But first, let’s take a look at what property development is and what the role of a property developer is.
Property development, also known as real estate development, is the process of buying, improving, and selling buildings and land. It also includes arranging for new buildings to be built. Property developers are the individuals responsible for coordinating all the activities involved in developing real estate. From buying land, financing real estate deals, building or outsourcing building projects, creating a business plan and strategy, doing feasibility studies, and overseeing the whole process of development from the beginning to the end.
Getting started as a property developer
As you can see, a property developer will require a large set of skills and industry knowledge in order to be successful in this sector. As they’ll be overseeing all aspects of the development, it’s important for property developers to stay focused and do their due diligence so that they may make wise decisions and not get caught up in developments that will take years and bleed them dry, money-wise.
Moving into the property development sector is an exciting prospect for most, but it’s important that you start small and take the time to understand the processes involved and get to learn the ins and outs of the industry before committing to such a big investment. Below we’ve outlined some of the key areas that will be needed in order to get started in property development, the right way.
- Focus on the development of one project at a time, at first
- Start with a develop-to-sell strategy to build capital and experience
- Partner with reputable developers to learn from them
- Contract or partner with first-class development team members
- Make sure you know what the industry is about
- Arrange investments
- Keep contact with suppliers
- Understand your target market
- Decide on your property sector
- Build a reliable team
We cannot stress this enough; it’s important to start small and slowly develop your property portfolio as you go so that you are not caught off guard by bad investments. Take your time to get to know the industry and reach out to other property developers to pick their brains before you begin on your journey. After all, knowledge is power and the more you have, the more equipped you will be to start on your journey into property development.
It’s a team effort
Property development requires an array of professional skills in order to complete a project successfully. From architects to lawyers, you’ll need to build a team you can trust and rely on, as they are key to your success in the field. Below are the key members you will need to work with.
Architects
Arguably the most important team member you will work with, you’ll need an architect from very early on to help with the planning of the development. The architect will also manage other technical professionals and lead them along during the development.
Real estate agents
Another key player in the development is the real estate agent you choose to work with. They will not only be key in the sale of a development, but they will also provide key insights that you will rely on to conclude the initial feasibility. They are experts in real estate and can help guide you through the process, which is why you need to be sure you team up with a reputable real estate agent that can help you throughout the process.
Quantity surveyors
A good quality surveyor is key to any development project as they play a vital role during the due diligence process as well as during the duration of the development. They will track and control expenses and resources to ensure that the development does not go over budget and that quality work is still delivered.
Town planner
The town planner you choose to work with will be involved in your planning process and offer valuable insights into what the planning commission may or may not approve. Having these insights before you start planning a development is invaluable as it will save you both time and money in the long run, as you will not plan an entire development that turns out to not be feasible in the end.
Attorney
Hiring an attorney that is experienced in developments early on in the development process is critical to all property investing. They will advise you on the application processes and applicable laws and ensure that every ‘I’ is dotted and every ‘T’ is crossed so that you can be confident that no unlawful issues may arise during the development process.
Engineers and construction professionals
The forces behind the entire property development, the engineers and construction professionals you choose to work with, can, in fact, make or break a project. Having skilled, reliable, and dedicated professionals responsible for the completion of the development will go a long way in ensuring that your development is completed on time, within budget and to a high standard.
The 3 main strategies that property developers can adopt
When it comes to property development, there are three main strategies that property developers can adopt. Depending on your goals, cash flow, and experience as a property developer, you can either invest in properties to sell, hold, or adopt a hybrid exit strategy.
Developing to sell
For first-time property developers, developing to sell is a great place to start. This way, you’ll build up both capital and experience. The goal is to sell all your interest in a development and walk away with a profit which you can then use to develop future projects.
Developing to hold
If you’re a developer who doesn’t need a big lump sum of cash straight away, then developing to hold is a strategy you can adopt. The sole intent of this strategy is to hold on to all the units at the end of the development in order to generate a rental cash flow.
Hybrid exit strategy
This strategy combines the best of both worlds and is also known as developing to break even. This strategy entails selling enough of the development to recoup all the development costs and then renting out the remaining units in order to generate a rental cash flow.
Final words
Property development is an exciting career path that offers ample opportunities within South Africa. Get to know the ins and outs of property development by signing up for an online property development and investment course, where you’ll gain the practical skills required to break into the property career space.
