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How To Start A Property Development Business

The first thing you must have is a good business plan.

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Content in this guide

  1. Business plan
  2. Zoning
  3. Title Deeds
  4. Find out who owns the land
  5. Financial support
  6. Building regulations
  7. Join the NHBRC
  8. Grading levels

1. Business plan

Business plan

In the business plan you also have to discuss how you intend to cope with the proposed electricity tariff increases and allow for possible interest rates hikes which would affect the profitability of the project.

Another important issue which must feature in your business plan is the cost of managing, maintaining and securing the residence.

Any organisation that is providing millions of Rand to develop such a project will need to be sure that the residence will at all times be properly maintained and is secure.

Without a sound business plan, you’ll be unable to find funding. It’s important to remember that a business plan is more than a means to money; it’s also the blueprint of the business and the best way to test whether or not the business is feasible.

You must show clearly in the business plan that you have researched the market thoroughly and are able to show that the students (who are always short of money) will and can afford to rent the accommodation as they are the key to the success of the project.

2. Zoning

zoning

Make sure that the property is zoned for this type of accommodation. Zoning is the grading of properties in terms of what it can be used for and what can be built on that property. Zoning schemes are imposed by Provincial Legislation and administered by Municipalities.

Zoning is the grading of properties in terms of what it can be used for and what can be built on that property. Zoning schemes are imposed by Provincial Legislation and administered by Municipalities.

South Africa’s laws require that in order to develop townhouses in a residential area the property must be zoned correctly (the property may only be zoned to develop one dwelling and not a number of different units).

If the property is zoned incorrectly, you have to apply for rezoning. Each local authority has different parameters in order to rezone property.

Related: Zoning and permits

3. Title Deeds

Title Deeds

In addition to the zoning regulations, development is also controlled by conditions of title. These conditions are set out in the Title Deed of each property, and can restrict the way in which a property may be developed.

Any development of land that ignores this legislation and its regulations can result in prosecution in terms of the applicable legislation.

The zoning regulations as well as the property description, and the size, orientation and other details can be obtained from the local municipally office and this department can also provide information regarding the National Building Regulations.

If a proposed townhouse development needs to re rezoned the application is a formal procedure. As it is a very complex procedure, it is best to consult a professional town planning consultant or other professional such as a land surveyor or a lawyer.

There are other costs to worry about as well. These include preparing the application, i.e. professional fees, the application fee charged by the council and the cost of drawing up plans.

Depending on the type of application, obtaining a decision may take as long as 12 months.

After the application is submitted it is circulated to relevant Council departments and agencies for comment.

Find out who owns the land

You will also have to find out who owns the land. Every property in South Africa has to be registered with the Deeds Registries Office in South Africa.

The deed constitutes proof of who owns the property. The deeds office keeps a record of all property transactions. If a title deed is destroyed or lost, application can be made to the deeds office for a duplicate original of the deed.

Related: How do I re-zone a property for commercial use?

4. Financial support

Financial support

As this is an education project, contact the Small Enterprise Development Agency, who provide free mentorship and guidance that will help will all the important steps in starting a successful business.

They will point you in the right direction in order to find funding and may also be able to help you get funding through the Department of Education.

However, although they do not fund projects, they will certainly be able to refer you to the right institutions. Other funders include:

NEF Imbewu Entrepreneurship Finance

They provide risk capital to new businesses in the property development arena. Visit their website for more information.

IDC – Healthcare and Education Fund

This fund supports education. Applications for financial assistance are evaluated primarily for economic merit (viability), while collateral is a secondary issue.  The policy is to have interest rates between 2 below- and 5% above prime overdraft rate. Download the pdf here.

Umsobomvu Youth Fund

Enterprise Finance aims to promote entrepreneurship among young people, so it provides funding to the youth (18-35 years old) to help them start a new business or grow an existing one. However you will have to demonstrate commitment to the venture and that it will be economically viable. Visit the website here.

Related: How to query details of ownership of commercial property?

