6 Ways of Exiting Your Development

A property developer should have more than one exit strategy. Discover Steve Chandler’s advice for creating yours.

All too often, property developers get caught up in the everyday technicalities of development. As a result, they lose sight of the big picture. They forget one of the most important parts of the development process – the exit strategy.

It’s crucial to have one and keep it in mind throughout. In fact, PDI’s Steve Chandler says that you need to have more than one exit strategy. His advice is for all property developers to have at least three.

Luckily, there’s no shortage of strategies at your disposal. No matter your sector, there are multiple ways to sell your development properties. Let’s take a look at some of the best.

1. Real Estate Agents

Your first option should be real estate agents. There are two types of agents that you might want to work with – local and global. For the Australian market, it’s in your best interest to work with both.

Local agents have a deep understanding of the local market. They have databases of people who have made inquiries on different types of property sorted by sectors. This is why they might know who you could sell the property to.

On the other hand, they have no contact with the broader market, which is why it’s important to work with global agents as well. They have massive databases of potential buyers that you’ll want to take advantage of.

A mistake that developers make is thinking that they need to have a large-scale development to enter the global market. This isn’t true, as you never know who might have an interest in your particular development.

So, if you want to dispose of your property quickly, the first strategy would be to get in touch with local and global agents. They’ll have the market insight needed to help you sell the property.

2. Investor Groups

Investor groups consist of individuals who want to buy properties for investment purposes. Working with them might help you sell your properties much quicker than with real estate agents.

This is because they often have investors who are ready to buy as soon as your development’s available. This gives you a reliable way of securing a profit as soon as you complete a project.

With that said, investor groups often ask for higher fees than real estate agents. In addition to connecting you to investors, they also provide other services like assessing your property. They do this so that they can guarantee that investors in the group will have adequate rental yields and capital gain.

If you’re ready to pay the price, investor groups can be the safest and fastest way of selling your development. It’s a near-foolproof exit strategy that you should think about.

3. Property Trusts

If you develop commercial, industrial, or retail entities, this might be a good option. Property trusts aren’t very interested in residential property, but they can be an excellent way to sell off other property types.

When working with property trusts, always keep in mind their main goal. A property trust seeks a stable stream of high income. They want high-quality tenants who can deliver it at as little risk as possible.

If your development can secure this, you should have no trouble exiting through a property trust. 

4. Retirement Funds

They might have another name in other areas of the world, but they all work pretty much the same except for a few minor nuances. Of course, they’re known as superannuation funds in Australia, which can be an excellent target market for your development.

As you know, a superannuation fund has a portion of income that the owners have to reinvest. In most cases, the investors won’t be very interested in residential properties, but all the other sectors are appealing to them.

Like with property trusts, owners of superannuation funds look for income-generating properties. They want a stable-long term stream of income that they can put into their retirement fund.

In Australia, the law gives people the right to manage their own funds. This means that they can invest in direct property, making them worth marketing to. 

It’s important that you check the laws that govern retirement funds before you start marketing. But if individual investors in your area can manage their own funds, you should definitely consider them as buyers.

5. Offshore Investors

In general, global real estate agents can access offshore investors. However, there’s a specific investor group that we should discuss separately. As the name implies, they’re investor groups that work exclusively with offshore properties.

The best thing about working with offshore investors is that they can act very quickly. You can sell your development in short order and at a high price. Of course, you still need to tend to their needs for generating a stable income.

It certainly pays to market to offshore investors when thinking about your exit strategy. They work with every property sector, so you shouldn’t have trouble selling your development on.

6. Retaining Your Development

As a contingency plan, the final strategy is to not sell your development at all. You can choose to retain it until you’re able to sell for the highest profit. Or you might even look at this as an investment opportunity.

The most important thing here is to familiarise yourself with the tax implications of retention. In some countries, you might even be able to defer any taxation until the property sells. This can boost your profitability and help you generate a stable stream of income.

From an investment perspective, the best thing about this is that you don’t pay profit margins. As a result, this can really pad your bottom line and your ROI. The acquisition costs are low and your rental yield is like everybody else’s, which means high profitability.

Choose Wisely

As you can see, there are many effective ways to get out of your development. It’ll depend on your sector or property, so it’s important to choose the one that will allow you to exit smoothly and profitably.

If you need help with this, Archistar can be an excellent solution. It offers a plethora of information that you can use to make the right decision.

If you want to learn how it works, feel free to schedule a demonstration.

This content comes courtesy of Steven Chandler of the Property Development Institute. Steve Chandler is a third-generation property developer with over 35 years’ experience. He is a lecturer at two of Australia’s most recognised universities and travels Australia delivering property development training at introductory and advanced levels. Steve has also authored a number of books on building and property development.