Developers profit margin

Kaiser74

[Deleted User] wrote: »

6 months is unrealistic. Very unrealistic.

Scenario 1 with site, it might have planning but then you need permits. 8-12 weeks rights there before you can even start (thats with sailing through the process and no objections)
If you are doing groundwork and building a house you need 18 months with a small contractor doing the work to cover everything from start to finish.

Scenario 2 doing a conversion, 6 months would be possible if you had all your ducks in a row and the building was already approved for splitting into apartments. But if not 8-12 weeks just for that part. And your not going to get multiple apartments done in 3 months no way.

In my experience you have to at least double the timeframe you expect to get finished in. And if you are paying high interest rates that puts your risk over the top for any sort of project. There will always be delays, theres too many moving parts and people to manage for there not to be

So in essence what you are saying is no matter how much money you have to invest 12% over 3 years returns no profit??

Kaiser74

Kaiser74 wrote: »

So in essence what you are saying is no matter how much money you have to invest 12% over 3 years returns no profit??

Even In the areas of site purchase, even with all permits and permission. The only caveat you propose is a refurb or spitting into apts and even then no profit?

Elemonator

No disrespect, but maybe give the property development a miss if you have to ask the likes of this website.

Should be consulting with professionals in the field, in my opinion.

Kaiser74

Kaiser74 wrote: »

Even In the areas of site purchase, even with all permits and permission. The only caveat you propose is a refurb or spitting into apts and even then no profit?

On the site purchase 100% no, and the interest rate is not your problem, you'll already make a loss before you pay the interest, a previous post by Kieran played that out well. Just don't go there, only a JV with a free site is going to make a profit unless your going much bigger then your talking about here and you have very good economies of scale in construction costs.

On the second its possible to make a profit even with 12%. The problem with property development as another poster pointed out previously is you cannot make a perfect plan. So much **** goes wrong, which causes delays, and delays eat your profits day by day. With experience you can get out in front of the problems to minimize delays, but on your first project your basically stacking the deck against yourself with rates that high.

By the way, the most important part of property development is the project manager which really needs to be you because a decent one on your scale is going to eat away your profits. And you have to be onsite everyday pushing demanding your standards. You can't trust any of your contractors to do that. Your job is a problem solver and an enforcer. That is basically property development, every day solving problems and pushing people to do their job professionally, all the way from the planning office, architects, to the estate agents. And I can tell you after 10 years of it, I hate all of them

Elemonator wrote: »

No disrespect, but maybe give the property development a miss if you have to ask the likes of this website.

Should be consulting with professionals in the field, in my opinion.

Property development isn't an industry with standardized experts and consultants, unless your going really big and can afford a team in a corporate to advise you. Theres too many hats. You need to have the balls and charisma first to get people to trust and work for you, then you need to understand drawings, value engineering, bureaucracy and administration, construction across all the trades, finance and accounting, and you have to be able to sell, and in a perpetual state of selling. Ain't no freephone number for all that stuff unfortunately! And having to have all those skills is often why there are so many bankruptcies. Someone mentioned before the amount of builders that go bankrupt because they try their hand at development. Completely different game which requires a polished approach for many things, that builders often don't have.

A book came out a few years ago about the big irish developers and how they all went bankrupt. When I was reading it I was quite smug as i had managed to turn a profit during the crisis with my development. Only for my next one to make a loss :pac:

antoinolachtnai

As the great sage sang:

Every gambler knows that to lose
Is what you're really there for

The problem with property development is that it all goes great when the price of property is rising. The big risk is that you think you are good at what you do because you make some money when the truth is that you just happened to invest as prices were on the way up.

I am not a property developer but I am pretty certain that there is no chance that in my lifetime, no matter how skilled I became, that I could make money on property development where the cost of my funds was 12 percent about the risk-free cost of capital. If somehow I managed to do it once it would be because I was very lucky. If I did make money off this lucky break, there is no doubt it would go to my head and I would lose money on my next deal. Would I leave the table when I'd made some cash? Maybe, but I doubt it.

If you did this, the key would be to get rid of your financier within 6 months, get them their money back, get your deeds back and find a lender who can actually afford to be in the property business with you. If you are not almost certain that you can do this manouver, you almost certainly can't make money at this.

For ever odd

The black hole for profits is safety.
Get it wrong, and you may also face jail time.

Very surprised it has not been mentioned.