You and your neighbour are out the front, both leaning on your mowers and having a chat. You mention the fact that you're now a Property Developer, and suddenly he looks all thoughtful.
"We've been thinking of downsizing," he says. "Getting a bit old for all this mowing nonsense. Do you want to buy our place?"
Chances are you've already had a bit of a snuffle around your immediate neighbours when looking at your own property to check out zoning and land size. You know their site has development potential.
Do you jump up and down with enthusiasm screaming YES?
Okay, so it might not be your next-door neighbour, but for a lot of people doing a property development, particularly their first one, there's a huge comfort factor if it's located in their local neighbourhood.
And I get it. There are some definite advantages to developing in your own area. Let's start out by taking a look at some of them.
Convenience
I tried to come up with a few different headings, but in the end it all came back to one word - convenience. Doing something close by is more convenient than doing something far away.
For starters, it's easy to keep an eye on the progress on site and the quality of the work, be it land subdivision or construction. You can also monitor things like the cleanliness of the site, which can be a major problem in some areas if your site has a cranky neighbour.
If you need to meet a consultant or contractor onsite, you can arrange for first thing in the morning or last thing in the day, and still go to work in between. It also means you don't have to annoy people by trying to organise meetings on weekends.
By the same token, if a meeting is needed at short notice and you're working from home, it's easy to just pop over to the site. Anyone who's done an interstate development will know just how hard it is to do anything spontaneously, let alone without substantial cost e.g. flights and accommodation, and your time!
And even before you buy a property development site, living in the area means it's easier to do your area research. If an agent calls you with a great opportunity, you can get there ASAP and check it out.
All of the above achieves two other important things - positive reinforcement and confidence building. Seeing your development taking shape really helps you to recognise that you're doing a great job and it's all coming together.
Of course, the flipside is that if the development isn't going well, you're going to constantly be getting your nose rubbed in it. Not exactly a great motivator, and sometimes being able to get away from your development site for a mental break is a huge relief!
Which leads into the "cons" side of buying the development site next door - and yes, despite all of the above, there is one!
Think about it for a minute. Most of the "pros" for developing in your area revolve around convenience. And while that's helpful, and can make the process run more smoothly, how many of you are interested in property development because it's convenient? It's far more likely you want to make money from the process.
That's why it's important to think about a bigger picture outside of convenience. Because if there's one saying I repeat a lot (and you've probably heard me say it plenty of times!) it's this - just because something is developable, doesn't mean it's profitable.
The early stages of my Property Development Formula are all about identifying the right strategy and area for you to look for deals. Once you have chosen your area, you need to do the research to become an Area Expert. This is one of the most important skills in successful property development and small-scale development investing.
Now, I have no doubt you know exactly where the easiest places are to park at the local shops, and which cafe serves the best coffee.
But do you know:
I could go on, but I think I've made my point. There's a lot more to being an Area Expert than finding the best cappuccinos. Again, this comes back to recognising a site isn't always profitable just because it's developable. You may build great townhouses, but if you don't know what your market wants, potentially you've created the wrong product and your bottom line will reflect that.
Understanding local property market trends, buyer demand and development feasibility is critical if you want to maximise your property development profit.
In fact, you can take a step even further back in the Development Process and ask the question - is this deal the highest and best use of my time and money right now? Which brings on my developing mantra - earn the most money, with the least hassle, in the least amount of time.
A simple way of saying it is Opportunity Cost. If you tie up your money in a deal in Suburb A, when you could have spent the same amount of money in Suburb B for double the return, then the difference is what developing the site in Suburb A has cost you in terms of opportunity.
So the starting point for my Property Development Formula is to always do the research to find your 1 Strategy, 1 Council and 3 Suburbs where you will get the biggest bang for your buck.
For some of you, that may well be where you live right now. If so, you get the benefit of convenience along with profitable opportunities to be a property developer.
For the rest, you might have to go a little further afield, but chances are you can find a development site not too far away that meets all the criteria.
Either way, if a neighbour tosses a shiny object into your backyard, don't be tempted to run out and grab it. Otherwise you might find yourself spending a lot of time on a wild goose chase looking for the goose that lays the golden eggs, when instead you could just trust the process and get on with becoming a profitable Property Developer.
