Answering the question”What is property development?” will teach you a basic understanding of how property developments work and how you can invest in one.
What is property development?
At the most basic level, the objective of a property development is to take an existing property and turn it into a better one, with a bigger price tag.
A property developer is not the same thing as a builder. A property developer manages all of the parties who work on a project, from builders, architects, engineers, and realtors.
It’s the property developer’s job to manage all of these parties and make sure that they’re all working together to design, obtain approval for, build, and sell the new properties.
How is developing different from property investing?
Traditional property investing is like buying a gold bar, waiting for the market to drive the price of gold up, and then selling the same gold bar for a profit. (This strategy is known as a speculative investment: you are ‘speculating’ that the market will go up.)
On the other hand, real estate development is more like transforming that gold bar into jewellery: you are changing the original asset into something new, with a higher value. Yes, the value of the final product will still be affected by the market value of gold, but you have more direct control over your profitability by transforming the asset.
The transformative nature of property development is what gives it the potential to outperform traditional buy-and-hold property investment strategies.
We have a Process Guide which explains the steps involved in property development in detail.∎
