Mistakes for New Property Developers to Avoid
It is not easy to become a property developer, however, becoming involved in the profession offers a plethora of opportunities. After someone completes their first development project they are able to gain leverage and financing becomes easier. Furthermore, as long as the investment is in a great real estate area there are great tax benefits, including security and nice returns.
While that sounds wonderful, there are many mistakes that people who are new in property development make when they first begin. The industry is about much more than simply buying property and then selling it for a profit. Marketing, sales, and communication skills should be finely tuned before beginning in the industry. In fact, anyone who hopes to be successful in property development must have a fundamental understanding of the financial and technical information involved.
There are common errors that new developers make that include the following:
MISUNDERSTANDING THE MARKET
In order to be successful in property development, one must have a solid understanding of the market. Developers must be aware of the needs of consumers so that what they create is satisfying a need. What are people looking for and why? Who are the most likely buyers? Furthermore, it’s important to predict the right time to develop and sell, keeping an eye on the economy and the real estate market.
BUYING THE WRONG PROPERTY
Most professionals did not buy the right property on their first attempt. Do not let emotions override a sound business mind. Bargains are usually available when the market ottomans out due to the fact that there is a lack of buyers and sellers are motivated. In turn, selling is best when the market is climbing towards a peak.
Do serious research and check recent sales of properties that are comparable in the immediate area. Nothing should ever be decided on a feeling. Instead, use real data and have a great knowledge of the market. Understand the area and don’t make the mistake of developing properties that aren’t suited for the market of that location.
UNDERESTIMATING THE BUILDING COST
It is very common for new or inexperienced developers to underestimate the building cost. Once all of the necessary documentation and project design is complete finding out that the total construction cost actually exceeds the budget is a major problem.
It will take a lot of time to revisit plans and find alternative ways to reduce costs once the wheels are in motion. Development teams must analyse every aspect of the design and consider every cost saving idea that is plausible. These things can include alternative finishes, size reductions and more.
There are a number of factors that go into successful property development. Not everything can be built on the cheap. Organize the correct finance package and keep a team of skilled professionals involved. It is vital that cost and budgets are controlled and the best advice is attained.
Originally published on Frank Mountain's website.