Developer vs Investor

[MTR]

Not sure whether to post in this section...

Just curious someone mentioned the other day that I was a developer not an investor, I thought this was strange as I thought I was both.

I consider developing property as a business involving projects such as renovating, improving raw land, builds etc.

A property investor is someone who is purchasing property with the intention of earning a return on their investment (purchase), either through rent (income), the future resale/s ...

My point is you can be both, develop property with the view of holding some stock which will generate a return, best of both worlds.

If you develop property and need to sell all your stock for income today then you are not a property investor you are running a business??

I have met a couple of developers who hold nothing, I think this is like cutting your nose despite your face as one of the principles to real wealth is accumulating assets. What do you think??

MTR

 

[westminster]

It depends on how you use the term.

There is the ATO sense and then there are the other permutations.

I call myself a developer because I do developments. However because I hold a lot people could call me an investor.

As to the ATO I'm probably a developer as I do it all to make money but we are still sorting out that issue and categorising company vs trust vs own name.

 

[Ace in the Hole]

I'd guess developers are in the business of developing to make a profit, it doesn't matter if they never keep any of their completed product.
Maybe they just want to keep ramping up the profits until they can do a mega development and then hold some for their end goal.

We've developed all 13 of our IP's, and hold them all.
I would not consider myself a developer, as I have not had the intention to ever sell for anything for profit, don't need the cashflow from developing so can service the accumulation of these assets.
So generally would consider myself an investor at best, but closer to just a gut feel gambler really.

 

[nhg]

If you weren't doing developments would you be able to live your lifestyle?

If not then development would be your job I imagine.

That said, I think developers who don't hold stock are just doing a job, the investment part is when they hold onto their assets for any period of time (as in not flipping it straight away for profit).

 

[CHAOS]

?
Investor = buy IP rent as is
renovator = investor who buys and adds value to existing building / buildings
developer =someone who subdivides land, adds a second dwelling, they make significant change to some aspect of the land component

 

[Blair007]

?
Investor = buy IP rent as is
renovator = investor who buys and adds value to existing building / buildings
developer =someone who subdivides land, adds a second dwelling, they make significant change to some aspect of the land component

I Don't agree with that, my first purchase was my PPOR, I've subdivided it and building at back, retaining both. I definitely don't see myself as a 'property developer' just as a property investor that uses developing as there chosen investment strategy.

To be classified as a property developer i think it needs to be a full time job and you would be selling the majority of your developments.

 

[Rockstar]

What do you think??

I think you are over thinking who and what you are.

More important is why you are doing it and where you are going. Who you are helping and how to improve the services you provide to society.

Not sure whether to post in this section...

Better shift over to Investor Psychology ............... or maybe not since you are partly a developer?

You're a misfit like me. Keep up the good work.

 

[MTR]

We are all misfits on SS..... but I can live with that

More important why you do it absolutely, and also that you enjoy doing it otherwise it is no more than a JOB and it wont be long and you will be over it.

Cheers
MTR

 

[Ideo]

I'm not an investor. My investments were sold to pay for land for developments.

I'd say part time developer. Even though I don't do any actual construction, just value add through DA or rezoning.

 

[PB007]

i reckon it all relates to how the ato see you with regards to gst and when you sell your development.

if you're selling at completion, you're called a developer paying and claiming quartely gst on construction and gst on sales.

if you keep development and rent, you can't claim quarterly gst on construction as you're deemed an investor.

so i agree you can be both.

correct me if im wrong, just info i have gathered...

 

[Aaron Sice]

i deal with the definition split every day.

in my professional opinion, an investor is someone who puts up cash/equity for a return in either product or profit.

a developer is the person who develops the land with either their own, or someone elses, cash or equity.

the developer gets their hands dirty, the investor does not.

but the developer can invest in their own product; and in my opinion, are a much more respected breed.

 

[HiEquity]

If you develop property, whether to keep or sell, then you are a developer.

Development is a form of active income - you need to put in the hours to get your DA, organise designs, contracts and builders, organise finance drawdowns, deal with planners / trades / architects, oversee the build and go through the punch lists and all the rest during handover. You should be able to work out your hourly rate - profit / hours required.

Once you have built the thing and it is comfortably leased out to a long term tenant, then you have transitioned to being an investor. Unless you then proceed to develop another one of course.

Myself, I'm a pure investor. I do enough development work in my day job that I don't want to do any more in my own time. Just give me passive cash flow please! It's hard enough work for me to just buy a passive asset and organise the finance etc. Doing development work for houses or shops etc just isn't how I want to spend my time, even though I would imagine it would be more lucrative than what I am currently doing, if carried out at sufficient scale.

 

[MTR]

i reckon it all relates to how the ato see you with regards to gst and when you sell your development.

if you're selling at completion, you're called a developer paying and claiming quartely gst on construction and gst on sales.

if you keep development and rent, you can't claim quarterly gst on construction as you're deemed an investor.

so i agree you can be both.

correct me if im wrong, just info i have gathered...

Yes, you can do both, IMO makes sense to go this way, capture potential growth and also for income after selling a couple reducing debt on the property you hold.

As far as ATO ruling goes it appears to be a very grey area, my accountant has advised that if you are making $75K pa and sell product you are seen as a developer, if you hold the property it needs to be held for 5 years if you sell prior to this you will incur GST.

I think its lots of work getting it to the stage where you can actually build, but what I love the most is the high I get when I secure a development site, this is IMO the most challenging part, anyone got any ideas on beating my competition

 

[FelixL]

my take on this is

investor mainly use money to earn money
developer mainly use time/skill to earn money

developer that also invest are like investor with rocket boosters

 

[Blacky]

According to the ATO it is very difficult to be both.

As a developer you pay a lot more tax (GST and CIT). Therefore they are quite aggressive in trying to determine you as a developer.
Once you start holding stock as a developer, or selling investment properties as an investor who developed, things can get pretty messy pretty quickly.

It is why a lot of developers sell the stock - as it keeps things cleaner from a tax perspective. Albiet they may hold investments in other entities.

Blacky

 

[Tim86]

I think this is like cutting your nose despite your face as one of the principles to real wealth is accumulating assets. What do you think??

MTR

I think the saying is like cutting your nose to spite your face...

Don't worry though I used to think another phrase was "for all intensive purposes" instead of "for all intent and purposes". Oh boy how silly I was back in the hay.

 

[MTR]

Yes, I can see why they do this, tax etc. so complicated.

I think sometimes there will be no choice, if the market turns, there are developers that get stuck with stock because they can not offload until the next cycle, for example Balga was flooded with villas/units. Developers started offloading over the last couple of years as prices started moving.

 

[Ausprop]

As far as ATO ruling goes it appears to be a very grey area, my accountant has advised that if you are making $75K pa

turning over, not making. pretty easy to do when it comes to real estate