Off the back of a successful The Block TV series, there has been renewed interest for would-be developers to throw their hand in for to start their own property development journey. The hype of the show and the location of Brighton added to some excellent results being achieved. However, talking to several local real estate agents in the Bayside area, they all agree that the average Joe won’t achieve the same effect without the juggernaut of the block behind them.
The Block program highlighted how design could influence result. Undertaking any development requires the developer to set your budget early and decide on the level of finishes your develop aims to use. Price and cost accordingly. Who are you aiming to sell too and how big will each house or apartment be?
Twists and turns on the yellow brick road
The property development journey that for many will have twists and turns, success and maybe some frustration. The rewards are there but so are the land mines. Property development from day one planning is a critical essential element. Planning from start to finish is critical to achieve a profitable result, reduce the risk and make a profit.
The Cost of a Project and its Profitability should be the number of question to ask before starting the journey. Its something you should understand and a financier will ask? Profit allows you to continue to the next one. Breaking even or just making a wage while is a great learning experience should not be your desired result,
For some, the journey starts with the block. Often it’s the family home. Let’s knock it overbuild two units flog one and live in the other. Oh you mean I need to pay tax and gst. Oh, the bank is unsure about lending us the money! What can go wrong?
Planning the development journey can eliminate some of the risks. Look at what can be achieved. Talk to those who are in the know, real estate agents, town planners, accountants and financiers. They all know little things that make a difference to the end profit result.
Seven vital questions in the property development planning process:
- What is the purpose of the development of, i.e. income or investment
- Does the property lend itself for development
- Will you sell the units developed
- How does the profit on the development stack up?
- What are my tax obligations under the development
- Have your considered the style and how big will the developed units be?
- How will the project be funded
Do not pass go without first have a clear plan. Once development starts changing intentions, the midway will create potential profit leaks. Make sure you do your sums . We then suggest that we sit down and discuss your workings. We will stress test your plan. See if it looks right and give you the heads up if we think you have missed something.
How we can Help you!
There are several things your Property Development Accountant will be able to assist you with
- Making sure the development adds up and that there is sufficient profit vs risk
- Looking at the gst, tax and stamp duty issues
- Assist you in managing cash flow aspects of the project, finance and how the flow of funds over the project.’
We would love to discuss your options ideas and plans . We can also explore with you how you can continue beyond your first project to make property development a successful business.
Factors that can impact on the profitability of your project include:
- Cashflow and finance factors
- Lack of planning
- Unknow easement issues
- The soil
- Supply and trades
- Indecision and changes
- The weather
These factors can not only slow the project but also cost you big dollars. May 2021 take you down a yellow brick road, and we wish lots of good fortune and good luck with your project.