put the project at a disadvantage, reducing potential profitability.
• Unrealistic Timelines: Not allowing sufficient time for planning, council approvals, and construction can lead to delays and increased holding costs.
• Starting with Complex Projects: Beginners should avoid jumping into complex developments and instead start with simpler projects like duplexes.
• Lack of Meticulous Documentation: Not putting everything in writing when dealing with consultants and contractors can lead to costly misunderstandings and disputes.
• Allowing Emotions to Influence Decisions: Letting emotions drive decision-making rather than relying on sound business principles can lead to poor outcomes.
• Overconfidence: Overconfidence and taking on more than one can handle, especially without sufficient profit margins, can lead to significant losses.
• Not Designing with the Target Market in Mind: Designing a project based on personal tastes rather than the preferences of the target market can result in poor sales or rental performance.
• Not Understanding Different Finance Needs: Failing to recognise the different financing requirements for property development, such as the distinctions between residential and commercial loans, can complicate funding.
• Improper Tax Planning: Misunderstanding tax deductions and the costs that can be deducted can result in unexpected financial burdens.
• Selling Properties Too Soon: Selling properties prematurely without considering the optimal time for market conditions can lead to missed opportunities for higher profits.

By avoiding these common mistakes, beginners can navigate the complexities of property development more effectively and increase their chances of success.

Links and Resources:

Michael Yardney

Greg Hankinson

Join Greg Hankinson, Brett Warren and Lachlan Mirams at the Ultimate Property Development Workshop in Melbourne on October 5^th – find out more and reserve your spot here

Also, please subscribe to my new podcast Demographics Decoded with Simon Kuestenmacher – just look for  Demographics Decoded wherever you are listening to this podcast and subscribe so each week we can unveil the trends shaping your future.

Some of our favourite quotes from the show:

“Everyone seems to believe Melbourne's going to pick up. It's a good time to buy, not that we're trying to time the cycle, but you've got to be cognizant of the cycle.” - Michael Yardney

“One of the other big mistakes people make is underestimating the power of local councils and neighbours in deciding what you can put on your site.” - Michael Yardney

“So if you don't like how something's going, if you don't like how something's going for you, change it. If something isn't enough, change it. If something doesn't suit, you, change it. If something doesn't please you, you change it. You don't have to be the same after today, ever.” - Michael Yardney

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