Foundations of Property Development
- Hey everyone, my name is Amber, and I help property investors with their property developers even if they’ve got no prior experience.
3 FOUNDATIONS OF PROPERTY DEVELOPMENT
When you master, you spend the time and you’re understanding these three things, and putting them together, you’ll be able to put together any kind of project.
- Due Diligence
- Feasibility and
- Funding
All three of them are actually interdependent, the reason being that you can’t do your feasibility unless you’ve actually done your due diligence.
DUE DILIGENCE IS MADE UP OF THREE DIFFERENT THINGS:
- MARKET RESEARCH
- SITE ANALYSIS
- LEGALS
Learn More due-diligence
Number one is your market research: who are you gonna target, is there a demand for what you’re gonna build? There’s, it answers also the different questions based on your end value of the channels, what you’re gonna use as an end value for the channels, depending upon the target demographics or the target audience that you’re gonna target.
After that, market research; you’ve got site analysis, you work out all the different things that affect your particular site, it could be the contours, could be the slope, it could be any number of things, setbacks, the width of the sign, there are so many different things so if you get your market research right and your site analysis right, those three things, those two things will actually give you numbers that you have to put in your feasibility.
The third thing under due diligence is your legal. Are there any legal issues with the site? For example, there could be some colourants on the site. How are they, how are you gonna handle them or whether or not you need to account for those costs in your feasibility?
FINANCIAL FEASIBILITY
- SMART FEASIBILITY
- DETAILED OR FULL-SCALE FEASIBILITY
- FINANCIAL TRACKING
When it comes to feasibility, you do your due diligence, you’ve come up with all these, all the data that comes from different documents; could be your contract of sale, could be details about the site, could be Dial Before You Dig, for example, to figure out what’s going on on that particular site, and your market research, or what actually you’re going to build or develop as a product and sell in the market. In your feasibility, there are three different kinds of feasibility.
The first one I call smart feasibility. Whoops lets just call that SFC, well, I call it SSC because I use a smart feasibility calculator for it, but let’s just put smart feasibility. The other one is your detailed feasibility, and the third one is your tracking. Smart feasibility is like feasibility that you do in under two minutes. The reason for that is that any time you look at a project, not all the information is available but you do a bag of the handle of, so to speak, feasibility to understand what’s going on with it, are there any numbers, is there any meat in the project so to speak, is the project fat enough for you to be able to commit to the project? So we do smart feasibility for all that. The second one is detailed feasibility. When you’ve got all your questions answered from your due diligence, whether it’s quotes and feed proposals from different consultants, or the reports that you’re gonna need for the projects, so once you’ve got all of that you map out on a timeline based on what you think your project is going to take in order to complete, so that timeline, and you allocate all those costs in your detail feasibility. The third one is your tracking feasibility, where basically you track everything that you accounted for a month by month so if you just think that in the fourth month of the development, you’ll be spending forty thousand dollars on consultants, you need to track that month by month so that you can keep an eye on the bottom line as the project is progressing.
FUNDING
- FINANCE
- STRUCTURE
The final thing is your funding. In funding, you got your finance and you’ve got a structure.
Have you got enough money to actually cover all the costs of the project?
These are the kind of questions that you gotta answer when you’re looking at your funding: where you’re gonna get it from, how much you’re gonna get it for, it is gonna be a mezzanine financing, what kind of structure you’re gonna use is gonna impact the kind of finance you can access. So, these are the three different foundations. You master all of this, and the best part is they actually happen right at the front of the project. So it’s not like you need to actually get into the project to be able to start answering these questions or start understanding them.
If you master, these three, you can do any kind of development.