The real estate market is once again on the way up and current projections are saying the market should rise by around 25% over the next five years. This means that this may be the best time for you to think about investing in property. Easier access to funds has been made possible by several recent initiatives so investing in property development is within easier reach. The following steps can make the path to becoming a property developer much simpler.
1. Come up with a business plan
A business plan for your property development venture is necessary whether you’re planning to go into the business full-time or simply as a part-time thing. The business plan matters because it will contain the details of the goals you’re trying to achieve and how you intend to achieve them.
2. To sell or to-let
When you develop property, there are two strategies you can use to get returns. You can either develop the property to sell it or to rent it out. The gains from renting the property are treated like a salary and will be subject to income tax. The gains from developing the property and selling it will be subjected to capital gains tax.
3. Consider the ROI and rental yield
If you’re planning to sell property, you must prepare for volatile market conditions or risk being stuck with properties you can’t sell. You should target a 30% ROI on your capital. The rental yield is the proportion of annual rent to the value of the property. 10% is a good gross yield and sometimes it can go higher.
4. Location is everything
When it comes to real estate, the location can either make or break you. Investing in locations that are already considered good will not offer much in terms of return on your investment. Locations that are on their way to being great are a much better option if you buy early.
5. Avoid overpaying
You can lose a lot of money if you pay over the odds. Ensure that you conduct a lot of research with the aid of sites such as Zoopla. This can help you to compare prices of property in a given area. Structural issues, bad neighbours and other factors should also be investigated thoroughly.
6. Time matters
Estate agents can make any deal seem like the best thing you’ll ever miss out on if you don’t pay immediately. Never be rushed into a decision by anyone else. However, if by your own analysis a particular property is good, don’t hesitate to go for it.
7. Develop with the customer in mind
Developing an expensive property in an area with low-income families or students may make it difficult to sell. Don’t develop your dream property, develop something that will be easy to sell or rent in that location.
8. Ensure you have the money you need
Property development requires a lot of money and can keep your finances tied up especially when you’re just starting. Ensure that you have what it takes to raise the money you’ll need. Banks can advise you on suitable channels for this.