"We've been thinking of downsizing," he says. "Getting a bit old for all this mowing nonsense. Do you want to buy our place?"
Chances are you've already had a bit of a snuffle around your immediate neighbours when looking at your own property to check out zoning and land size. You know their site has development potential.
Do you jump up and down with enthusiasm screaming YES?
Okay, so it might not be your next-door neighbour, but for a lot of people doing a property development, particularly their first one, there's a huge comfort factor if it's located in their local neighbourhood.
And I get it. There are some definite advantages to developing in your own area. Let's start out by taking a look at some of them.
Convenience
I tried to come up with a few different headings, but in the end it all came back to one word - convenience. Doing something close by is more convenient than doing something far away.
For starters, it's easy to keep an eye on the progress on site and the quality of the work, be it land subdivision or construction. You can also monitor things like the cleanliness of the site, which can be a major problem in some areas if your site has a cranky neighbour.
If you need to meet a consultant or contractor onsite, you can arrange for first thing in the morning or last thing in the day, and still go to work in between. It also means you don't have to annoy people by trying to organise meetings on weekends.
By the same token, if a meeting is needed at short notice and you're working from home, it's easy to just pop over to the site. Anyone who's done an interstate development will know just how hard it is to do anything spontaneously, let alone without substantial cost e.g. flights and accommodation, and your time!
And even before you buy a property development site, living in the area means it's easier to do your area research. If an agent calls you with a great opportunity, you can get there ASAP and check it out.
All of the above achieves two other important things - positive reinforcement and confidence building. Seeing your development taking shape really helps you to recognise that you're doing a great job and it's all coming together.
Of course, the flipside is that if the development isn't going well, you're going to constantly be getting your nose rubbed in it. Not exactly a great motivator, and sometimes being able to get away from your development site for a mental break is a huge relief!
Which leads into the "cons" side of buying the development site next door - and yes, despite all of the above, there is one!
Think about it for a minute. Most of the "pros" for developing in your area revolve around convenience. And while that's helpful, and can make the process run more smoothly, how many of you are interested in property development because it's convenient? It's far more likely you want to make money from the process.
That's why it's important to think about a bigger picture outside of convenience. Because if there's one saying I repeat a lot (and you've probably heard me say it plenty of times!) it's this - just because something is developable, doesn't mean it's profitable.
The early stages of my Property Development Formula are all about identifying the right strategy and area for you to look for deals. Once you have chosen your area, you need to do the research to become an Area Expert. This is one of the most important skills in successful property development and small-scale development investing.
Now, I have no doubt you know exactly where the easiest places are to park at the local shops, and which cafe serves the best coffee.
But do you know:
- Planned infrastructure in the area?
- Current demographics?
- Whether the population is growing or decreasing?
- Development projects in the pipeline?
- Prices?
- Demand for the product of your strategy?
I could go on, but I think I've made my point. There's a lot more to being an Area Expert than finding the best cappuccinos. Again, this comes back to recognising a site isn't always profitable just because it's developable. You may build great townhouses, but if you don't know what your market wants, potentially you've created the wrong product and your bottom line will reflect that.
Understanding local property market trends, buyer demand and development feasibility is critical if you want to maximise your property development profit.
In fact, you can take a step even further back in the Development Process and ask the question - is this deal the highest and best use of my time and money right now? Which brings on my developing mantra - earn the most money, with the least hassle, in the least amount of time.
A simple way of saying it is Opportunity Cost. If you tie up your money in a deal in Suburb A, when you could have spent the same amount of money in Suburb B for double the return, then the difference is what developing the site in Suburb A has cost you in terms of opportunity.
So the starting point for my Property Development Formula is to always do the research to find your 1 Strategy, 1 Council and 3 Suburbs where you will get the biggest bang for your buck.
For some of you, that may well be where you live right now. If so, you get the benefit of convenience along with profitable opportunities to be a property developer.
For the rest, you might have to go a little further afield, but chances are you can find a development site not too far away that meets all the criteria.
Either way, if a neighbour tosses a shiny object into your backyard, don't be tempted to run out and grab it. Otherwise you might find yourself spending a lot of time on a wild goose chase looking for the goose that lays the golden eggs, when instead you could just trust the process and get on with becoming a profitable Property Developer.
