What Really Goes Into A Property Development Business?

If you have an eye for investment, the housing market, and making a property as appealing as possible, you may want to find a career capitalizing on those skills. Property development is more than just building and it’s more than just buying and selling property.

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It’s the step-by-step process of finding, improving, and selling properties for a profit and it can be a hugely lucrative business in the right market. But what goes into getting such a business off the ground? What are the skills you need, the partners you need, and the processes you have to go through?

The funding

Property development is all about making investments pay off. As expensive as property is, of course, you’re not necessarily going to have all the cash you need to get started on hand.

All throughout your career, in fact, you’re likely going to have to keep finding and tapping sources of funding.to avoid eating the brunt of costs yourself. Property development loans don’t work like new build loans, either.

You don’t get the lump sum of cash all in one go, but rather it tends to be split into different stages, each stage representing a stage of development. For that reason, experience in creating and working to budgets on developments in the past could be crucial.

The strategy

Not all property development business work exactly the same, either. You might have a wildly different profit model from another business in the same market, for instance. In plain terms, your profit model might be based strictly on the purchase, development, and sale of land and property.

Or, depending on what your local market is like, it might be based on buy-to-let or build-to-let properties. You need to figure out your market, which of your options is going to be most profitable, or if perhaps you need to mix both strategies to some degree and come up with the appropriate business plan.

There are templates available to help you craft it, essential as it is. If you don’t have the path to profit laid ahead of you, it is going to be all the harder to find it.

The speciality

Most property developers specialize in some kind of property or some kind of investment opportunity. The most common kind is those who buy, renovate, and sell resident homes to the private market.

But you might focus on acquiring land and building new properties or developing properties for commercial entities instead. Finding a niche is valuable because it gives you a specific market to focus on. Properties have to be developed not by any one rule-book but catered to the specific buyer or tenant.

Learning what their priorities will be can allow you to focus your budget more specifically on what is most important about the property for them, not just a scattershot approach to increasing the value of a property.

The location

There’s one rule in property development that you have to learn above all else: you don’t make your money when you sell a property, you make it when you buy it. For that reason, opportunism is one of the key factors in a successful property development business.

Finding those opportunities for profit is all about location, first and foremost. You need to get to know different areas, look for the signs of neighborhoods that are on the rise, changes in demographics, whether a city or area is more rent-friendly or more profitable for buying and selling, and so on. Pay attention to rent price, to recent sales, and to signs of development in an area such as new services and businesses opening there.

The timing

Opportunity is all about timing, as well. The housing market has its ups-and-downs not just in the grand scheme of things but from year to year. To profit as much as possible, you need to buy when prices are cheap, then develop and hold onto properties until prices are high again.

Finding the ideal time to buy and sell might not always depend on seasonal shifts, either, but on market dynamics. It’s a good idea, once you’re up and running, to sell property before you buy, so you don’t always have to rely on bridging loans that can impose some restrictions on your overall budget.

The connections

As a property developer, your expertise is going to be in finding the best possible opportunities for property development. You are likely not going to be a contractor or renovator yourself, so you need to build connections within those industries to make the actual development side as painless and cost-effective as possible.

This includes builders, utility fitters, painters, renovators, architects, and companies that rent out equipment like diggers and tip trucks. Fostering connections within these industries is crucial. The better your relationship, the longer you’ve worked with them, the more likely you are to benefit from better deals.

Beyond just searching for these services like a consumer would, take the opportunity to network within trade shows that tend to act as a shared space for many of these services.

The marketing

The property market isn’t the only one you need to concern yourself with. You need to focus on building a brand as a property developer to the market of consumers, as well. This includes learning to market the properties you develop and doing so without the assistance of realtors can reduce your overall costs.

But property developers can also extend their services to others, such as landlords or property owners who want to increase the value of their own property. If you offer your development services to others, then you have a strong brand.

This includes having the right digital brand, but it also includes having show homes created in conjunction with interior designers and stylists to give an idea of the final product you offer.

If you don’t have any experience either in renovations, property investment, or construction, then it’s probably a good idea to get some. You need to know the market and what’s involved before you try to make a career profiting from it.

 

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