Have you ever thought about the development, selling or improvement of property? Does the idea of creating something new from the ground up speak to you? If your answer to the previous questions is yes, then the chances are that your interests might lie in property development. However, how does a first-time property developer expect to break into this field?
Most first-timers branch out into the property development field by embarking on a home-build project, whether the developer decides to improve a current property or build from scratch. Building from scratch is often a preferred method, as this way, the developer can recreate the ideal property without the limitations that an existing property can impose.
Still, bringing your fantasies can be challenging, especially if you’re a first-time property developer with no prior knowledge to reflect on. Even those who have completed this process repeatedly have regrets and things they wish they’d known sooner.
So, to save first-time property developers from making the same mistakes as those before them, we’ve created this article outlining several things that first-property developers wish they’d known before starting their first home-build project – keep reading to discover what they are.
Determine Your Budget
It’s not a secret that property development is a very lucrative industry, regardless of its hobby or profession. All property developers understand that no two property development projects are the same. Without successful planning or budgeting, many will fail to bring the return on investment that was initially hoped.
Failure to allocate an accurate budget for your planned proposal can lead to numerous problems. From misevaluating the project once completed, investing too much or too little of their own finances and not obtaining the correct amount or type of finance needed to sustain the project and much more.
Unless you’ve saved up a considerable amount of your own finances, you will most likely have to consider a loan to break into the property development world. Fortunately, there are a variety of loans available that are suitable for aspiring and seasoned property developers alike that are perfect for getting first-timers started. Some of the options are as follows:
- Acquisition Loans – Much like the name suggests, an acquisition loan is used as a purchase option for undeveloped land, often with no plans for development. Although these types of loans are popular among property developers, they are often not sufficient and are typically accompanied by other loans to develop the land further.
- Development Loans – Property developers who have recently acquired land may need funding to put any plans into action, where development loans come in handy. As well as being a requirement to turn raw land into a building site, development loans can be used to make improvements such as levelling, running water lines, building roads etc.
- Acquisition And Development Loans – In the instance that a developer might want to acquire and develop land simultaneously, acquisition and development loans are available. These loans enable developers to achieve and turn land into a building site, giving them much more flexibility.
- Construction Loans – As the name suggests, construction loans are acquired to finance the building or reconstruction of any real estate project. Unlike other loans, construction loans differ as the developer receives the money in monthly instalments as the project progresses instead of one lump sum. If more money is deemed necessary, these monthly payments will increase as more money is withdrawn.
As with any business industry, networking, making connections, and befriending knowledgeable professionals such as Sydney-based entrepreneur Lincoln Frost is one sure-fire way to bolster your chances of success; especially within the property development sector. It’s a well-known fact that the best way to learn is through doing instead of seeing and making connections is one way you can do just that.
When you first break into the property development world, you might find it challenging to make connections. So, you may want to explore alternate ways of doing so until you find yourself a part of a network. You could achieve this by attending networking events, signing up for emailing lists or connecting with like-minded people via social media platforms such as LinkedIn or Twitter.
Additionally, it’s not just seasoned property developers that fall under this umbrella; the term knowledgeable professionals also applies to other property development professionals. From architects, builders, environmental specialists, and many more, there are various knowledgeable professionals to connect with and work alongside.
Doing so will enable you to create a shortlist of knowledgeable professionals in the property development sector that you can rely on for advice or work alongside on your projects. For instance, suppose that you’re looking for an environmental consultancy to conduct ecological surveys on your behalf. In that case, you could consider contacting and shortlisting companies like Biodiversity Net Gain Plan.
Their ecologists carry out a range of ecological surveys on behalf of property developers and homeowners alike to ensure that the environmental impact of your proposed development isn’t questioned. For more insight, browse their website or contact a team member directly to see how they could help you further.
Understand The Property Market
A skill that separates novice property developers from seasoned ones is understanding the property market and how it changes daily. Once you have a sound understanding of what is going on in the area and how it fluctuates, you can then use this knowledge to decide which properties to develop and which to leave alone.
Likewise, you can also use the property market to make other informed decisions about the income of prospective buyers, desired locations, and demographic. Identifying these valuable statistics will keep you one step ahead of your competitors as you’ll have first grabs on prospectively lucrative properties that’ll give you a good return on your initial investment costs should you sell.
For those just starting in the property development sector, expanding and understanding your market knowledge can be challenging if you have no prior knowledge. Fortunately, there are multiple resources available for developers looking to broaden their understanding of the property market ranging from internet resources aimed at beginners to books. Alternatively, you could consider hiring a mentor to give you some one-on-one tuition.