5. Building regulations

Building regulations

It is widely known that the regulations for the building industry in this country are far less stringent than those of other countries.

A good reputation is so important

A reputable developer will never cut corners when building. By law certain standards have to be met throughout the building process. Architectural plans must adhere to council regulations and be passed by the local municipality.

Approval

Foundations must be approved by a building inspector before concrete is cast; the structure undergoes a damp proof test, the roof structure has to be passed and when the building is complete it must pass a final inspection.

Building inspectors can make or break a development

No loan for the construction of townhouses will be authorised by a bank without a building inspector approved by the National Home Builders Registration Council (NHBRC) passing the structure. If you plan to sell townhouses and have cut corners, buyers will be unable to obtain funding to buy a town house.

The Builders Manual

Before you start building contact the NHBRC and arrange to get a copy of their guide, “The Builders Manual”. It is a complete guide to building and explains costing of materials, planning and just about everything you need to know.

Download ‘A Guide to the Home Building’ manual here.

There is no such thing as a free ride

There is software on the market which is designed to assist owner builders to effectively cost all aspects of construction including labour, materials and equipment. However, it’s unlikely that you will find free software that you can use effectively. Contact the NHBRC for advice.

6. Join the NHBRC

NHBRC

“Avoiding the professional services of a Quality Surveyor could be a foolish decision”, says Zweli Mtetwa, Public Relations Manager for the NHBRC.

“We can help. We look at plans and can advise the best route to take, discuss the right materials and check quotes to ensure that castings’ are correct and that the owner-builder is not being over charged. The only requirement is that the builder has to join the NHBRC. Registration with the NHBRC will also give builders credibility” advises Mtetwa.

Any enterprise that wants to tender work from the public sector in the construction industry, must register with the CIDB.

Before you can register with the Construction Industry Development Board (CIDB) you must have established your business and have a history of various construction projects under your belt.

For registration and membership fees – download the NHBRC registration form here.

The CIDB registration qualifies you for projects in the Public Sector

Any enterprise that wants to tender work from the public sector in the construction industry, must register with the CIDB. To register with CIDB your enterprise must be a registered business entity with the Companies and Intellectual Property Commission (CIPC).

Register the work you have completed

You must register any construction work you have done. These include contracts for the combination of goods and services, extension construction, installations, repairs, maintenance, renewals, renovations, alterations, dismantling or demolition of buildings and engineering infrastructure.

These projects must be above R200 000 for public sector and R300 000 for private sector. This creates a track record for your business which you require to register with CIDB.

Finance is not the only criteria

Your company’s ability to finance a particular construction project does not automatically mean you will qualify for a project; you need to have solid experience behind you. Nor does a grading designation actually determine which project you will be able to do.

7. Grading levels

Grading levels

There are nine grading levels

The different grades show the size of contracts a contractor is capable of doing. This is based on financial and works criteria. The financial criterion comprises best annual turnover, track record, and available capital.

Works capability assesses a contractor’s track record and the number of qualified professionals in certain specialist categories (e.g. electrical).

Financial capability

This is evaluated in terms of the contractor’s best annual turnover during the past two years, the largest contract the contractor has performed in the past five years, and the value of the available capital that a contractor is able to secure in order to perform a construction contract.

Works capability

This area is evaluated in terms of the largest contract the contractor has performed in the class of works applied for, as well as compliance with statutory requirements (e.g. registration with the Electrical Contractors’ Board of SA).

The contractor must also have the required number of qualified professionals in their employ for the grade applied for. These can be either full-time employees or full-time equivalent.

There are various levels of CIDB Grading. Always apply for the level you are capable of:

CIDB Grading Level

When the contractor grading is granted it will consists of a combination of alphanumeric characters that represents the capability of the contractor in a particular class of works. E.g., 5GB represents a contractor that is capable of performing a contract to the value of R6.5m in a General Building class of work.

A contractor can also apply for recognition as a “potentially emerging contractor”. Potentially Emerging status indicates that the contractor has significant development potential, but has impediments that must be overcome.

