Embarking on a career as a property developer can be both exciting and challenging. While the prospect of creating value and shaping communities is alluring, there are several hard truths that aspiring developers should be aware of. From dealing with public perception to navigating financial hurdles, this article reveals seven crucial insights that will prepare you for the realities of property development. Whether you’re considering a career change or already in the field, these honest reflections will help you navigate the complex world of real estate development with confidence.
1. People may judge you
This was a hard one for me, for the first two years since I left me career as a Nurse, when people asked that I did for work I told them, “well, I’ve been a mental health nurse for 20 years and recently changed to property development”. This, likely, was more to do with me than them, but I did have a fear of being judged. I feel there’s a stereotype. ‘Those greedy property developers are destroying the suburbs, killing the trees and decimating the natural habitat of the wildlife. Carving up land and making houses so small there’s no room for furniture, you can’t even fit a car in the garage’… ‘they’re money hungry, selfish and care about nothing but their bank balance’. Maybe that’s going too far, but the identify shift was difficult in my head.
Another misconception is that people think you have nothing to do, you sit around all day doing the barest minimum amount of work, friends can just breeze in when they see your car at home because you’ll be free and ready to entertain them. The truth is that it takes researching and analysing hundreds of development sites before you find that one needle in the haystack that is profitable at all.
(If any of my friends are reading this, please still come around, just call first in case we’re in a meeting) 😊 Which leads me to point 2…
2. It can be lonely
Sadly, it is a lonely game to be in. Especially if you’re single or your partner isn’t as enthusiastically wanting to talk set backs and minimum lot sizes as you are. You have to find your tribe. Hopefully, if you’ve come into the game from any educational course, you’ll likely have met people along the way. Or be able to network with others doing the same thing. Luckily, most property developers are a positive bunch. We’re wired to see opportunity where others can’t. We’re up for a challenge, fabulous at finding solutions to problems, and there are always problems with every development. So that’s definitely a skill you’re going to need, resilience to set backs (and not just the lineal kind).
3. Competition
Sometimes it feels that the whole world is chasing the same deal as you, especially in the market recently. More than once, we’ve been in competition for the same site with other developer friends. We’ve semi-regularly bumped into our friendly competitors at open homes. In fact, we’ve even also bid against each other at the same auction. That’s even before you add in the interstate investors from the eastern seaboard, who have also been pounding the keyboard and found your deal at a price that Easterners think is pocket change. It’s definitely more difficult in a competitive market, when vendors expectations of sale price is so high and the build price increased by 40%. It makes keeping a positive mindset hard. Reminding yourself regularly that there’s plenty of deals to go around and trying to keep an abundance mindset is key.
4. The Banks don’t like you as much
When you’ve quit your jobs, the bank, funnily enough, aren’t as keen to lend you the Million dollars they once were. This is where you sometimes need to get creative to make things work. You could look at commercial lending or team up with other developers to do a joint venture. We’ve been lucky enough to purchase a number of properties without involving the bank at all, simply by teaming up with others. Mark and I love this kind of relationship, working together to make sure that everybody wins in the process.
5. Number crunching and budgeting
I know, boring right? The fact is, without being good at numbers you WILL NOT be a successful property developer. There is no way around it. You can’t wing it. All this said from somebody that failed high school maths, twice. The good news is you can learn it, I did. Or you can also employ somebody to review your feasibility. Or ask your accountant to look over your numbers, or even team up with accountants as your joint venture partners! I know that sounds far-fetched but accountants actually make really excellent business partners and we’ve been lucky enough to have two Accountants team with us over multiple projects.
6. Working from home
This seems like more the norm after the covid years, but it can still be challenging, often when the dog is playing with a squeaky toy during a zoom meeting. Or when you have a husband who resembles at fog horn on the phone and his desk is next to yours. Much harder I suspect, when your work desk is the dining room table and you have a house full of children. These days, we tend to like to get out and about and arrange meetings in coffee shops or a nice restaurant.
7. Pushing through boundaries / fears
This one is a biggie, perhaps even the biggest. Quitting the day job particularly, is a challenge. Even when you’ve proven to yourself that you can keep a roof over your head and food on the table over a few deals. Most property developers won’t quit their day job until they’ve got enough financial buffer to see them through at least a year’s living expenses. You have to get used to playing the long game and knowing exactly how much it costs to run your lifestyle is imperative. It can be a very long time ‘til payday. Even with those $’s carefully budgeted and safely in the bank, as you slowly see it dwindle, without certainty on your next pay day, it can play on your mind and keep you up at night. On the plus side, it does keep you motivated to chase the next deal and build your financial buffer to increase your comfort level.
So all in all, some things to consider and some hard things to overcome, but not insurmountable and absolutely worth it.
Nicola & Mark of Harwood Homes have been developing properties all over the Adelaide area, in particular the south of Adelaide. From sub-divisions, property renovations to larger property developments, they are a wealth of information and heavily experienced. If you have a property you would like to sell off market or subdivide and are looking for the right partners chat with Nicola and Mark today.