Making your money work harder can sound like a cliche but in such a capital intensive business as property developing, it pays to look at ways to recycle your money quicker and generate higher returns.
So I speak with Australia’s number 1 commercial finance broker Dan Holden about how you can leverage your money and time. It’s been more than a year since we spoke with Dan and a lot has happened across the lending landscape in that time, and with Dan’s business, so we have a lot to catch up on.
During this discussion we talk about what’s happening with construction finance lending, where sources of funding are coming from and ways that you can make your capital work harder for you.
Lessons for real estate developers
1. Have you identified your business model
Do you know what type of developing business model you have? Do you build townhouses, apartments, house and land packages? What’s your profit margin per unit? How many units do you need to produce each year to generate the revenue and profit you want? Are you looking to switch categories? These are all questions that would be good to have answers to because once you understand what you do, you can set about on making it happen.
2. Are harnessing the power of your capital
Making your money work harder can sound like a cliche but in such a capital intensive business as property developing, it pays to look at ways to recycle your money quicker and generate more returns. This may mean looking beyond traditional bank finance, looking beyond project to project and also beyond the cheapest funding out there. This might be a significant shift in thinking as you move from cheapest money to a model that may create a higher velocity of cashflow.
3. Be ready to change and adapt to the marketplace
The property market is always going to be dynamic, the economy will ebb and flow, sentiment will change, and regulation and policies will flex, so you can count on change. A change in the market can be an opportunity to switch product offering, move into different sectors or perhaps a new market all together whether that is interstate or overseas. So give some thought to what moves you could make if things tightened up in your segment of the market.
Alright, we are just about at the end of episode 35, don’t forget you can find me on Instagram (https://www.instagram.com/property_developer_podcast/) and Facebook (https://www.facebook.com/propertydeveloperpodcast), and remember you can find all the past episodes of the show over at www.propertydeveloperpodcast.com. You can listen to the previous conversation I had with Dan Holden, which is episode 14 (http://propertydeveloperpodcast.com/2016/05/20/clever-property-development-funding-tips-from-a-leading-finance-broker/), and if you want more finance tips then tune into episode 28 with Matthew Royal (http://propertydeveloperpodcast.com/2017/02/10/28-property-development-finance-for-serious-developers/).