The essentials for small and medium developers who are looking to start, or scale, their business from a solid foundation of tried and tested methods, processes and strategies.
Successful developers invest time, effort and money to understand the fundamentals of the business; Process, People, Product and (Market) Place. These fundamentals form a solid foundation in which to build a low risk, high reward property development business that can have a positive impact to many.
In last month’s episode we rounded off stage 2 of the property development lifecycle; the appraisal process.
The next stage is to secure the deal. This will involve putting together proposals, discussions and negotiation. In this article, we will be explaining the most common contracts and agreements used in land and development purchases, and discussing the best negotiation practices.
One of the core values that runs through all of our businesses is fairness, so we like to ensure any deal we do delivers value and creates a win-win. This is a quality that will stand you in good stead when building a successful, sustainable development business. Creating deals that work on the selling side of the transaction comes down to your ability to understand the owner’s present situation: what they’d like to achieve, their motivations and any inhibitors.
Agreements and contracts
You can be creative when it comes to deal structures, but you need to ensure that you don’t oversimplify or overcomplicate matters when it comes to contracts and agreements.
Essentially there are two types of contracts used in acquiring development opportunities:
- Control contracts
- Purchase contracts
Control contracts give you as the developer rights over land you do not (yet) own, allowing you the opportunity to invest in adding value, usually through planning prior to purchase or sale. The most common control contracts are option agreements and promotion agreements.