Thinking of starting your very own property development? And have you ever wondered how hard or easy it is to get started? Read this our bite-size guide to get your property development on a path to success.
For many first-time property developers, getting an overview of the process involved in property development is very important. Many want to know how hard or easy the process itself is before getting into it. It is with this that we’ve decided to share with you this bite-size guide.
Before starting any property development project, there are a few things you need to ask yourself. In particular, ask yourself if you have;
- Good Negotiating Skills
- Capital/Funds To Invest
- Time To Do Proper Research
If your answer is a definite yes to all these questions, this is a good start. It is also good to familiarise yourself with the different types of development. That said there are seven commonly known types of property development. They are multi-family, retail, warehouse or industrial, mixed-use, office, hotel and land development.
Why Property Development?
Given that you are thinking of starting such a project, chances are you already know why investors choose to make this investment. For those who don’t, below is a list of why investors choose to make this investment;
Make/Save Money – It offers an opportunity to make large development profits.
Tax Benefits – Getting good tax benefits is another reason why many opt to make this investment.
Easy Finance – With new property developments, investors can easily get finance for future projects. Once completed, investors stand to have better leverage when seeking financial support.
Better Rental Returns – As a property investor, you always want to get good rental returns. Once finished, your property offers an opportunity to get better rental returns.
Is It Hard To Get Started In Property Development?
The answer to this question totally depends on how you approach the process. If you approach this process properly you stand to reap big benefits. It will also be simple and easy. If you approach it the wrong way however, this process will be extremely hard. Furthermore, it will leave a huge dent on your bank account without the possibility of reaping any benefits to recover.
One way of getting started in property development is instilling traits of a good property developer. Good property developers take into account several things before embarking on any development. To help you be a good a property developer thus ultimately starting out your property development the right way, below are key steps you need to take.
- Develop A Property Development Business Plan
- Factor In Rental Yield & Return-On-Investment
- Buy-To-Let or Buy-To-Sell
- Don’t Rush Be Patient
- Tailor Your Development For Buyers or Renters
Develop A Property Development Business Plan
Whether you are planning on starting property development a part-time or full-time business, a plan is a must. In particular, you need a professional property development business plan. If you are not sure where to start, you can get a template business plan online you can use.
For a more detailed plan, we suggest seeking services or advice of an expert. In addition to developing a detailed plan, they’ll tune it to suit your property development needs. While developing a plan bear in mind resources you might require.
Factor In Rental Yield & Return-On-Investment
Thinking of rental yield or return-on-investment (ROI) is important when starting in property development. This is more so important if you have a buy-to-let strategy when starting out your development. Calculating rental yield is simple. To get your duplex annual rental yield, simply measure annual rental income against your property’s value.
If you get 10%, this is regarded as a good gross yield. Furthermore, this yield can increase significantly if you happen to have multiple occupants. If you are planning on selling your properties, go for a 30% return on investment minimum on your capital.
Buy-To-Let or Buy-To-Sell
When starting out with property development, you need to know your exit strategy. In other words, are you going for a buy-to-let or buy-to-stay exit? If you are after a long term strategy, consider going for a buy-to-let exit. Not only does it guarantees some sought of stability but also helps you build up an extended property portfolio. This eventually will replace or supplement your salary.
When going for a buy-to-let mortgage, the rental income generated is seen as salary. These results in it treated as income tax. If you are looking to quickly increase your capital, consider taking up a buy to sell strategy. With it, you’ll be more dependent on conditions that move the market. With this, you’ll be in more risk despite the fact that it does offer instant return-on-investment (ROI).
Don’t Rush Be Patient
When starting in property development, it is important that you don’t rush things. In particular, don’t be rushing into buying a new property. Make sure you do your research on a given property before making a purchase. For this, you might need to spend time getting to know the market area where the property is. Why is research important? Well, it prevents you from buying irresponsibly.
If you’ve done your research and all is well, it is important to act quickly. If you are not sure on the price, you can always compare price online. Sites such as Zoopla and Rightmove offer such a service. Complete your property fast and you’ll turn it sooner. Also, the sooner you’ll be able to cash in on your return-on-investment.
Tailor Your Development For Buyers or Renters
When starting in property development it is important you develop to the demand. In particular, tailor your development to the needs of your area. Here, things like research come in handy. If you happen to carry out research, you’ll be able to tell what’s in high demand. This way, you’ll be able to tell whether you should build for buyers or renters.
While having a definite reason as to why you are building is important, you should as well make sure you don’t overstretch your finances. Go with your budget to guarantee maximum profit realization in the end.