Why Most First Time Property Developers Fail

These days, it seems like everybody wants to become a property developer or investor. Especially with interest rates becoming more unpredictable as ever, investors are getting their cash out of the bank and seeking comfort in real estate - real estate development to be specific. Being a first time property developer is a lot like the first time you drive a car; you don't get it right at first. But if you keep trying and practice makes perfect, then eventually (after a few tries) it becomes second nature. It takes time to learn what works best for your own situation but once you do learn from experience then success will follow!

Here are my thoughts as to why most first-time real estate developers fail badly.

As a builder I have met with numerous clients that have purchased a property with the intention to develop townhouses. My first question to them is 'Have you completed a feasibility study?'. in which most do not have the slightest clue with what it even means. The few who have completed a 'back of the napkin' feasibility study usually work their projects out like this: *Buy Property = $600k (because the agent said it was a great buy) *Build 3 Townhouses = 3x15SQ townhouses @ $10k per square (because volume builder rates were this 5 years ago) *Sell for $500K EACH with a Profit of $450k (because the same agent said the market is hot and property is flying out!)

My response is, “what about town planning?” “what about developer contributions?” “What about interest? Stamp Duty? Land surveying? Services? Landscaping?” Those are just the beginning.

It’s tough to see eyes full of fear when all these unforeseen costs have been brought into the picture and their potential investment go down the drain. Being a first time property developer can be an intimidating experience. It’s not your fault if you've never been into the real estate business before and don't know what to expect.

Here are a few tips:

• The best way to avoid mistakes is by doing some research on how other people have gone about their own journeys in property development. There are plenty of blogs and websites that offer advice on this topic, but it's also worth talking to fellow developers who have successfully started up their own businesses over the years – especially if they're willing to share their experiences with you!

It’s not a real estate agents job to give you investment tips. Do your own market research and get to know an area before you buy or sell in it.

• It’s important to understand the process of buying and selling property. The first step is to know what you're getting yourself into. You need to understand how it works, what jargon stands for something, and where things are located in relation to each other (i.e., where you'll be living). This can be difficult if you've never been involved in this type of business before—but don't worry! There's no reason why anyone should feel intimidated by real estate development jargon or lingo; all it takes is some reading time and an open mind...and maybe even some practice sessions beforehand while watching videos online.

• Builders will make a margin on the cost of materials and trades on your project. If the land slopes has a lot of steel and complicated roof and structure then you will be paying A LOT more than what a volume builder can build per square. (That’s why they don't build custom houses!)

• If you are new to the property development business and don't have much money, there's a good chance that you will run into financial problems. You may need to borrow money from a bank or family member. Or maybe even get a loan from mortgage lenders.

Maybe this all sounds like too much work for someone who just wants their first property without having any idea what they're doing. But if you're serious about building your own home and making it profitable, then there's no better way than learning from other people who have already gone through this process before (like me!).

• The most important thing to do before you purchase a potential development site is due diligence. You should do a proper feasibility study with absolutely every aspect to consider. If you don't know what to do then pay a professional to do one for you. You may think that your project is going to be easy, but that's not always the case. You'll need to be prepared for unexpected costs, delays and problems.

● You'll also need to be prepared for challenges. Be prepared to deal with unexpected problems and issues that might arise during the development of your property, including having them resolved quickly and efficiently; otherwise, it could cause delays in construction schedules which could end up costing you more money than usual or taking longer than expected (or both).

● Another important thing to complete is a cash flow projection. Most people leave this one out but interest can be the biggest killer of a project. If this seems like too much time and effort then the other solution is to partner with an experienced property developer.

Property Development can be financially rewarding but simple mistake can also send you bankrupt very quickly. As a first time property developer, you're going to have to do things differently than other people. You'll need to learn how things work and what's important for success in the industry. You'll also want to make sure that your project is financially sustainable so that it doesn't fall apart during construction or when trying to sell it off down the road (which could be years from now!). There are many factors at play here - from planning ahead with reputable contractors who are experienced with building new homes in particular neighborhoods, hiring good construction crews before even starting any work on anything major also helps a lot. Don't stress too much about everything coming together perfectly on its own!