You have no doubt seen property developers on the tv. There are specialised television shows where people buy a building, often in a dilapidated state, and renovate it to add tremendous value. They then sell the property for a huge profit or rent it out to others. By buying something cheaply and breathing new life into it with repairs, furnishings, and an updated style, the world of property development has become something that even those with little experience in real-estate have been able to venture into. Could this be something you could get involved in? Have you a hankering for the riches that other property developers have made? Do you have DIY skills to transform a money pit into a monetary goldmine? Then this article is for you. We will outline the beginning of a property development career, with a few handy pointers into what you need to consider when beginning a business in this field. Consider these the building blocks for what could be your next career.
Look at your finances
It’s obvious, we know, but you do need to get your finances in order before you begin your property development business. If you have a poor credit score, perhaps because of an influx of debts, you will struggle to secure a loan from your local bank. So, get your debts sorted out first. Then look at your budget. Depending on the location of the properties you are looking to buy, there will be an increase in costs the more upmarket you go. This applies to the lowliest of properties unless they really are in a rundown state. You also need to consider the hidden costs. This includes the ongoing property maintenance costs, including issues that spring up unexpectedly (asbestos, hidden faults), as well as tradesmen fees, and legal costs should you hire a lawyer. Needless to say, one of the biggest mistakes amateur property developers make is not budgeting properly, so this needs to be your priority before making a move into the property market.
Construct a plan
Every business needs a plan, and the world of property development is no different. When forming your business plan, you need to look at where you are now, what you want to achieve, and how you will get to that point, with actionable step-by-step ways to get there. This includes looking at your finances and working out how much you need to get started. It also requires you to decide what type of property you are looking for, and what you intend to do with it after renovating. Then ask yourself the important questions. How do I intend to market my business? Will I need to hire staff to help me? Should I outsource any tasks relating to the business? How will I sustain myself financially before I begin to make a profit? Important questions all, and you need to consider each one of them when formulating your business plan.
Should you rent or sell?
This is a tough call, and it depends on what you want to do with your property business. You could make all the necessary commercial renovations first, and then focus on a longer-term strategy by becoming a landlord. You won’t make back a profit straight away, but in theory, you will make your money back (and more) eventually. A rented property can be added to your portfolio, being one of several sources of income if you extend your efforts beyond one property. You will accrue a tidy sum of money, and make a profitable business in the rental market. Still, there are all the expected pitfalls in becoming a landlord, such as dodgy tenants, though you can hire a real-estate company to manage your property. You will also be responsible for ongoing costs, including maintenance fees to restore the upkeep of the property, as well as taxes and landlord insurance.
On the other hand, you could go for a shorter-term solution, by buying a property to sell when you have increased its value. You will make a quicker return on your investment, but you do need to consider the housing market. You don’t want to buy something that you can’t shift later on, so research is paramount. It’s wise to take the advice of experienced property developers, as well as speaking to local real-estate agents to get an understanding of how likely your property is to sell. Of course, if your property doesn’t sell within a reasonable time frame, you could always put it up for let until the housing market swings in your favour. In any case, research is key.
Consider the location
This is one of the more important factors in real estate. Develop a property in a run-down area or in a place hit by a recession, the more likely you are to run at a loss, especially if you intend to sell the property. On the other hand, if you are buying property in an area of growth or redevelopment, you are more likely to attract buyers and tenants, and make yourself a tidy profit as a result. Again, you need to do your research, and this includes visiting the location you are considering. For example, if there are plenty of local amenities, such as shopping malls, leisure centres, etc. then the more incentive there is for people to move into the area. Consider areas of natural beauty too. Properties with a park or local countryside nearby are going to be in high demand.
Some property developers spread their wings internationally, especially in areas of cheaper housing, or where there is a need for holiday homes. This is something you need to be careful of, as there are risks involved here, especially if you are thinking about letting – it’s not easy being a landlord when you are thousands of miles away! If you are thinking about going down this route, you should really buy-to-sell. Unlike buying something in your own country, you need to have an understanding of international currency, whether that’s looking at the price of a resale HDB or any other form of accommodation. You will also need to hire a translator if you aren’t fluent in the country’s language, as you may make an error that will see you out of pocket. This may be a profitable avenue for property developers, but when starting out, it is best to stick to something locally until you have more experience under your belt.
Don’t go it alone
Unless you are skilled in all areas of DIY, you will need to hire others to help you. There are plenty of tradesmen touting for business on and offline, so do your research and hire a group of people you can trust to get the job done to your specifications. You can easily source reviews of local building firms online, but your family and friends may be able to give you recommendations as well. It’s always worth hiring a Project Manager, especially if you aren’t confident in managing a team of labourers. This person will ensure the job gets done within a reasonable timeframe and will communicate any issues with you. Especially for amateur property developers, this will give you extra peace of mind while you are trying to find your feet. Then there are the other people you may need to outsource tasks to. This includes a website designer to find a virtual home on the web to showcase your properties, an accountant to manage your finances, and an administrator to manage the expected paperwork, from tax returns to employee contracts. Unless you plan on taking some of these jobs for yourself, you are doing yourself a massive favour by employing others to take the weight off your shoulders.
Of course, there are those other important people in your life. If you have a family to support, you do need to make sure they are in full agreement about your ideas for a property development business. Considering the number of financial costs involved, you do need to ensure your family’s security. There is more than that, of course. Their moral support will be vital. As with any business, property development can be stressful, especially when dealing with the strains of renting and selling. Having people alongside you will help, ready to lift you in times of struggle, and there to celebrate with you when you start to make a success of your business.
We have looked at the building blocks of the property development business, from forming a business plan to hiring the right people. Each one is an essential step in the right direction. A lack of research or due regard for any one of these building blocks is a mistake – they are the foundations for a property development business, and you risk failure if you don’t have them in place. So, bear them in mind before you begin, and continue your research. Whether this is a part-time or full-time career plan, you have the potential to succeed in this business. Who knows, you may even become the next property millionaire! So, if this is something you are looking into, we wish you every success in this potentially profitable endeavour.
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