Many people wish to become real-estate developers as it means making large development profits, saving money by evaluating your project cost below market value, obtaining required finance more easily, receiving profitable rental returns that allow you to pay off the mortgage and accessing more convenient tax benefits.
When you become a property developer, you are able to acquire for yourself high-quality properties at discounted prices. How does this benefit you? Well, you are able to build a property portfolio faster than any average real-estate investor.
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What does property development entail?
As a property developer, you will be expected to carry out a range of tasks such as buying land, building and even developing facilities. Property development is often referred to the continual reconfiguration of an existing property to meet the demands of society. The property in question can be corporate high-rises or public roads.
Things you should know before you venture into property development
A successful property developer must have a good amount of both ambition and patience, both of which are required in the process of property development. You also need to possess sound knowledge regarding the procedure. You may think you know enough to see you through until you stumble onto a roadblock a little way into your first developmental project.
A property developer is basically a property investor who commits their talent, equity and expertise in transforming land from its current use to better and more profitable use.
It is a wise idea to learn a little about the property in question, the construction process, market conditions, town planning, finances, economics and how to go about marketing real-estate properties.
You can’t expect to go into property development armed with this knowledge. Start humbly and you will acquire all the knowledge you’ll need along the way.
It is important to start small so you do not incur major losses in your first couple real-estate development projects jeopardizing your career as a real-estate developer.
If you want to educate yourself about property development, interact with experts in the field. Speak to real-estate agents, finance strategists who can brief you about development finance, lawyers who can help you draw up contracts, accountant who will help you figure out ownership structures, town planners/urban designers, architects/draftsmen, engineers, landscape architects, building contractors, project marketers/managers, construction managers and the like.
Most importantly, engage with a property strategist. He/she will help you research, locate and negotiate your property purchase. They will help you increase the returns on your property investment and generally make sense of the finances involved.
Can you afford the project?
Before you go about investing in property – ask yourself this singularly crucial question. If you can’t afford it, the profit it makes will not matter very much.
Understand how much you will be required to borrow and how you will take care of all other associated costs before you begin developing any project.
It is advisable to obtain financial pre-approval before you sign on the dotted line.
It allows you to come to terms with your limitations as a property developer and know how much you can actually contribute towards sustaining the project.
You may be able to gain convenient access to the finances required for investing in a property. Gathering finances for property development prove to be more of a task.
You can take a chance on lenders and banks, but don’t be disappointed if their risk-assessment of your development project turns out negative. You and your development team will need to prove an impeccable track record in order to obtain finances from these sources.
If you intend to construct four or more buildings on the same site, banks will perceive your development project as commercial in nature. The funding process will become more complex.
Lenders usually cover the “hard costs” of project development but do not shell out finances for the “soft costs” such as architect/consultant fees and the like.
So you’ll need some savings in place before you can get into property development in the first place.
Other important information
After you’ve narrowed down on the location for developing your property, assess the kind of property that people would want in the area. If the area is populated more with the elderly, developing single-story houses will make more sense than constructing houses with several floors. Similarly, a house with multiple bedrooms and bathrooms will be necessitated by a neighborhood which is populated mostly by families.
Have a plan in place, weigh the pros and cons, look at the numbers involved carefully and proceed ahead. If you’re still in doubt, DG Institute offers a free e-book titled “Property Developer’s Guide to Success” to break you into the basics of property development. It is among the many books by Dominique Grubisa which have taken the wealth education market by storm.