Related: I would like to get started in the property sector. What should I know before starting a real estate or property related business?

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Start-up Industry Specific

How Do I Start A Security Company In South Africa?

There are two kinds of security companies, one that sells products and one that sells services or you can combine both.

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To start a security service company in South Africa you must register with the Private Security Regulatory Authority (SIRA). There are two kinds of security companies, one that sells products and one that sells services or you can combine both. It is estimated that the private security industry in South Africa employs over 400 000 individuals.

If you’re looking at starting a security guard company in South Africa, the following guide will be able to assist you in the deciding if it’s the right decision for you.

You need a lot of capital

Starting a security business requires a good deal of capital outlay and it’s highly recommended that one should have a background in this field.

Decide what kind of company you want to start

There are two kinds of security companies, one that sells products and one that sells services or you can combine both. Each sector falls under its own regulatory body.

What about area competition?

Greg Margolis is the CEO of NYPD Security, a niche security company that has operated for the last five years in the leafy northern suburbs of Johannesburg.

“To run your own security service company I think that you have to be well rounded in terms of not just being a good business person, but you also have to be a people person, a marketing person and know a good deal about the business.

“There’s tough competition, but I love what I do and wouldn’t sell my business even if I was offered triple what its worth. I am passionate about what I do”, says Margolis.

Starting a Security Services Business

To start a security service company in South Africa you must register with the Private Security Regulatory Authority (PSIRA). This includes paying a registration fee of R2 280 and writing an exam. Once you have passed the exam, proved that you do not have a criminal record, SIRA will conduct an inspection to establish whether or not your business meets the infrastructure requirements. A further fee of R1 710 is charged for the assessment. Each year the business is re-accessed which costs a further R500 plus the annual renewal fee or R520.

The following documentation is required for registration:

  1. An authenticated copy of the CM1, CM2, CM27, CM29, CM31 and CM 46 (apply at Registrar of Companies or Attorneys), if the applicant is a company;
  2. An authenticated copy of the Partnership Agreement if the applicant is a partnership;
  3. An authenticated copy of the trust deed and the letter of authorisation to the trustees from the Master of the High Court if the applicant is a business trust

Related:Steps for Setting the Right Prices for Your Security Business

Also required:

  1. The Suretyship form (SIRA 4) to be signed by the natural person who has taken full responsibility of the security business
  2. Every director, member, partner (as the case may be) applying for registration as a security business must have successfully completed, at a training establishment accredited in terms of law, at least, the training courses Grade E to B
  3. An authenticated copy of the Tax Clearance Certificate from the South African Revenue Service (SARS)
  4. An authenticated copy of the VAT Registration Number from SARS.
  5. An authenticated copy of the PAYE number from SARS
  6. An authenticated copy of the COID number (Compensation for Occupational Injuries & Diseases) from the Department of Labour
  7. Sufficient information in writing to enable the Authority to ascertain that the applicant security business meets the requirements with regard to the infrastructure and capacity necessary to render a security service;

This include, inter alia, the following:

  1. Submit a business plan to the Authority including the location and activities
  2. A resolution by the applicant security business stating that it will be able to operate for the next year
  3. The applicant proves that it has an administrative office that is accessible to the inspectors of the SIRA
  4. The applicant must have equipment which is necessary for the management and administration of the security business, e.g. fixed telephone, fax machine, a hard copy or electronic filing system for the orderly keeping of all records and documentation
  5. Show that the affairs of the applicant security business are managed and controlled by appropriately experienced, trained and skilled persons
  6. The applicant security business has at its disposal a sufficient number of registered and appropriately trained and skilled security officers for the rendering of a security service for which it has contracted or is likely to contract
  7. The security officers must be properly controlled and supervised
  8. The applicant security officer has at its disposal sufficient and adequately skilled administrative staff members for the administration of the affairs of the applicant
  9. The business must have has all the necessary equipment, including vehicles,  uniforms, clothing and equipment that must be issued to its security officers
  10. The applicant security business is in lawful possession of the firearms and other weapons that are necessary offer security services in respect of which it has contracted.

