Lesson 1 - Don’t expect to make money quickly

Residential property development can be very profitable, however equally costly if not approached with vigilance.

Taking the first step

Residential property development can be very profitable, however equally costly if not approached with vigilance. In this blog series over the coming weeks, we reveal our 15 key lessons that are the result of experiences in the recent past. These lessons have been learned the hard way, sharing our experiences so you don’t have to make these same mistakes. Hard work, determination and the sqft.capital deal modelling tool coupled with these rules to live by will lead to that long and profitable property development career you dreamt of.

Don’t expect to make money quickly

Money doesn’t grow on trees - unless you plant them on your new development’s sun deck / oasis / city garden. A rather over exploited concept is that property development is a license to mass-print the aforementioned lifestyle-tokens. Let’s start this content by hoofing that alluring concept into touch before we look at how to make money.

Property development can make money - it can make very good money. So can putting all of your life savings onto black. So, can having the audacity to call 'hit me’ when your holding a pair of faces (the difference is here that you have an 8% chance of success - guaranteed – knowing these odds however should give some real perspective as to your next move).

Before advancing and after processing this blog series, it is highly recommended that before you chose this direction in life (as it is a committed direction, not a hobby):

  • You must establish why you wish to do it, and
  • What you wish to accomplish from it.

The intention of this long-form content is to assuage fears about this business, confirm doubts, dissuade gambling and make you a ton of money. If that is actually what you want.

Ploughing money, time, sweat, sleepless nights and significant risk into a business just to be swimming lengths in your pool of gold sovereigns years later is a bad way to start. This business is about dealing with numbers – processing so many that your decisions are almost binary. More significantly, identifying (arbitrage) opportunities, consistently through knowledge, experience and number crunching. More of that to come.

A concept that should be considered as friendly advice to those who commit to an industry / lifestyle that seems appealing (and is made appealing by the press with the intention of turning the next page of their siren-esque, epicurean, weekend supplement) is as follows; if you can take a balanced view of the future of your development business, are able to get the capital to start it, have worked tirelessly to first know, then identify, then secure a “deal” - and actually build out the thing, and even sell it for more than you have invested - you should make a profit of some form.

Given the miserable, pessimistic points of the previous sentence, you may have realised that it could be the best part of two years before you actually bank any of that alluring pass to a better lifestyle. Understanding this fact and the association that you will have no cash flow for this period (unless you are lucky / clever enough to have another source) is the first step to success in this industry.

On a lighter note - to the aching moans of those debt-adverse Guardian readers - the enticing aspect about successful property development is that it involves raising public money, leveraging that, and taking a percentage of the profit on the side. Add a zero to the capital raised and that percentage can become your next Ferrari in the blink of an eye.

If this statement is understood, it is a clear pathway to the understanding of the earnings that are potentially inevitable. If it is taken out of context, in a fashion that the global financial crisis of 2008 was the fault of “all the bankers”, it will seem reckless, irresponsible and a crusade to misguide budding entrepreneurial property developers (who incidentally, have the risk-tolerance and balls to help increase this country’s starved housing demand and so should benefit from the wealth and rewards it can bring).

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