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The property development industry is full of exciting opportunities and lucrative rewards. However, before you can start building your portfolio, you need to have a handle on the costs involved in property development. This guide will help you do just that by sharing some tips for developing smarter and safer.
Do Your Homework First
The first thing you need to do is research the market. What are other properties in your area selling for? How many of them are affordable and located in a decent neighborhood? Is there demand for more housing, or is the current population growing at a steady pace?
The next step is to find out about the area itself—where does it have access to transportation, utilities, food stores and other amenities? Is it safe and clean enough that people would consider moving here rather than somewhere else?
The third step is to explore how much profit you could make on each unit if you built condos instead of single-family homes. If there’s no way you can sell them at an affordable price point (or even break even), then this may not be a good development project.
Spread Your Risks
- Don’t put all your eggs in one basket.
- Don’t be afraid to try new things.
- Don’t be afraid to fail.
- Don’t be afraid to ask for help.
- Don’t be afraid to ask for advice or ideas, even if it’s not your area of expertise!
Finally, don’t forget that learning is a lifelong process—so long as there are questions left unanswered (and trust us, there always will be), then there’ll always be something new to learn!
Create a Cash Buffer for Emergencies
You should always try to have a cash buffer in the bank for emergencies.
How much you need will depend on how many properties you own and how many dependants you have, but as a general rule, it’s good to keep enough that any unexpected bills or emergencies can be taken care of without having to sell off your property investments.
If something does happen that drains some of your cash buffer funds, don’t worry too much! As long as there are still more than enough funds remaining in your buffer account after paying off debts and other expenses related directly back into development projects then all is well. If there aren’t quite enough remaining after paying off those debts then consider using some profits from other properties first before dipping into this fund.”
Be Prepared to Wait Longer for the Money
You need patience because developing properties takes time, especially if they’re fixer-uppers or involve government approvals (which can take upwards of 2 years). You also have to factor in resale periods into your math; sometimes these properties don’t sell right away. In fact, there’s even a chance they never sell at all! This means that even though there are lots of risks involved with buying and selling real estate investments—the biggest risk might just be waiting around while nothing happens.
Learn About Development Finance
Development finance is the process of raising money to build a property. It’s usually done in two ways:
- A developer will have a business partner who provides all the non-borrowed capital. This can be either an individual or another company. This type of arrangement often requires you to give up some voting control over your company, so it’s not always ideal if you’re looking for full control over your project.
- You’ll need to find a lender—usually through one of their intermediaries—who will provide all or part of the financing needed for construction and acquisition costs (if they don’t provide both).
Find an Experienced Accountant
If you’re serious about property development and want to build a portfolio that will stand the test of time, you need an experienced accountant. An accountant who can help you with your tax returns, accounts and business plan is crucial to your success.
Find a Good Solicitor
A good solicitor can help you with everything from buying a property to selling it, so it’s worth spending time finding one.
You’ll want to find a solicitor who specialises in property law. They’ll know all the ins and outs of the legal side of buying and selling a property, and will be able to make sure that nothing slips through the cracks—they’re there for you every step of the way!
Don’t Work With Just One Lender
It’s important to work with a lender that has the most suitable criteria, rates, terms and conditions for your project. The best way to do this is by meeting with at least three lenders before committing to one. You don’t want to miss out on better options simply because you were working with someone who didn’t understand your property type or had different requirements than other lenders.
Don’t Forget Extra Costs and Hidden Expenses (Eg. Stamp Duty)
If you want to make sure that your development is a success, it’s important to know what the total costs will be. You may think that the only expense is the price of land, but there are other extra costs (such as stamp duty and transaction fees) that can add up quickly. There are also hidden expenses like legal fees, building costs, and materials—so don’t forget about these!
Property development is risky business, the more you know, the safer your investment will be.
Property development can be a risky business if you don’t know what you’re doing. Before you start, make sure that you have done your homework and that you understand all of the risks involved.
- Know the Risks
- Spread Your Risks
- Create a Cash Buffer for Emergencies
- Be Prepared to Wait Longer for the Money
When it comes time to market your projects, reach out to PropertyRender.com to bring your vision to life with 3D renders, project websites, professional copywriting and other project marketing services.