Accountants, Business Advisors, Superannuation, SMSF
7 Common Mistakes made by First Time Property Developers
How can you avoid making the “usual mistakes” made by a first time developer?
As a specialist Property developer advisors with over 30 years of experience, our clients are able to utilise our expertise including our network of consultants and other advisors to guide them through every step of the property development cycle.
We offer advice on de-risking both the Developer and the project, structuring, income tax, GST advice and a second opinion servers to name a few right up to the winding up of the project.
The most common mistakes we’ve found new property developers make are:
- Not de-risking the developer or the project
- Not carrying out a proper due diligence on the site and the project.
- Preparing an incomplete feasibility study
- Not seeking specialised advisors early on in the process
- Appointing the cheapest advisors
- Incorrectly calculating the GST on the sale.
- Raising funds incorrectly.
1 - Not de-risking the developer or the project
Most often than not, first time developers will undertake a development in their own name, borrow against their family home to contribute funds into the project. What this now means, anything you now own under your personal name including your family home is now at risk should the project not be successful.
2 – Not carrying out a proper due diligence on the site and the project
An analysis of a site including the purchase contract are non-negotiable. Not getting this right at the start may end up costing you hundreds of thousands in the end. Before you commit to a development, you need to be aware of the various regulations, legislations that will affect your project. Most developers are not aware of these, that’s why its critical to engage professional to assist and guide you through this process.
Check out our complimentary Site Acquisition Checklist!
3 – Preparing an incomplete feasibility study
There are a lot of expenses attributable to a property development project that most inexperience developers often ignore or are not aware of. We have prepared a FREE feasibility schedule where we have identified most of the costs that need to be included when preparing a feasibility study.
Request our FREE Financial Feasibility document
4 - Not seeking specialised advisors early on in the process
Most of the 7 mistakes identified mainly occur due to not engaging professional assistance early on in the process. Even short delays can be costly and most can be avoided when you have an experienced hand guiding and advising you along the Journey.
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5 – Appointing the cheapest advisor
A picture tells a thousand words.
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6 – Incorrectly calculating the GST on the sale
Upon the sale of your development GST is payable on the sales price. Most developers are not aware of the two-methods in calculating the GST resulting in extra GST paid.
7 – Raising funds incorrectly.
ASIC prohibits anyone from raising equity for their development. If you were to approach anyone asking them to invest in your project or if you were to make a statement like “if you invest in my project you will receive 30% return” you are deemed to be in the business in raising equity/capital which requires you to hold an AFS licence ( Australian Financial Services Licence). Anyone caught and convicted will face a serious penalty and or Jail time.
It is very important to engage professionals who are industry experts. Saving a dollar early in the piece can result in thousands of dollars in not getting it right.
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