Developers what have your learnt so far??
- Thread starter MTR
- Start date
This is a great thread - i'm pretty eager to learn a whole lot more about this with view to having a go at it over the longer term. On the face of it, it seems like a big and stressful co-ordination activity between the different parties involved in producing the final development. Developer seems to manage the whole process.
Taking some of the lessons learnt a level up, would be interested in knowing the first steps some of you took and whether there are certain people characteristics that the more established developers have. E.g. good negotiators, etc?
Will spend a long time researching and talking to people over the next few years while accumulating the capital required.
Taking some of the lessons learnt a level up, would be interested in knowing the first steps some of you took and whether there are certain people characteristics that the more established developers have. E.g. good negotiators, etc?
Will spend a long time researching and talking to people over the next few years while accumulating the capital required.
Having the right people to work with is very important, specifically a good draftsman. I am a builder myself and do my own developments so I know the importance of a good design.
I am currently quoting a job for a newbie developer, 2 town houses side by side. - Their 'cheaper' draftsman has designed their units to sit at a height that requires a bit of fill.
-The engineer designs according to the plans received and he designs a P class slab to suit the fill.
-P class slab is largely more expensive than a normal slab as it is almost twice the work.
3 phone calls by me today and we will be able to lower the height of the building and go to a normal slab and save around $15k for the developer. No one else picked up on it, designer, engineer, developer, other builders...
Helps to have a switched on team working with you.
Tim
I am currently quoting a job for a newbie developer, 2 town houses side by side. - Their 'cheaper' draftsman has designed their units to sit at a height that requires a bit of fill.
-The engineer designs according to the plans received and he designs a P class slab to suit the fill.
-P class slab is largely more expensive than a normal slab as it is almost twice the work.
3 phone calls by me today and we will be able to lower the height of the building and go to a normal slab and save around $15k for the developer. No one else picked up on it, designer, engineer, developer, other builders...
Helps to have a switched on team working with you.
Tim
Lesson from hundreds of clients and their profits / CGT etc....
1. The amount of tax on the profit is usually less, not more than feared when the client has asked right questions early
2. The issue of a few hundred $ of planning advice is always well regarded later when profits are calculated.
3. Those who fail to plan structure etc almost always regret their choice and pay for it.
4. Pay just the right amount of tax but don't overpay through assumptions and flawed matters from bypassing advice.
Personal observations:
- Arguing / negotiating over a few thousands dollars is immaterial in long run
- A cheap solicitor does the job of a expensive one (conveyancing). Save the money and use a great one if something goes wrong.
- A cheap tradie never does the work of one with a good attitude. Pay someone enough to do a good job.
- Never have regrets from walking away ie a bad inspection, price etc
1. The amount of tax on the profit is usually less, not more than feared when the client has asked right questions early
2. The issue of a few hundred $ of planning advice is always well regarded later when profits are calculated.
3. Those who fail to plan structure etc almost always regret their choice and pay for it.
4. Pay just the right amount of tax but don't overpay through assumptions and flawed matters from bypassing advice.
Personal observations:
- Arguing / negotiating over a few thousands dollars is immaterial in long run
- A cheap solicitor does the job of a expensive one (conveyancing). Save the money and use a great one if something goes wrong.
- A cheap tradie never does the work of one with a good attitude. Pay someone enough to do a good job.
- Never have regrets from walking away ie a bad inspection, price etc
Design - Use a creative draftsman and not one based on price (within reason of course) because it could mean the difference of getting that extra allotment out of the block. Also, if you can find a draftsman that has building/construction as a background it will also assist in ensuring that the design in going to be cost effective to build.
Specialists - There are many people we have used who are experts in their field and without them, I doubt we would have gotten half our developments through council. People from Planning Consultants to Traffic Engineers, they can all be highly valuable when council knock you back on your initial plans. We had a development recently which had previously been purchased by another Developer and they struggled to get 5 homes on there. Council knocked them back. We took on the challenge, council knocked us back too but with every knock back, we employed the services of various people to address the issues and come up with solutions and eventually, we have managed to not only get the 5 but an extra allotment (i.e. 6) when previous developers couldn't even get the 5.
Standard sized windows - Whenever drawing up plans, ensure the window sizes are as standard as possible. That way you can just buy the ready-to-use roller blinds from places like Spotlight to install window treatments instead of having each blind custom made. Can save you a bundle!
Follow ups - Never rely on people to do their job, always follow up but don't cross the line of harrassing them
. The number of times we've had agencies advise us they need 4 weeks to look at our file only to give them that time before following up and finding out they haven't even started or that our file got 'lost'. All delays cost money and eat into your margins.
Builders - Shop around. We always get on average 10 quotes from various builders. They vary so massively as well and is such a huge expense for any development its worth the effort.
Big Developments - say 10+ homes, always allow an even bigger contingency for things like power upgrades, water extensions, easements etc. Doing a group of 15 and our power upgrade is around $200K. Not to mention the water extension, and easement thats being created which is another $50K.
Specialists - There are many people we have used who are experts in their field and without them, I doubt we would have gotten half our developments through council. People from Planning Consultants to Traffic Engineers, they can all be highly valuable when council knock you back on your initial plans. We had a development recently which had previously been purchased by another Developer and they struggled to get 5 homes on there. Council knocked them back. We took on the challenge, council knocked us back too but with every knock back, we employed the services of various people to address the issues and come up with solutions and eventually, we have managed to not only get the 5 but an extra allotment (i.e. 6) when previous developers couldn't even get the 5.
Standard sized windows - Whenever drawing up plans, ensure the window sizes are as standard as possible. That way you can just buy the ready-to-use roller blinds from places like Spotlight to install window treatments instead of having each blind custom made. Can save you a bundle!
