Property Development: Turning Bricks and Mortar Into Bread and Butter

Developing a property can be a worthwhile endeavour. You can depend on it for your main source of income (as many others do) or to supplement your income. The task of buying a plot and building a house on it or buying an existing property and refurbishing it may appear simple especially if you're just beginning to immerse yourself in the business of developing properties. Therefore, you'll do well to take several pointers from the experts. As a novice to property development, you need to know a number of essential things that will greatly influence your success in the field.

Getting started in property development

Property development can include the process of sub-dividing land as well as renovating properties for resale. The method can also mean tearing down a property and rebuilding it. If you want to develop properties for a living, the first crucial thing you need to spend a lot of time on is doing your homework. Embarking on property development necessitates educating yourself, talking to the right people, observing what others before you have done and taking note of the locations where they're developing properties. It's also crucial that you are able to determine the type of property you want to invest in and to be certain of the market you'll be targeting.

To get the most from your investment, be sure to buy properties below market value as this technique lets you earn profits faster. You can find BMV properties at auction where you can pick them up at prices 30% below their market valuation. To be sure, look for distressed sellers - or those who have an urgent need to sell due to reasons such as divorce and repossession - as these homeowners are willing to accept offers significantly lower than what their houses are truly worth.

Where to develop properties

In determining where to target your property development plans, research again plays a vital role in the achievement of success. Remember to look for an area undergoing a growth stage, where a population expansion is being experienced and a location where rental homes are in demand. A good location would be one that's in close proximity to learning institutions, shops and public transportation.

Obtaining finance for your project

Depending on the endeavour, property development finance can be taken out as either a residential or commercial loan. Each will be based on your circumstances which will then determine the amount you'll be paying in terms of interest on your finance. There are several factors that will be considered when deciding on the rate. One is your background and experience in developing properties. The rate will also be based on the industry sector at the time you applied for finance and the loan proposal you have forwarded to the lender. If you're just starting out, banks will most likely require a higher level of security. This means you have to put more of your own funds into the development.

You can also obtain 100% property development finance for your project. There are three ways to achieve this. First is by finding a property below market value and sourcing a lender willing to provide finance against its real market value. Second is to provide additional security - which can be in the form of another property - to lenders who require it prior to providing 100% finance. Third is through gross development lending which involves providing a forecast for the end sales value of your project after it has completed the build phase.

Property development is a venture that requires time, patience, research and the ability to take calculated risks - more so if you intend to make it your main source of revenue. As long as you have thoroughly learned the ins and outs of property development, taking on these risks can be greatly superseded by the benefits you'll be earning once you have become a successful property developer.