Date. 2th February 2021
The property development process is not so complicated, it involves some basic stages. If any developer takes the time to learn each stage, master the actions required and complete their tasks in the correct order. Then they will be well on their way to a profitable property development business.
Sourcing your development sites is a key stage and the very beginning of the property development business. A successful developer will have systems in place to manage the site efficiently and will build on a network of contacts to ensure sites are continually being fed into their funnel.
Knowing where to look, who to contact and the strategies for finding market sites is fundamental to a property developer. The success of the property development stages starts here and mastering the site location methods is a skill, we need to spend more time learning.
Once we have found a suitable site which fits into our?business plan criteria, then we can move into another stage.
The development appraisal forms the backbone of the financial side of property development and is arguable the most important step within the property development. Learning how to complete a development appraisal?is key and is an area all new developers should spend a lot of time looking learning
A good developer will know their appraisals inside out and be able to quickly and efficiently put together an initial site appraisal or full cash flow appraisal depending the stage of the project.
Knowing where to get reliable and quality inputs for the?gross development. Value?or?development costs?is a skill developers need, and you need to understand?how to measure profit?and track the viability of a project.
There are no excuses for not knowing your numbers. Banks will need your financial requirements, investors will demand a certain level of knowledge, and to have any credibility in the industry, having a solid grasp of your development appraisal is a must.
We have now found a site and completed an initial development appraisal to establish that the site is worth pursuing. We can now enter the detailed due diligence?stage of the property development stage and it is here we try to manage the main risks of a project. Take on good risk and execute it
During this stage, we must have the mind frame of trying to find reasons for not buying the site. We are trying to find the red flags. This will mean we analysis and assess everything to do with the site which will have a physical, financial, legal or construction impact or constraint on the project.
This will include the following below
We will often need the input from our project team at this stage, which includes be a Project
Manager, Architect, Solicitor, Engineer, Quantity Surveyor depending on the site and specific conditions.
Once you have completed the due diligence stage, do not forget to go back and update the development appraisal. Any findings from the due diligence stage which is going to affect the financials and ultimately the site value. The development appraisal should be continually updated throughout the property development process to track profit and to alert the developer of any required changes to strategy.
We are now armed with a site, a land value and a completed due diligence checklist. It's now time to secure the site and close the purchase.
Often the actual form of the deal will be out of your control. This is typical when an agent brings a site to the market and sets the conditions of sale or at property auctions. In these cases, it is important that you understand what the conditions are and how to put forward a professional and credible bid to make you competitive.
In other cases, you as the developer, can control the deal and take a lead in securing the site. These are often the scenarios where larger profits can be made and the skill of the developer to manage the process will have a direct result on the bottom-line profit.
There are many different ways to structure a deal and its useful for developers to know the various methods to ensure this stage of the property development process can happen.For example, there will be times when a?joint venture is a better solution than an option agreement, taking a site unconditionally may make you more competitive or its the actual relationships you have with agents that seal the deal.
It is rare to find one deal the same as another, so see each site as a learning opportunity and get sites bought well. Buying well has one of the biggest impacts on your profit
A development cannot happen or go ahead without funding. Money is one of the?main pillar of
property development?and is an area new and inexperienced developers struggle with the most. For each site that you look at, you need to understand how you will fund it and how to structure the financial side.
It goes without saying that even though funding is the main of the property development process, you will be thinking about how a project will be funded earlier than this.
Again, each site is different and will require a different set of funding criteria, however, a developer should know, for example, the difference between debt and equity, what development finance is and whether bridging loans are actually useful for developments.
When you are buying a site unconditionally, then you may initially only need to focus on securing funding for the land price and professional fees. If you are securing an option, then you may not need much funding at all.
A good developer will have access to funding, a good contact with investors and brokers and understand the importance of putting together a deal to make it financially efficient.
One of the other the pillars of property development is planning, and the required permissions to actually be able to start and finish a development project. As a property developer, you need to manage the process to ensure all the permissions are in place and that we have a scheme designed that is viable.
Design is critical to the property development process. A skilled developer will know how to squeeze, optimise and maximise?every single square foot?on a site to achieve the maximum amount of profit?the site can yield.
There are many other permissions required, not just planning. For example, building control and party walls. These all need to be managed along the process to ensure that a development can actually go ahead and executed.
This is fairly straight forward. What is our strategy for securing our revenue and ultimately making our required profits ?
Traditionally, developers buy, build and then sell, however, there are other strategies to consider which include renting out the final project, build to rent, or selling a site before construction with planning permission secured.
You will have set out your primary strategy in your?business plan?and this is not something which is decided at the end of project.
Reaching the construction stages in property development process is a major milestone and there will have been some serious work, effort, time and money already invested in the project.Even though the project will have been significantly de-risked along the way, there is still plenty of places for risk to turn up and we must ensure that we contract with the?right builders for the project?and have a procurement strategy in place which is suitable.
There are many ways to contract with a builder, and this will also depend on the role you are taking during the construction process. Traditional methods include design & build, two stage tender and contracts such as a JCT. New developers would benefit from employing a project manager and contract administrator to take the lead during this stage. Construction practical completion is an essential and final stage of the property development process.
There is no one deal or development is the same as another. However, the steps above can change its order. You shouldn't finish this and think that the development process is a simple as going through the steps in the following sequence. Sometimes the stages will change and overlap with each other depending on the development itself.
As you gain more experience and complete more developments projects, knowing which order and what needs to be completed along the property development process, will become second nature.
PGDCM PGDSM PGCPM MQSI SACD
Construction- Quantity Surveyor- Valuer/ Appraiser. Project Management
37 PattensenTurkeyen, Dennis Street, Georgetown, Guyana