EP 140: How To Understand Profit In Property Development
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Return on cost (ROC) is a crucial metric in property development that measures the profit of a project as a percentage of the total cost. It is essential for both investors and developers to understand and calculate ROC accurately to assess the financial viability of a property development venture. The importance of annualising return on investment (ROI) is a key factor that is often overlooked or misunderstood by stakeholders in the industry.
Annualising ROI is crucial for accurately evaluating the profit of a project over a specific time period, typically one year. This is important because it allows investors and developers to compare the return on their investment to other investment opportunities or benchmarks, such as the interest rate offered by banks. By annualising ROI, stakeholders can make more informed decisions about the potential returns and risks associated with a project.
In this week’s episode Hilary and Bob discuss how to understand profit in property development. They share insightful tips and insights on the topic, including a reminder not to judge a person by their car! So stay tuned to learn from the legendary Bob Anderson, gaining valuable knowledge about maximising profit in property development.
Episode Highlights:
Bob’s tip of the day [01:10]
How to understand profit in property development [03:38]
Clarifying the email offer [04:59]
Explaining return on cost (ROC) [08:02]
Return on equity vs. return on investment [09:44]
The significance of ROC in property development [13:07]
Differentiating between loan and equity partners [13:51]
The structure of equity partnerships in development [17:32]
Final thoughts and upcoming webinar [26:11]
Resources:
To learn more about our upcoming webinar; How To Develop Commercial Projects please click here: https://www.propertymastermind.com.au/how-to-develop-commercial-projects/
For more information about Hilarys book 3 Wines In, how to increase your self confidence today without the hangover tomorrow, please click here: https://hilarysaxton.com/3-wines-in/
To get inspired and to start taking action, listen to Hilarys podcast: Bounce Back Better. Available on Apple, Spotify or wherever you get your podcasts.
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