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The Secrets of Property Development
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Almost everywhere you look, property developers are being associated with huge profits!
Well, this is certainly possible…
…if you know the little-known property investment secrets!
Before I reveal this valuable information, it’s important to explain a bit about property development and how it works.
First of all, property development is quite different from traditional property investment methods.
One of the reasons is because capital growth isn’t required in order to generate a profit.
So why doesn’t almost everyone jump in to take advantage of this lucrative investment opportunity?
Well, the large amount of starting capital is one reason.
Knowing exactly where and what to build and who to build it with is another.
The intense personal involvement is yet another reason why becoming a property developer is nothing more than a dream for most people.
Do you have huge amounts of money, time and knowledge?
Probably not! But don’t let this discourage you.
You can still earn returns that are every bit as high as large property developers, but with one important difference…
You don’t need to invest a huge amount of capital or time!
How does this work?
Well, it’s easier than you may think.
Start by joining a group with investors who think just like you. Find others who share your goal and then register your property development company.
This will entitle each investor to a shareholding. The next step involves having the company buy the development land and start building!
Who should be in charge?
The company’s directors should be individuals with detailed knowledge of the particular development market you choose. They will be responsible for establishing the company, and each investor will enjoy a share in it.
What will the directors do?
They will take care of all the necessary details concerning the development.
These include setting up independent banking and accounting, locating a suitable building location, negotiating a fair purchase price and raising funds and reducing the tax burden by collaborating with tax and financial advisor's.
The directors will also hire the lawyers, landscapers, notaries, architects and building contractors, find the required construction materials and then oversee the actual construction.
Administrative tasks such as liaising with architects, banks and suppliers, reporting to the shareholders and running the company are also important. An effective director will make the sure the project remains on budget and on schedule!
During the construction process, the directors will also solicit the help of local or international real estate agent to help promote their property!
Now, on to the most important question…
How will you actually earn a profit?
Well, once the company earns a profit from the sale of the property, the property development company will dissolve. This is the part where you come in.
As a shareholder in the company, you are entitled to a share of the profits.
This minimises your risk and effort, while maximising your possible returns! Property market performance plays no role in the amount of profits you can earn.
How does the funding work?
Here’s an example using estimated figures.
Project Summary: Construction of a Dubai Commercial/Residential Tourist Resort with a Plot Size of 15ha
- 10 Commercial Retail Properties (approx 100m2)
- 50 Luxury Villas (approx 120m2)
- 2 residential complexes with 50 units each (approx 45m2)
- 5 Hotels (approx 2000 m2)
- Total Development Costs: £8.5million
- Total Income: £11.25million
- Development Profit: £2.75million
- Developer’s Profit Margin: 32%
Return on Investment: 309%
Let’s break down this project summary further.
Development Costs - The total development costs include any construction costs, professional fees, bank loan interest, government taxes and cost of the land.
Profit Margin - The developer’s profit margin will change depending on where you live. However, it will be affected by certain factors such as construction costs, unit sale prices, professional fees, taxes, finishing standards and the price of the land.
Hence, you may earn a lower profit margin if you live in Spain or the UK than Bulgaria because the construction costs and price of the land are higher in these two areas.
Project Funding - The shareholders can fund the project by investing 20% of their own money and obtaining another 30% from banks. The pre-release sales of discounted off plans can make up the remainder of the necessary project funds.
Return on Investment – You can potentially earn a £2.6 million profit with a capital investment of only £840,000.
What is the end result?
A staggering 309% return on investment!
How would this work if the fund attracts a total of 10 investors?
Well, if each investor purchases 10% of the development company shares, their individual investment will be £85,000.
How did we arrive at this amount?
Divide the amount of invested capital by the number of individual shareholders.
Now, let’s look at how much each investor can earn once the property development is completely sold.
If the property development project lasts 3 years, you would use the following formula:
In this case, here is the potential profit:
The above calculations haven't taken the fact that the property market may grow by 10% to 25% in between the build period. Therefore your ROI will be higher than the above 309%
Even if the property market stagnates, you'll still return a brilliant 309% return on your investment!
I'm sure you’ll agree that this is much higher than you’ll ever earn from a regular savings account or traditional buy-to-let method!
Return from Property Development to Home Page
» Learn How to Be a Property Developer New!
Be a property developer and earn more money than you could ever imagine. I'll show you how….
» Property Developer in the UK?
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