Words used by a #propertydeveloper that built and
sold 14 apartments and saw very little of the $8m sales proceeds.
We had the opportunity to break down the numbers for the development site and the pic below tells an interesting story.
From the $8m proceeds:
$4,930,000 – 62% went to purchase and construct the site.
$1,400,000 – 17% was ravaged in taxes permits, contributions and approval fees
$1,100,000 – 14% net profit
$570,000 – 7% to finance the project (interest, establishment/line fees over 18 months)
What’s most troubling about construction is that the government makes more money (albeit directly through taxes or indirectly through permits etc) than the developer in almost every build. But it gets worse, tax in this instance is at company rates, try and draw the net profit at the individual level and you’re paying more tax.
The truth is most builders and developers are caught up in the “rush of the build” and do not get the opportunity to effectively plan and monitor where the money is being spent. We are privileged to have helped clients implement better strategies to ensure better results on development sites and long-term cashflow.