To Buy Land Correctly Is Fundamental To Successful Real Estate Development
From the desk of Colm Dillon ...
Author of "Residential Development Made Easy"
Hello Colm Dillon here ...
For your development project to be successful every element must be planned carefully.
To acquire land for development is just one intergal part of that planning process; however it tends to be the focus of most start-up developers.
Before starting the development process to buy land, you need to decide who or what legal entity is going to buy land. For instance is it going to be in your personal name, in you and your partner's names or a company name.
Answering that question is important because you need decide who or what entity is going to borrow the money to purchase of the land, but also borrow the money for the total development. Many people keep these two actions separate, yet they are linked.
Each individual’s personal circumstances are different. Add to that the different States or Countries in which we live, and and you can see that they are many permutations to be determined before you can answer that question.
These decisions are fundamental to your work as a developer. After all we are developing to make money and setting up your structure correctly ensures that the money you make is tax advantageous.
My best advise is to investigate and engage a good property accountant, a good property lawyer and a good propertyfinance broker before you go to buy land.
Notice I have bolded the word property against these three
professionals. Please understand that in any profession, there is the need to specialize.
I mean you would not get the best advice from a lawyer who mainly did family
law, now would you.
What's the answer? Before appointing anybody ... interview
them ... after all you are about to base your future on their advise.
Have your personal and or company financial details clearly set out and in particular have your 'wealth plan'defined so you can brief each of these professionals.
Don't do you thinking in front of them. It wastes time; is unprofessional and costs
you money. The better the quality of your preparation ... the better the brief
you will leave with them.
Except for the Finance Broker, they all charge by the hour.
Please - please - please; if your best friend or Aunt Mary's next door neighbour
is a lawyer, accountant, broker - don't engage them! Or if you want to go in that
direction, interview them and ensure they have the correct property background.
Residential Development Made Easy goes
into more detail as to how you proceed with these professionals and determine which entity actually does buy land; borrows the money; develops it from the greatest tax advantage to you and protects you legally
Let's Get Control of The Land Before We Buy Land
So your plan is progressing. We know who or what entity is going to buy land. The next point to consider is what 'tool' are we going use to gain control of the land.
You'll see as you progress through the development process, you need to build in as much flexibility 'for you' as you can.
We haven't got there yet, but eventually you'll need to made an application to the local authority in order that you can build what you want i.e. 4/6 townhouses, apartments etc. What happens if the
authority says 'no.'
Do you still want to buy land? I don't think so!
So in this part of Residential Development Made Easy I talk about the various strategies you can adopt to gain control of the land the correct way.
Time To Find That Development Land
One of the things you'll discover in my eBook, is that you can do several
development activities at the same time.
One of the 'Activities' I tell you to do "well before" any of the above action steps is to do your market research ... yes, I tell you how to go about it!
Is it important? ... Multi million dollar corporations spend 'millons' on market research ... if it's good enough for them to do it, I think it's more than good enough for you as well. It's professional ...
it's necessary ... and it's in your financial interests.
You can do this kind of research before you spend a 'dollar' of your own money ...
you can do it in fun way ... but with a method behind it ... all explained in
Residential Development Made Easy.
From that data base you'll know what type and size of accommodation product you want to develop. You'll finally also determine what is the total 'make-up' of your development.
OK, every authority has different development rules. You should go to the
Authority's offices and find out 'the rules' for the type of land you want to buy.
Architects know these rules ... ask them to explain to you the quick 'easy' way to determne a development site's capacity!
I give an easy example in my eBook ... how to assess the number of residential
accommodation 'units' you can develop on a particular land site ... from the front seat of your car. All this impacts on your development costs.
Buy land for $100,000 and put eight units - houses, whatever, on it the land cost per unit is $12,500 per unit. If you local authority says No and only allow you to put four units on the land ... that looks like double yourcosts to $25,000.
Negotiations To Buy Land
Only you know if you can 'Do It Yourself!'
Well, Can you negotiate to buy land directly with the Seller of the land? It's the one I use myself ... but is it for you?
It's you choice ... if you go my way, my eBook gives you a 'word for word' script. Even if you don't do it yourself, you need my information to be able to manage the person who does it for you.
Plus other options.
The Contract to Buy Land
In Residential Development Made Easy I address
this subject in great detail.
You need to know the detail of Contracts for the Sales & Purchase of property.
In two sections of my eBook I give a 'blow by blow' detailed explanation of how to ensure your contract is prepared correctly to buy land for what you want to achieve.
To emphasise how important your understanding of the Contract is, let me just say this to you.
After you have completed all your market research, talked to your accountant,
lawyer, finance broker, many real estate agents, found the property and
successfully negotiated the purchase ... you then have to design your project and make application to the Authority for permission to develop.
This is the point: (read that last para again)
After all that work, time and money spent, the only thing that connects you
back to the land you want to develop is a 'bunch of paper' called a Contract.
The words on the Contract should ensure that, if you get your approval to develop, that the Seller can't change his/her mind and not sell you the land.
By that time you've invested a lot of time & money ... by getting an approval to take a property from its current position, say one house, to four townhouses, you have increased its value Subsantially.
If your contract is not correcly worded and the vendor can 'get out' of the contract, then the value increase you have created passes to him/her.
This is not a Happy Experience ... read Residential Development
Made Easy and be aware of what to do.
Oh Yes, I almost forgot. If you decide to negotiate the purchase of the property yourself, I take you through a special session on Contract Presentation to the Seller ...
By definition, there's a 'right way' and there's a 'wrong way.'
Life is full on these decisions ...
'turn right and you're successful,' or 'turn left and you're on your way to trouble'... 'learn the right way and be successful,' or 'keep flying blind
and learn from the school of hard knocks.