Article provided by Property Development Workshops pty ltd
There are basically 3 main paths that investors take on their journey to creating wealth through property. They would usually:
- buy investments properties and rent them out, often using a negative gearing strategy and if they have bought wisely and wait long enough, these may result in positive cash flow hence providing the investor with both capital gain and income
- buy property that can be fairly easily renovated to add value and they would then sell for a small profit or rent for a higher yield that would otherwise not have been possible if they had not renovated, hence gaining an immediate uplift in equity as well as a maximising their rental returns, and finally
- take a serious step towards wealth creation by doing property development.
Property development is undoubtedly the most profitable wealth strategy the investor will ever take and even doing just one can return literally hundreds of thousands, if not millions of dollars. A word of caution however. With the high rewards come high risks and property development should not be attempted without thorough due diligence, education and support.
So what is property development?
According to the Collins English dictionary property development is:
“the business of buying land and buildings and then making improvements to them so that their selling price exceeds the price paid for them”.
Sounds simple enough! So why aren’t many more investors partaking (and making millions!)?
Barriers to entry
Well, from my 18 or so years in the property development industry and consulting with potential developers, I have found these to be the most common reasons cited:
- Not enough money/equity
- Not enough experience
- Not enough support
- No knowledge of the industry
- Perception that PD is too risky
- Don’t know where to start
- Fear of failure
These are very valid reasons. Indeed this industry has one of the highest failure rates in Australia. However, I would argue that there is one over-riding reason for this. And it’s a lack of property development education.
All of the barriers to success listed above can be addressed by you obtaining the right education and the blue print to apply the knowledge.
Yes, having the education is even more important than the money. Money can always be raised if you put together a robust scheme that “stacks up”. Indeed, there are many ways to raise funds for development including notional equity, land owners equity, external investors, bank etc and the returns for all stakeholders can be exceptional. On the other hand having lots of money and no knowledge on how to go about doing a development is going to be more of a curse than a blessing. Throwing money at a bad deal makes things worse not better.
In my opinion, this is the reason why passive property investors can make the best developers. They are generally fairly risk adverse, they have a passion for creating wealth through property, they have a general knowledge about the value of property and very often they “know their patch”. All these factors augur well when considering whether to do property development and ultimately the level of success.
Thankfully there is somewhere to obtain practical and realistic property development knowledge and education. And at the risk of slipping into a sales pitch, Property Development Workshops
offer 3-day courses in Sydney and Melbourne. Yes, these are educational courses only and there is no selling of investment properties and the like. If you would like to know more and whether property development is for you, we do offer a FREE Introduction to Property Development Course
where you will learn about such things as:
- ‘De-mystifying’ the subject of Property Development
- Identifying the 8 Elements that make up Prop Dev
- 7 Phases of the Property Development Process
- Risks in property development
- Overcoming barriers to success
- What Profits can I expect-Case study
- Is it for me? Next steps to Success
More information can be found on our website www.propertydevelopmentworkshops.com.au
Jim Castagnet is an investor, developer, educator, soon to be published author and founder of Property Development Workshops Pty Ltd
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
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