Entering the booming sector that is property development promises great rewards in the form of hefty development profits, increased rental returns, stronger financing, and tax benefits.
All in all, this is a great way to build your portfolio faster and safer than the average investors.
Still, you should be aware that the property development landscape is rather competitive and has a steep learning curve.
To achieve success, you need a mix of ambition, patience, and perseverance. After all, you have to face the financial, economic, and legal maze in which there are as many wrong turns as there are right ones.
How to Get Started in Property Development: First Steps
Planning and research
Property development encompasses a variety of activities, from purchasing land to developing business facilities.
It revolves around the reconfiguration of properties in a way that accommodates shifting business and society needs.
In general, your chief goal is to obtain high-performance properties, ones that are cheap to own and have the potential for built-in capital growth.
You are not hunting for immediate gains, but long-term profit.
To gain a foothold, you will have to make the most of your equity, talents, and knowledge.
Firstly, put an effort to educate yourself. Grasp the basic concepts of real estate economy as well as the ins and outs of the way your local market functions.
Gather as much information as possible on finances, town planning, large development projects in the area, construction processes, level of competition, etc. Assess the cost of a project and its profitability.
Use all these insights to formulate your property development business plan. Next, get in touch with other industry professionals.
Depending on the scale and complexity of the development project, you might have to work with: real estate agents, contractors, urban planners, architects, project managers, engineers, lawyers, property strategists, and others.
In other words, you have to successfully navigate the large ecosystem and establish connections.
Key pieces of the puzzle
All this homework will minimize the likelihood of mistakes happening during the first few projects, which is something that sets many investors back.
Here, we can learn a lot from burgeoning markets like the Australian one. There, property developers remind us of the importance of location, which always helps real estate sell and lease faster. They like to hand-pick it, keeping an eye on lifestyle trends, new infrastructure, amenities, access, and other vital factors.
This kind of focused strategy enables them to acquire livable, people-shaped properties in prime locations. So, seek more than just a brick and mortar shelter: find properties that enthrall with design and fulfill people’s dreams.
As a rule of thumb, homes that include ample storage space, a sustainable solution, low-maintenance materials, and room for customizations perform well everywhere.
Then again, those who are only making baby steps in this business tend to work with small- to mid-sized residential property projects that are less pricey.
To understand how to get started in property development, always ask yourself whether you can afford a purchase and whether the returns are worth it. Also, work out a concept for the site you are considering and carry out a feasibility study.
You need to do what makes the most sense in terms of the location and target customers.
For instance, if you want to cater to families, chose locations close to schools and take on projects like building an extra bedroom.
Property development is a numbers game
Furthermore, you have to get your financial house in order and see exactly how much money you would have to lend.
Factor in both hard and soft costs (like architect fees). When doing the math, try to always take the long view.
The lifespan of most property development projects is just one or two years. You need to recognize when it is better to hold on to the property and when to sell it.
Also, have finance pre-approval before diving in because the whole process is more demanding than getting funds for a simple investment. This is especially true for projects that involve the construction of several dwellings and thus qualify as commercial endeavors. Therefore, you should ideally have a lot of money saved up from the get-go. Finally, remember that you can maximize the returns through smart property management.
We have not mentioned some other stages such as negotiating contracts and actual purchasing, so get familiar with these. Covering all the bases is the only way to come out on top and attain your development goals. It is time to get out there and locate your golden opportunities.
From the ground up
To lay the foundations for long-term success, do your research and collect the data. Use a reality check to validate your ideas and plans. You do not want to fall at the first hurdle. Try to embrace a structured and predictable approach to property development, which is not some game of chance with big bets and jackpots.
You should feel free to start small in property development and slowly work your way up.
Know your limits and avoid blowing the budget. Pay attention to key factors like site location and evaluate the profitability over the course of time. Make educated decisions and convert land and buildings into real gold mines that generate wealth and fortify your portfolio.
So that’s how to get started in property development.
About The Author
This article was written by Faith McGregor.