Related: Get going with a One Page Business Plan

Landing contracts

security-contract

The most important thing you can do to start and operate your own business is to develop a good business plan.

It’s invaluable because the business plan forces you to come to terms with your business. Selling the business concept seems to the problem, said Margolis. These are his five tips that will help to get the business going.

“The security industry in South Africa is very competitive. You have to get out there and you have to keep knocking on doors, there isn’t an easy solution”, explains Margolis.

Top Tips

1. Look at your business plan and decide if you have a competitive advantage. If not, work out how you can make the market understand the unique value your small business has to offer.

2. It is important to make yourself known. It isn’t difficult or expensive to increase awareness about the business. Attend ratepayer meetings, spend time at the local police stations, and attend meetings the police have with residents and businesses in the area. This way people get to know you and respect you and half the battle is won. Networking is the way to go.

3. It’s my experience that bigger companies are reluctant to give security contracts to a company that is a one-man show. Make sure that you have a structure in place. Clients need to know if something happens to you, the business will not fall apart, and the services they have paid for and you have agreed to supply, will not cease. Clients need to understand that besides experience, that you are credible and that all the checks and balances are in place. This must be one of the key selling points.

4. Consider taking on a partner. Choose a partner who has the attributes that you lack. The ideal partner would be one with strong links and contacts in the community that you want to work with. Let your partner control the selling side while you handle areas you’re strong in, such as expertise and service delivery. The other option is to employ sales staff.

5. Stay abreast of new trends in the field, and update your skills. This is something that I strongly believe in. You have to be well rounded in terms of not just being a good businessperson, but you also have to be a people person, a marketing and sales manager and know a good deal about the neighbourhoods you work.

 

Are you new to starting a business? Read 15 Things Every Newbie Needs to Know About Starting a Business

Security products

What are the requirements to start a security product supplier business?

If you are starting a security company that sells electronic alarm systems and other security products it’s wise to become a member of SAIDSA in order to provide your business with the credibility it needs to be taken seriously by the public and security service providers.

The objective of SAIDSA is to upgrade the quality and standards of electronic security and to protect the public from unscrupulous, “fly-by-night” operators. When a security system is purchased, an ongoing relationship is entered into between the purchaser and the security service company concerned.

The security service product supplier must have the infrastructure and the required expertise to support the relationship continuously.

Security Sector Regulatory Bodies

The security industry has established a number of bodies to regulate itself. Membership in these bodies is voluntary. They include:

Ready to get going? Here’s 10 Steps to Start Your Business For Free (Almost)

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Start-up Industry Specific

How To Start A Farming Business

Keep these nine points in mind when launching your new farming business.

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Start-up Industry Specific

How Do I Start A Transport Or Logistics Business?

An all in one guide to starting a transport and logistics business.

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transportation

Thinking about starting a transport business?

Forecasts indicate that the demand for freight transport will grow in South Africa by between 200% and 250% over the 15 to 20 years.

Some corridors, (high volume transport routes that connect major centres), such as the corridors between Gauteng and Cape Town (which amount to 50% of all corridor transport) will increase even faster.

The scope in the transport and logistics industry is varied – from a one-man show using a small truck to transport goods and offer services, to a fleet of transport vehicles which travel the length and breadth of South Africa’s roads.

Road transportation includes commuter transport from taxis to bus transportation.

It can be a tough industry and there are many threats facing transport businesses but if you get it right, you can build a successful business.

What is covered in this guide:

  1. How to start your transport and logistics business
  2. How to get funding for your transport business
  3. What are the costs involved
  4. Finding customers and getting transport contracts
  5. Getting onto suppliers lists
  6. Buying trucks and employing drivers
  7. What are the regulations and risks
  8. Where to find guidance to start your business.

Ready to get going? Click the arrow button to learn how to start your own transport business.

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