Property development or commonly known as real estate development is a business for well-established entrepreneurs with a good experience of risk calculations in the real estate business. This is known as a business of legends as it involves a lot of smart and hard work.
And what does a property developer do? Let us know how to become a property developer. All you need to for your real estate portfolio is the following steps with some knowledge and experience.
Guide to Property Development
Okay, let’s start with the fundamental ones first. The real estate business must start with a complete investment plan. So, do you have a business plan for property development?
Develop a Business Plan First
You must have heard that if you fail to plan, you plan to fail. This is very true in every walk of life. Without a good realistic plan with milestones, you cannot learn and earn from your startup venture.
A perfect business plan has a core strategy that explains the ways that help in competing with other businesses in the same niche. Doesn’t matter if you want to start a full-time or a part-time property development business. You gotta be careful, make sure you have a good plan with core strategy.
You must set particular and targeted goals about where would you see your property venture in the next 5 years as well as a timeline for achieving your goals and objectives.
Calculated moves help you stand firmly
Buy to let or buy and sell
After you have made the perfect business strategy, its now time to talk about the exit strategy in your real estate venture. What is the exit strategy in your business plan?
Essentially in the property business, there are two ways to exit. Either you buy to let or you buy and sell the land and property. Both work really well.
Obviously, the buy and sell option is most profitable. Buying and selling is a short-term strategy by which you quickly increase venture capital. Buy-to-let contracts are easily available but the profit from this mortgage is not exempted from taxes. You will need to pay up to 40% of the tax.
Take Rental Yield & ROI Seriously
If you have planned to stick to a buy-to-let business strategy, then let’s talk about the rental yield. It is essential, sometimes to avoid the recessions you need to consider rental yield in spite of hoping to sell the property.
Rental yield is computed by estimating annual rental returns against the cost of the property. Usually, 10% is rated a good total yield and this can increase dramatically with increased residents (student lets houses for example). When trading properties you need to aim for at least 30% return on your capital. Your goal should be maximizing the return on investment.
Market Research: Location is the Key
The location is arguably one most overused word in the property development – but it really is important just because the property is all about geographics and location.
Buying property in an already high priced location is not a wise decision.
You must be able to find an area that’s on the rise and buy early. Look for potential areas of growth and upscaling where other developments are taking place or are just planned.
Timing is crucial
It’s critical to note that you don’t make decisions in haste while buying a property. Some of the agents would make you hurry but beware, don’t be submissive and follower. Take your decisions after a good research. In the property development timing is the best free tool that can earn you millions in a few months.
It is all about playing the right shot at the right time! However, once you have found a fitting property in the right location, it pays to move quickly. You need to make smart decisions once you have the right location and good pricing land.
The location is Everything
We have already discussed a few things like market research and location. These two things are the essential key to success in the real estate business. Market research with the location is crucial to assure you to buy at a rational price, in property development, you make more money when you can do some negotiations. Why is location important?
Tailor your developments for Buyers
It’s very important to tailor your development to the need of customers in the area you’re buying in (This must be a part of your business plan). Is the local market students for families? You need to customize your offers for a specific group of people. Be careful with the budget, it is very easy to spend more than the fixed budgets. Instead of creating a dream property for yourself, customize for your customers.
Ensure suitable property development finance
Becoming a property developer requires a lot of investment! Property business is a business that eats up all your money until you make your first sale. You cannot grow and expand your real estate business during that time when all the money is tied.
So, you need to get advice from financial advisors. Most of the banks have dedicated bank managers dealing with the property development business and they guide the investor to maximize their profit. Let’s wind up the topic with some of the best quotes from the world’s famous businessmen and entrepreneurs.
Now, one thing I tell everyone is learn about real estate. Repeat after me: real estate provides the highest returns, the greatest values and the least risk. — Armstrong Williams
What are your thoughts on this? We would love to hear from you in the comments.