Financial Readiness: Are You Equipped for Property Development Success?
Are you ready to start your first development?
A question I get asked but a lot of my students is...
Am I ready to do a deal?
This is SUCH an important question!
It's also one that many don't consider before jumping into a development.
If you're new to property development, one of the biggest challenges you'll face is understanding if you're financially ready to take on a project.
With so many different costs and expenses to consider, it can be hard to know where to start.
To be ready you must have a strong understanding of your revenue streams, expenses, and debts.
It's important to understand:
- your lifestyle
- family financial commitments
- the impact it could have on these things.
When I started out I spoke to professionals, banks, financial advisors, and friends who had experience on where and what these impacts might be.
As detailed below, the common advice I received was to consider the following five areas, and to understand a resulting financial position.
I hope that my experience and learnings will provide some clarity to you.
So you can determine if you are ready!
Or if you are not quite there yet, how to get ready!
Determine your budget
The first step in any development project is to determine your budget.
This includes the purchase price of the property and the costs associated with development.
Be sure to factor in all expenses including:
- taxes
- insurance
- approvals
- construction costs.
At Rising Star, we teach this as one of the key steps, introducing to you the Feasibility Assessment.
This shows you how to crunch the numbers, so you only buy profitable deals and I give you my feasibility model to help you do this.
Get pre-approval for financing
Before you start looking for properties, it's important to get pre-approval for financing.
This will provide a clear understanding of what you can afford to borrow and help avoid wasting time on properties that are not feasible.
One of the benefits of being a member of the Rising Star Inner Circle is the access you receive to a community of skilled and like-mined professionals that share their learnings.
This includes finance brokers, or people that have used them in the past to access development funding.
If you don't have much borrowing power, don't worry, this is where I teach students the power of money partners.
Assess your cash flow
It's important to assess your cash flow.
This will ensure that you can always cover your living expenses.
Plus it's always a good idea to build in a buffer to cover any unexpected costs that may arise during the development process.
Consider partnering with others
If you're not financially able to take on a project alone, consider a partnership.
This could be a business partner, family member, or friend.
Someone who is willing to invest in your project and share in the risks and rewards.
I advise having this detailed legally so that all parties fully understand their commitment, risk and potential reward.
Successful partnerships can be ongoing and used across many developments.
Property development can be a rewarding and a lucrative endeavour, and it's how my family has achieved financial freedom.
But it's important to approach it with a clear understanding of your financial situation.
By following these tips, you'll be better equipped to determine whether you're financially ready to take on a development project.
Having someone in your corner to help you understand this could save you thousands of dollars and months in mistakes.
My advice is to try not to feel overwhelmed by the idea of taking on a project and instead educate yourself around it.
The Rising Star program and community is one of the many resources available for you to tap into.
The doors to the Inner Circle are currently open
This could be how you get ready to do your first deal!
It’s about knowledge, planning and working towards wealth creation in YOUR own time and when YOU are ready.
Until next time.
