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The Benefits of Becoming a Property Developer

Many investors have become wealthy through property investment, very wealthy. But the real profits in the property market are at the wholesale end – in property development.

So let’s look at some of the benefits of becoming a property developer:  

When you become involved in the property development process (and we discus this in a series of article son this site) you could benefit in the following ways:-

1. Savings – rather than buying properties at retail, you can acquire your investments 15- 20% below their market cost.  This is because you don’t pay developer’s margin, agent’s commission, GST, marketing and other costs usually included in the price of buying real estate.

2. Profits – at the right time in the property market you can make good profits selling your development projects.

3. Easier finance – once you have completed your development project you can approach banks to re mortgage your properties. They will usually lend you 80% or more of their retail value when completed.

In many instances this is about what it cost you to develop your project and you can take out your initial equity. In other words it’s a bit like borrowing 100% of the cost of the property or having “nothing down.”

4. Leverage – Following on from the above point you get massive leverage when you have completed the development project. Often you control a substantial property or even 2 or 3 townhouses with little capital in the properties as equity.

5. Tax benefits  – owing new properties gives you all the benefits of depreciation allowances giving you a great “after tax” return.

6. Higher rental return – your tenants will pay the retail rents. They won’t know that the cost of your property was substantially below the retail price. This means your rental yields will be higher than for someone who bought their property at market value.

7. Security – if undertaken correctly, property development can be very lucrative. If you buy your development site well your investment will always be underpinned by the security of real estate in a prime position.

All these benefits of becoming a property developer allow you to grow your property portfolio faster and safer than most investors. This is of course a strategy that I have used personally to make fantastic returns on property.

Most people think that property development is too hard and only suitable for professionals. In fact most don’t have the time, knowledge, skills or contacts to become developers.

That’s where Metropole can help you.  Metropole organises everything and takes much of the worry out of investment by assisting you with all the development expertise from concept to completion.

Metropole’s Property Developer Program allows investors to safely develop residential property and become an “armchair developer.”

You can potentially make a significant profit by developing a residential site and capturing the increased equity and become a property developer without getting your hands dirty!

Of course there is always two sides to the coin – clearly there are significant potential risks if you get involved in property development. Read the other articles on property development on this site and we’ll walk you through the process, and further explain these risks and the potential rewards



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'The Benefits of Becoming a Property Developer' have 4 comments

  1. Avatar for Property Update

    March 6, 2012 @ 7:24 pm bill

    To be a property developer, should we set up a company first?

    Reply

    • Avatar for Property Update

      March 6, 2012 @ 10:27 pm Michael Yardney

      Bill
      Before you get involved in any sort of investing, and particularly property development you need to get accounting advice for the best structure for asset protection and tax safety. It’s critical to see your accountant early on

      Reply

  2. Avatar for Property Update

    March 30, 2013 @ 1:29 pm Rourke

    Hi Michael,

    I am a designer looking to become a property developer and was wondering if you could suggest or point me in the right direction to get hold of good information. I have enjoyed reading your articles and have found them very informative. I am keen to make property development my full time occupation and will be spending plenty of time researching of the coming months before I do so…

    Kind regards,

    Rourke

    Reply


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