Follow ups - Never rely on people to do their job, always follow up but don't cross the line of harrassing them
. The number of times we've had agencies advise us they need 4 weeks to look at our file only to give them that time before following up and finding out they haven't even started or that our file got 'lost'. All delays cost money and eat into your margins. Builders - Shop around. We always get on average 10 quotes from various builders. They vary so massively as well and is such a huge expense for any development its worth the effort.
Big Developments - say 10+ homes, always allow an even bigger contingency for things like power upgrades, water extensions, easements etc. Doing a group of 15 and our power upgrade is around $200K
. Not to mention the water extension, and easement thats being created which is another $50K.Good post MTR.
I've not completed any developments but am interested in learning all the ins and outs. I've been reading and learning from the more experienced people from SS.
Assuming you develop to sell, what structure do you have in place as developers? Do you operate under a company or under a trust?
I've not completed any developments but am interested in learning all the ins and outs. I've been reading and learning from the more experienced people from SS.
Assuming you develop to sell, what structure do you have in place as developers? Do you operate under a company or under a trust?
Only in the process of starting... but learning each day.
What I've learnt so far -
- Everyone wants some of your money, nearly got done with an unnecessary soil test ~$1,500 that wasn't going to be for construction purposes. Really only useful for those that don't own the site already and want to know what they're in for. I already own the site, if the soil is good bad or terrible not going to change a thing as I'll still be proceeding with the development.
- Multiple quotes is the key. So far difference in architects quotes have been from $8k - $15k. Will be looking to get quotes from approx 10-12 different builders
- Don't take the first no. Had 3 different architects tell me 3 couldn't be done on the site. I thought it could be done. Worked up some rough designs myself and spoke to council planner direct who was extremely helpful and now looking promising for 3.
- Leverage of those who have done it before, I'm fortunate enough to have a family friend who develops 16 lot sites. I see her once a week and bounce ideas off her. Everyone might not get that, but everyone has this forum which has a wealth of knowledge. Ask the right people the right questions.
What I've learnt so far -
- Everyone wants some of your money, nearly got done with an unnecessary soil test ~$1,500 that wasn't going to be for construction purposes. Really only useful for those that don't own the site already and want to know what they're in for. I already own the site, if the soil is good bad or terrible not going to change a thing as I'll still be proceeding with the development.
- Multiple quotes is the key. So far difference in architects quotes have been from $8k - $15k. Will be looking to get quotes from approx 10-12 different builders
- Don't take the first no. Had 3 different architects tell me 3 couldn't be done on the site. I thought it could be done. Worked up some rough designs myself and spoke to council planner direct who was extremely helpful and now looking promising for 3.
- Leverage of those who have done it before, I'm fortunate enough to have a family friend who develops 16 lot sites. I see her once a week and bounce ideas off her. Everyone might not get that, but everyone has this forum which has a wealth of knowledge. Ask the right people the right questions.
A new one that I have learnt but ignored prior to developing (ROI) - return on investment, I think very important, especially if you plan to make this your day job.
Measuring timeframe per project, I did post something about this some time ago now -
If a project is estimated to make a profit of $100K on development A in timeframe of 12 months ....... but it blew out to 24 months, then you actually only made $50K in 12 months, or perhaps less due to additional holding costs etc.
Perhaps more importantly not realising the profits at the estimated time frame means you have lost opportunities of reinvesting your funds/profits.
This may also apply to the larger projects, expected higher/bigger % profits, can be higher risk, can be harder to source finance, longer time frames. My observation is that perhaps the smaller projects, lower risk, less % would equate to similar outcome as profits of some larger projects because you are able to turn over more projects in shorter time frame. What do you think??
Give you an example of timeframe with this project, one my current projects which I am cutting up 1 block into 2 blocks and on selling, not building. I worked out that I would only make perhaps an extra $30-40K by building 2 houses on each block. By selling the 2 blocks it will take me 8-10 months to complete this project, I take my profit and buy another development site and start working on plans and permits or whatever.
If I build on these 2 blocks in the current Perth market with shortage of trades I probably would be looking at an additional 9 months. I think better to move on because I can make much more than $30-40K with my next project, saving myself 9 months, and not to mention much more work required when building.
Another thing I learnt, the builder always under estimates the time frame of the project, add an additional 2 months I think
MTR
Measuring timeframe per project, I did post something about this some time ago now -
If a project is estimated to make a profit of $100K on development A in timeframe of 12 months ....... but it blew out to 24 months, then you actually only made $50K in 12 months, or perhaps less due to additional holding costs etc.
Perhaps more importantly not realising the profits at the estimated time frame means you have lost opportunities of reinvesting your funds/profits.
This may also apply to the larger projects, expected higher/bigger % profits, can be higher risk, can be harder to source finance, longer time frames. My observation is that perhaps the smaller projects, lower risk, less % would equate to similar outcome as profits of some larger projects because you are able to turn over more projects in shorter time frame. What do you think??
Give you an example of timeframe with this project, one my current projects which I am cutting up 1 block into 2 blocks and on selling, not building. I worked out that I would only make perhaps an extra $30-40K by building 2 houses on each block. By selling the 2 blocks it will take me 8-10 months to complete this project, I take my profit and buy another development site and start working on plans and permits or whatever.
If I build on these 2 blocks in the current Perth market with shortage of trades I probably would be looking at an additional 9 months. I think better to move on because I can make much more than $30-40K with my next project, saving myself 9 months, and not to mention much more work required when building.
Another thing I learnt, the builder always under estimates the time frame of the project, add an additional 2 months I think
MTR
