Property development can be a lucrative business. With the right investments, the real estate market is primed to help you make a lot of money. However, it takes nuance and experience to successfully establish a property development business. It is not quite as simple as starting a production company. Before you dive in, make sure that you are prepared. Take a look at our top 6 do’s and don’ts of starting a property development business.
Do: Have A Business Plan
Every good business starts with a good business plan. The key to a successful property development business starts with this essential guideline. Keep in mind however, that it is important to remain flexible. Revise your business plan if needed. The real estate market is always changing, and as a property developer you need to be ready to adapt.
Whether you get caught up in a bidding war or you simply fall in love with a space, overpaying for a property can be dangerous. Do not spend more than you planned on any property. Paying above market value on a piece of land can put your entire business at risk. Sticking to your budget will help to ensure that you receive a return on investment.
Do: Tour Properties
One major mistake many new property developers make is going in blind on a property. Instead of falling prey to false claims, make sure that you know exactly what you are buying. Visit all potential properties and evaluate them first-hand. If possible, have an experienced inspector, contractor or environmentalist join you so that they can give their input. This is where business collaboration comes in handy. Touring the property is an absolute must before you make your decision.
Don’t: Ignore Location
Property developers, real estate agents and consumers all have on thing in common: they care about location. Do not buy land that nobody will want to live on or travel to just because it is cheap. Ignoring the location of your property can be a major downfall when it comes to reselling. No matter how beautiful the buildings or well landscaped the lawns are, people will not want to buy property that is in a bad location.
Do: Watch The Market
The key to successful property development is to keep an eye on the market. It is your job to know when and where you can find the best deal. “Buy low, sell high” requires more than just good negotiation skills. While you can learn a lot from buying and selling investment properties along the way, you need to understand the market in order to succeed. This requires knowing your potential buyer before taking on a property. Do as much research as possible before you buy into a property.
Don’t: Get Stuck On The Short Term
Another mistake of many property developers is that they only think in the short term. Whether it involves cutting corners on construction, buying into a trendy area or just trying to get rich quick, thinking short term can be bad for business. Before you buy a property, think about the potential it holds. How can you utilize this investment 2 years from now? This question can help bring perspective to any situation.
Do: Decide Buy To Let Or Buy And Sell
There are two types of property development businesses, buy-to-let and buy and sell. You will need to identify which type of business plan is the one you want to pursue. Buy-to-let is a bit more of a long-term business strategy. Buying and selling real estate development is definitely more of a short-term business strategy. This makes it more risky. However, it also provides the chance for greater profits sooner. Decide which property development business model is right for you in order to experience success.
Don’t: Sacrifice Where You Shouldn’t
Most of property development are large upfront costs. It is not a good idea to go cheap on your upfront costs. These costs will dictate the quality of materials on the property. Whether you are choosing flooring, appliances or exteriors, the premium costs of quality will pay off. When it comes time to maintain the property or sell to another owner, your quality details will be long lasting. Of course, its a good long term decisions that earns a profit in the long run.
Breaking into the property development business requires a lot of time, dedication, planning and even some project management tips. That is why it is important that you follow our do’s and don’ts. As long as you stay focused and make the right choices, you can become a successful property developer.
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