Would you bare it all for a stranger? Or even riskier, would you make yourself financially intimate with someone you hardly know? Even if your intuition says ‘go for it’, you’d be a fool to do so.
When the stakes are as high as they are when you’re entering the property development market, who you choose to partner with can make or break you.
Believe me, I understand the instinct to want to rush in. You want to secure financial freedom and security for your family and the idea of property looks like a smart way to do it.
It’s a logical conclusion given the fact that property investing is a time tested and proven strategy for creating wealth. Throughout the years it has remained Australia’s favourite form of investment. It won’t surprise you that more than 60% of the wealthiest Australians became successful through property investing.
So, the question is, how do you do it effectively?
“Finding good partners is the key to success in anything: in business, in marriage and, especially in investing.” – Robert Kiyosaki
Partnering with a property developer allows you to use their expertise, network and team to become involved in lucrative projects. They’ve gone through the process before and can share their real-life experience with you. However, like anything in life, there are bad, mediocre, and even phenomenal players in the space. So how do know you’re choosing the right developer to partner with?
Here are 4 critical factors to consider before partnering with a property developer
*No ethical developer will fail to meet these requirements.
Okay, it’s time to commit to someone, and I’m going to tell you exactly what you need to look for so you don’t get your financial heart broken.
Partnering with a property developer should be a freeing step for you, lightening your load by letting you know you’re in safe hands. You can only do that if you trust that they’re real people – people who are transparent, honest and upfront. Yes, it’s a feeling you get, but it also must be earned.
- ‘Trust your gut’ is great advice – sometimes. Your intuition is an important cognitive function, but you’d be crazy to rely on it 100% for major financial decisions. Instead, critically look at the facts. Gather data from a range of sources – personal recommendations from the investor’s past or current clients if you can get them. Proceed with proper caution and don’t stop studying just because your instinct tells you someone’s got the goods.
- Does this property developer have a solid track record? Find out about the developer’s experience and their results.
- Do they share your values and care about your future? Yes, it’s obvious that everyone wants to make a profit but what are their personal values? Do they line up with your own?
2. The numbers
Will the project deliver high returns? This is a biggie!
An effective property developer needs to be a Superhero.
I’m not exaggerating. They are a rare and wonderful beast.
High return projects need people who are like bloodhounds for finding high potential locations. People as creative as Steve Jobs for creating a concept, number crunchers like Warren Buffet for determining feasibility and also a Mike Tyson-like left hook for purchasing property and getting the right price.
Often all this happens before you as an investor even come on board. This is why property developers build special teams who excel in each of these core areas. When the mix is right, the numbers stack up and the results speak for themselves.
To check that the numbers are right for your project, here are 3 steps to take:
- Watch the project presentation and come prepared with questions (if they don’t have a cracking project presentation, there’s your first warning sign!)
- Review the cost of the project and its potential profitability
- Review the concept and feasibility study
Financial planners, accountants, bank managers… I’ve worked with them all for 30 years and I’ve observed one thing.
No one cares about your money more than you do.
I don’t care what anyone says, this is always true. This is also why it’s impossible to be completely passive in your property investments. Having said that, you also don’t want to micro-manage your portfolio. What you want is to partner with someone who makes it easy and stress-free to find out what you need to and want to know about your property investments.
You want someone who is a good communicator.
Your property investment represents your future, so you need to have effective communication established before, during, and after a property project. Consider these questions before committing to a project and a property developer:
- Are they open to your questions and show a willingness to answer them?
- How often do they communicate with you about project updates and progress?
- Do they communicate in a way that is clear and useful to you?
- Do they do the things they say they will do?
Every investment has risk involved. Whether its stocks, bonds, mutual funds or property, every form of investing contains risk. It scares many people off and can make for nerve-wracking investing. But, if you find the right property investor to partner with, you will get to understand the risks. We are always afraid of what we don’t know, so get busy and get familiar with risk!
The best way to establish how much risk a project has is to ask the developer. Here are a few questions to give you some ideas about determining risk.
- What are the specific risks in this project? (council approvals, engineering challenges, architectural/builder issues)
- What is the worst-case scenario for the project and what can you do to reduce the risks?
- Do they have plans and strategies to manage different scenarios to protect your investment?
An ethical property developer won’t try to diminish the likelihood of risk or gloss over it. Instead, they’ll show you they are 100% across every possibility and have planned for it. Sure, hope for the best but always plan for the worst!
Shopping for a Property Developer – Have You Found A Keeper?
If you can put a huge tick in each of these four categories – trust, numbers, communication, and risk – you have found a property developer to work with into the future. Great property developers will also assess you as a potential partner, so don’t be afraid to be picky. Building a relationship that’s open and built on a win/win formula is best for you and the developer, so make sure you are getting in bed with the right developer!
If you’re looking for someone that ticks all the boxes, give Adpen a call. You’ll find that their work speaks for itself and that their people are fantastic to work with. But don’t take my word for it, do your research and find out for yourself!