How Do Real Estate Developers Make Money

How Do Property Developers Make Money?

Nov 1, 2019 by | All, Developer Insights

There are lots of ways to earn a crust today. Yet if you've ever wondered how property developers make money, you're in luck.

At Little Fish Property Developments, we believe in sharing our expert knowledge with you. So you can take that first step into property development and maximise the value of your land.

So, let's take a look at just how you can make money by developing your land.

The Short Answer

In short, residential property developers make their money by maximising the true value of the land they are working with.

They do this by building separate dwellings and subdividing them, so they can be sold as individual dwellings. They understand the local laws and regulations inside and out and can maximise their designs and builds accordingly.

A successful property developer won't try to fit a square peg into a round hole and develop something that has too many unknown variables. It's a step by step processthat if followed correctly, will result in a tidy profit.

Time is Money

One thing that property developers understand is that, even if there's a profit at the end of the process. Every day in the project has a dollar amount attached to it. Time is money after all.

Efficiency is the key. Knowing when things need to be done and making sure nothing is missed saves both time and money.

As a result, smart developers leverage highly refined systems and development processes to ensure efficiency and value for money.

Days can quickly turn into weeks, weeks into months and months into years. Which can blow out a project and promptly make it unviable.

There's a reason you see abandoned developments in most major cities and towns.

As well as being aware of the impact time can have on costs, a developer has a clear understanding of how long things should take and exactly how much they should cost.

They also know the timelines that all the steps should occur in. This way, they can keep a tight grip on the reins and stop costs from ballooning and projects timelines from blowing out.

A successful developer is a project manager, first and foremost.

If you want to learn more around costs and timing for a standard Melbourne dual occupancy development project check out this case study.

They Have a Solid Network

Professional property developers have a rock-solid network of partners, contractors, suppliers and other associated and relevant professionals in the property and construction sectors.

They can offer these people continuous work. As there's always a project on the go, so they get preferential treatment and cheaper than wholesale rates.

This keeps costs down and keeps the ship sailing smoothly, resulting in quicker builds and turnaround times, therefore, keeping the business and individual projects viable.

how do developers make money

Location, Location, Location

The holy grail of real estate. Location is so important when it comes to residential property development in Melbourne.

A savvy developer will know precisely which areas to develop based on precise numbers and facts and have years of experience in identifying optimal development sites in the right suburbs.

The best and most successful developers are looking at countless metrics when identifying a site and never let emotions dictate any decisions no matter how big or small the decisions might feel at the time.

What might seem like something small and insignificant can become extremely costly and significant if you aren't careful.

So you need to be smart, build up your own knowledge bank and stick to the numbers and facts.

Quality developers also get access to off-market opportunities due to relationships with local agents they have built over time.

So don't be afraid to get around to the auctions in the areas you are looking on a Saturday and make yourself known.

As the old saying goes, if you're not networking then you're not working!

Side note – you need a comprehensive marketing plan for your development which you can learn more about here.

Now you know how property developers make their money you're probably wondering how you can do it!

How Can You do it?

You may feel a bit overwhelmed after reading this article, and that's understandable.

There's a lot to take in and many plates to spin to develop a property and make a decent profit successfully.

If you have the appetite to go at it alone then the key is to gain as much knowledge as possible, knowledge is not only power but it's also money when it comes to developing.

So, roll your sleeves up, be patient and disciplined enough to learn everything you can.

On the flip side, if you have the appetite to develop your land or purchase some land to develop but would like some help then don't hesitate to reach out to us here at Little Fish Property Developments.

We're in the business of making your land work for you. It's what we do day in and day out for everyday landowners just like you, and we absolutely love it! With a bit of luck, you'll start to make significant capital gains.

As property development consultants we'll look after the whole development process, end-to-end, and explain every step of the way to you in terms you can understand.

We also have our custom-built project management portal for you to follow along as much or as little as you like.

Why not become an 'arm-chair' developer! Find out how much money you need to do a property development.

For more information on how you can start to become a property developer, call the team at Little Fish on 1300 799 277.

Filled under: All Developer Insights