How to find the best property development deals
Love to earn money as a property developer but sure how to locate the right project? Find out how to find the best property deals.
Even the freshest faces to enter the property development arena know that the most important thing on their to-do list is finding the right property or piece of land to develop.
Auction houses, property listings, direct-to-vendor, and commercial estate agents should all be on the target list. Fantastic deals can be found via each of these sources, but which approach is best to bag a profitable project?
Why the ‘armchair approach’ doesn’t work
Many new developers opt for an armchair approach. The internet allows access to various commercial property web portals, and if we register our details and set up a few searches, then every new property hitting the market that meets our selected criteria will automatically hit our inbox.
Except that’s not the case.
The best deals never make it onto the internet. They stay resolutely off-market. If you limit your efforts to what comes up on your laptop screen, you’re not going to catch sight of any of the really good deals.
By off-market I don’t mean that these properties aren’t for sale, nor that commercial agents aren’t involved – quite the opposite.
Why commercial estate agents are the best sources – but you need to get your timing right
Commercial estate agents are hands-down the best source of opportunities for developers, but you will need to intercept these opportunities after the agent has secured them but before they advertise them to all and sundry.
This is the default way for an agent to sell a property (commercial or residential): a client is secured, and instruction taken; someone from the office visits the site, measuring up and taking photos; this information is used to create a pdf document; this pdf is emailed to the agent’s database, the information is added to the agent’s website as well as to the property portals to try to find a buyer.
This process works, but it is pretty labour intensive, plus it can take a while to come off.
Many agents have a little black book of ‘hot buyers’
A more attractive approach for many agents is to reach for their little black book of hot buyers and select a few they know will be interested in the property. The conversations will likely include a variation of the line I’m only talking to a handful of my best buyers.
You can see how this can work well for both the agent and the vendor. There’s no measuring up or taking photos, and no marketing other than a handful of phone calls.
Only a few viewings are carried out within twenty-four hours, involving people the agent knows are likely to be interested in buying the property. And if they sell it, the agent gets their commission more quickly and incurs fewer costs, plus the vendor gets a good price and a quick sale.
If no hot buyer is interested, the property ends up on the portals where the slipper-clad newbies are gathered. In other words, if you’re looking exclusively online, you only see the deals that the hot buyers didn’t want. An online bun fight is not where you want to be. So, how do you become a hot buyer?
The key lies in building personal relationships
Like many aspects of property development, the key lies in building personal relationships. There are a few points to consider. Firstly, the agent will need to view you as a strong potential buyer; you’re not going to get a call just because you asked nicely. This means you’ll need to do the groundwork necessary to prove yourself worthy of being contacted.
Secondly, there isn’t a clever algorithm telling the agent which hot buyers would be interested in any particular deal. The agent will create their own mental list of buyers who might be interested. It follows, then, that to be a hot buyer, you need to be at the forefront of their mind and not just sitting on a mailing list.
Finally, there’s no ‘cost’ to the agent in adding you to their list of hot buyers. If they are going to call five hot buyers, it is no big deal for them to add a sixth to the list.
How can you become a ‘hot buyer’ and get access to the best deals?
Many new developers meet with an agent, reflect afterward that it went well; the agent seemed very friendly, said they were confident they would be able to send them lots of deals and promised to stay in touch. The developer gets a steady stream of emails every week, making them aware of new instructions. But they haven’t achieved hot buyer status.
Hot buyers aren’t people that meet an agent once; hot buyers are the ones that regularly call the agent every few weeks to stay in touch and try and build a relationship. They’ll invite the agent out for coffee or lunch and make a point of creating rapport.
In short, they’ll make it easy for the agent to remember them when the right deal comes up. Is the developer a ‘mate’? No, just someone who has taken the effort to build a friendly yet professional relationship with them.
Read more property development advice
Keen to learn more about property development? We recommend reading these other articles by Ritchie:
- The ‘ugly’ secret to one of the most overlooked (and profitable) property development strategies
- Frequently asked questions about small-scale property development
- Five common mistakes made by small-scale property developers
- Six ways you can make your small-scale property development projects stand out
Ritchie Clapson CEng MIStructE is a veteran property developer of almost 40 years and co-founder of propertyCEO, a nationwide property development training company that helps people create a successful property development business in their spare time.
It makes use of students’ existing life skills while teaching them the property, business, and mindset knowledge they need to undertake small scale developments successfully, with the emphasis on utilising existing permitted development rights to minimize risk and maximize returns.
Photo by Roselyn Tirado