Our property development process has allowed us to achieve returns of 13-16% per annum for our investors, and in this guide we show you how we did it.
From site acquisition all the way through to final payout, we explain every part of the property development process in this property development guide.
We also explain how our Property Syndication model allows investors to earn the returns of a property developer without having to lift a finger themselves.
The complexities of property development are broken down into a clear 15-Step process
The process described in this eBook is derived from how we manage our 18 projects.
This book is not written for experts, so it's jargon-free and easy to follow.
Before we can set out to explain the process of undertaking a property development, we must first clarify what a property development is, and just as importantly, what it isn’t.
Property development, also known as real estate development, is a business strategy that encompasses a variety of practices designed to increase the value of a property so that it can be resold for a profit. On a smaller scale, this may include activities such as the renovation and resale of pre-existing properties (colloquially known as ‘flipping houses’). On a larger scale, this includes activities such as converting an established dwelling into multiple smaller dwellings or building on unused land.
A property developer is not a builder. Property developers are the people who oversee and coordinate all of the tasks and contractors required to complete the property development. This includes construction, but also includes other tasks such as site acquisition, design, permits, and much more. We list these tasks in more detail later in this book when we outline our process.
It’s also important to understand how a property developer makes money. Many people are familiar with the traditional property buy-and-hold strategy and assume that property developments make money the same way. This is true, but it doesn’t fully cover it.
With a buy-and-hold strategy, the asset does not change, but it’s perceived value does. What you own is identical to when you bought it, but market factors have changed the demand for the asset, and thus the price is different. This is like buying stocks in a company. If you buy 100 shares in a company, the value of each share may change, but you still only have 100 shares.
In the case of property development, the asset does change. As an example, if you start with a single detached home and develop it into six townhouses, you have fundamentally changed the asset. You have changed one thing into another thing, and the new thing’s value is separate from the old thing’s value. This is like transforming 100 shares in one company into 150 shares of another company.
The benefit of property development over a buy-and-hold strategy is that the developer is able to directly adjust the value of the asset themselves rather than being entirely dependent on market forces to make a profit. While a strong market certainly helps and will result in more profit, a property development can still be profitable even in a declining market. There are a variety of factors other than final sales price that also influence how much profit a particular development will generate, such as the purchase price of the land, contingency in the budget, construction costs, and loan interest.
Outside of undertaking your own property development, you can also choose to invest in someone else’s property development and make a profit that way. This is Lion Property Group’s business model: we allow other parties to invest their capital into our projects and we undertake the developments on their behalf.
Investments into a property development are regulated by Regulatory Guide 77: Property Trusts and Property Syndicates (RG 77) issued by the Australian Securities and Investment Commission (ASIC) in 1994. RG 77 outlines several legal structures which can be utilised to collectively invest in property, including property developments. For our Developments, we use a Unit Trust structure as outlined in RG 77.
Whether you choose to undertake your own property development, or invest in a property development via a Syndicate or Unit Trust, property development is capable of delivering exceptionally high returns when properly planned and efficiently managed.
The operative phrase of that last sentence is ‘when properly planned and efficiently managed.’ Like all investments, property developments have an element of risk. And like all business ventures, property developments can fall victim to mismanagement. The remainder of this book is dedicated to explaining how to plan a development project and the strategies that can be implemented to work as efficiently as possible and generate the highest returns.
View our property development info pack to kickstart your property development journey. All the information you need about Lion, our models, and our expert team, in one convenient place, so you can make an educated decision.