There are heaps of ways to earn money in this day and age. But have you ever wondered how a Melbourne residential property developer makes profits? In this useful article, we’ll unpack this, so if you’re thinking about making that first step into the game, you can make an informed decision. So, what are you waiting for? Let’s explore this in more detail.
In short, property developers make a profit by seeking to maximise the value of the lot they have acquired. They achieve this by building two or more houses on a block of land and then subdividing them. This means they can be sold as separate titled lots.
Great dual occ advisors and or property developers will also have a firm knowledge of local laws and regulations. They’ll know these details in-depth. This means they can optimise their designs and projects accordingly. A savvy property developer won’t try to force something to work or develop a lot that has too many variables. It is a step-by-step game that, if done correctly, will result in a significant profit.
Each day has a dollar value
A property developer who makes money knows that, even if there is a profit at the finish line, each day has a dollar amount. Remember that saying that “time is money?” Well, that applies more than ever in the property development space. A successful property developer is efficient and makes sure nothing gets missed. This saves both money and time. A smart developer will utilise their highly refined systems and protocols to maxmise efficiency and dollars.
A project will take months, and if this blows out into years, a project can quickly become unviable. Have you ever seen an abandoned project? They’re a sad sight, with graffiti-sprayed branded banner walls that are a testament to a project that blew out and ruined the developer. A smart developer will cut off a project blow-out at the pass and ensure it comes in on time and to budget.
Relationships are key
The one thing that all professional property developers have in common is a core network of suppliers, partners, contractors, and other associated professionals. These will exist in the construction, property, and real estate sectors. With their finger on the pulse and juggling multiple projects, a successful developer can offer all these people jobs. With a project always happening, the networks can get preferential treatment, and the developer can get great rates. This means costs are lowered, and the projects keep running smoothly. This means faster builds and settlement times, which in turn means the developer is always making money.
A keen eye for location
We’ve all heard the phrase before, but the location is king. A smart property developer is plugged into the pulse of the market and knows which areas to develop for a profit. They base this on figures and facts and often have multiple years of experience in identifying sites that are ripe for development. They will look at infinite metrics when choosing a site. They will also never let their emotions get in the way of a smart business decision. No matter how they might feel at the time, they are calculated and calm in their decision-making. A small mistake can cost thousands down the line. So profit-making developers are smart and make the right choices at the right time.
Another word on networks as well. Great developers can get access to off-the-market sales due to their relationships with sales agents. These connections are built over time. If you’re thinking about taking on this challenge, don’t be afraid to get around to auctions and open homes and get to know the agents.
What else to consider
These tips can seem overwhelming, and that’s alright. There are heaps of factors to absorb and a few balls to spin in the air to develop property and make money doing it. But if you have the desire to learn and take on a challenge, you need to be open to learning as much as possible. Knowledge is power, but it is also profit in this space. Don’t be afraid to have a stiff upper lip, practice your patience and discipline, and learn every angle.
If you’re still keen but don’t want to manage the process yourself, there is an argument for engaging a professional development project manager in Melbourne to do the hard yards for you. There are outfits out there that will manage a project for you, for a fee, but you’ll still see a profit provided you can invest in the land and the costs. This is a smart move for people who want to be “armchair developers.”
Property developers make their money by knowing the process inside and out, knowing that each day costs money and having airtight figures, processes, and networks. It is not a career choice for everyone, but it can pay off provided you are willing to learn and put in the hard yards. And remember, there are companies out there that can do it for you, and you’ll still see a profit in the end.
Author bio: To put it mildly, Peter Kelly is enthusiastic about real estate with 10+ year’s experience as a residential property developer in Melbourne, Australia. When he’s not looking at properties, or visiting potential sites, Peter can be found online searching realestate.com. For him, it’s more than a job – it’s an obsession. Peter is a co-founder at Little Fish, where he currently heads up the project management side of the business.