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Does size matter?

Does size matter when you are starting out in property development?  The bigger the project the bigger the profit right?

Property Development is not easy. Its actually pretty darn tough.  It firstly takes a lot of time and energy to educate yourself on the subject, you then spend hours and hours looking for a site, only to then spend hours more researching it to then find out that the bank wont lend you $8m to complete your 16 townhouse development overlooking the city.  Where did you go wrong?

You thought size mattered.

Size doesn’t matter in Property Development.  Profit is profit.

At CCORP one of the things we often see is how new students rush into looking for the big projects, chasing the big money, thinking they can run before they can walk, before they can crawl even.  They set themselves up for failure from the start and some then turn their backs on this amazing industry before they have really given themselves a chance to see what they can really achieve.

Start small.  Take baby steps.

Start with something small, something “cheap”.  The objective is to build your confidence, put what you have learnt into practice and to get a deal under your belt.  Even if its $20k, $50k or $100k its still a profit.

One thing you need to still ensure is that you have a minimum of 20% MDC (Margin on Development Cost) just in case you encounter any issues along the way and being your first development this is a possibility, heck it’s a possibility even after dozens of developments.  20% MDC is bare minimum, do not compromise that.  Really you want to be looking for 25% MDC, 30% is even better!

So what is small? What can you dig your teeth into for this learning curve?

Redevelopment:

Find a property that’s in need of a facelift.  Nothing too drastic, just a bit of a cosmetic overhaul.  A lick of paint here, new kitchen bench top there, a modern bathroom and some new floors.  You will be amazed at the changes you can make.  Like any development, make sure you do your research.  Make sure that you will be able to get the right sales price after your redevelopment, and don’t over capitalize.

Subdivision:

You may even have one sitting right under your nose.  You know that saying, “diamonds can be found in your own backyard”.  Check out your local council for the minimum size block, if they say its 400sqm and if you have a property that is larger than 800sqm you may have a potential subdivision property.  If not start looking in your local area for property like this.  You may even get lucky and not have to move the current house that is on it to subdivide the back or front section of the property.

Duplex:

Starting with a duplex is a great step into development.  Here you are actually building something and you can really get the experience of dealing with a development site, builders, council, project managers and all.  This is a good step up and into development and here at CCORP we have seen many clients use this as their first step.

House and land packages:

This is an amazing and simple strategy, and one that can produce profits with very little monetary contribution.

All of these strategies can provide you with a profit.  The outlay and risk is much smaller than jumping into a 16 townhouse or 100 apartment development on millionaires row.

Property development does not have to be hard or scary, you just need to take it in your own stride, take baby steps, crawl before you can walk, walk before you run.

Size doesn’t matter. Profits are profits.

If you would like more information or help on any of these strategies contact CCORP on 02 9371 4799 or book into one of our upcoming property development seminars by visiting www.ccorp.com.au/events/

If you are a current ProDevelop student and would like assistance with these strategies please contact support on support@ccorp.com.au

Kylee van der Torre

General Manager – CCORP