YO U R I N V E S T I N G
So, You Want to Be a Property Developer Are you sitting a piece of land that can be subdivided, or do you want to take property investing to the next level? Ben Tutty finds out how.
New Zealand has a property obsession. For Kiwis, owning our own homes means financial security, certainty, and freedom from niggly property managers.
low-decile area in Christchurch and built a spec home. We needed capital so we offered our friend a profit share to secure the loan.”
Following that logic, a career as a property developer has to be the ultimate road to riches, right? Well, sort of.
That was the first and last profit share Blair and business partner Matthew Horncastle ever needed, but it built the foundations for what Williams Corp is today.
There’s money to be made in developing property, but it’s not all supercars and capital gains. From buying land, to getting council consent, to completing a build and selling a development – there are countless complexities to tackle before you make a single dollar. Putting down foundations Blair Chappell knows a thing or two about making dollars developing property. He’s one of two managing directors at Williams Corporation, which has become the fifth largest residential developer in the country* after just nine years of trading. He says his company sprang from humble beginnings. “We took a loan out from a contractor friend of ours, bought a $65,000 section in a 56
INFORMED INVESTOR |
SUMMER 2021
Just like Chappell, if you want to develop property, starting with something manageable is a good idea. “Small scale and simple is better at first. Buy a property with a big section and build one house on the back, or subdivide and build a house on the back of a section you already own,” Chappell said. “This will give you a taste of what it’s really like to develop property. You’ll get a feel for the process of financing, contracts, consenting, subdividing, marketing and selling.” After a long, arduous and time-consuming process that could take over two years, you should also be prepared to barely break even – or even lose money. After all, property development is a high-risk game and the learning curve is steep.
Build a team then build an empire Building a home from scratch and selling it is a big job, to put it lightly. Ian Laywood, Director of Property Finance NZ, one of New Zealand’s leading independent property finance specialists, says you need to build a good team and strong relationships before you lay a single brick. “It’s vital that you have a strong relationship with your builder. If that doesn’t work, it’ll end up in tears, no matter what. “Make sure you get good references and have a thorough look at what the builder’s done in the past. Talk to people they’ve worked with previously to find out what they’re like. Don’t be scared to get a few prices.” Equally as important is finance, he says. “Talk to your bank but don’t be frightened of the non-bank lending market. Banks are very strict and may require you to cover as much as 1.2 x of your debt in pre-sales.” You’ll also need an architect, a good tax accountant, a geotech surveyor, a valuer, a lawyer, and possibly a real estate agent. Better get out the phonebook.
