PROPERTY INVESTMENT

The difference between property investors and developers

September 27 2016
Investment vs development

If you’ve considered building in your backyard the thought might have crossed your mind, does this make you a property developer?

We take a look at the profiles of a property investor and developer to help you determine where you may fit.

The Property Investor:

In general, most property investors build one dwelling, either on a single survey strata or a green title block. Property investors are looking at a longer term commitment of between 5 – 10 years and are building the property for wealth creation and/or tax minimisation.

A property investor builds with a balance in mind; between a property that will increase in value and a property that functions well as a rental, to maximise rental yield.

The home design and location a property investor chooses to build is extremely important, as it will impact their rental income and potential property growth. Property investors do not want to under or over capitalise the build, and must ensure the level of finish is suitable for the area they are building in.

Property investors are best off when they speak with professional consultants who work with investors on a day to day basis. It is okay to look at display homes to get ideas, but display homes are designed for families to live in… not as an example of an investment property.

The Property Developer:

A property developer, in contrast, is somebody who takes a parcel of land and builds multiple dwellings on the same title. The amount of dwellings allowed will depend on the zoning restrictions or R-Codes.  A developer will generally try to get as many dwellings on the block as allowed, to maximise their returns.

A developer aims to create new home stock and on sell this to home owners and investors. This is a shorter term strategy than a property investor. A property developer would be looking to take advantage of a slower building market, to have lower costs and quicker build times to get their stock into the real estate market sooner.

An inexperienced developer can run into trouble when they are trying to work out the feasibility of a development project by using just the R-Codes to determine the number of dwellings that can fit on their block. Without professional guidance that takes into account the shape and topography of the land, costly miscalculations could be made.

Want to know more about Property Investment and Development? Join the WA Property Club for the latest news and information about investing and developing in Western Australia.

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