Property Development and Investment - 5 Things You Need to Know
Whether you’re considering starting out in property development and investment, or looking for the ideal project to expand your portfolio, there are a few fundamentals it’s always worth bearing in mind.
1. You need to know what your plan is, both long-term and short-term
Finding lasting success in property development projects is, in many ways, more of a marathon than a sprint.
Successful property investment strategies tend to be backed by robust project management and sound financial planning, because achieving the best return on your investment often involves allowing assets to rise in value over a number of years. This requires very different tactics than more speculative, quick-turnaround buying and selling. While both can yield positive results when handled properly, always be aware of which approach you’re aiming at before searching for a suitable property development opportunity.
Besides a careful plan for getting into property development, an equally sound exit strategy is sensible. This is closely related to the value of setting realistic and measurable goals - always a key part of any property investment process, but one that’s sometimes overlooked at the planning stages.
2. You need to know what strategy to aim for
There are a number of important factors to bear in mind when considering a move into property development and investment.
Among the most fundamental will be the decision between buy-to-let and buy-to-sell, as this will have a considerable impact on shaping your overall property investment plan. Buying-to-let, for example, tends to revolve around longer-term property investment strategies, and is less immediately subject to temporary fluctuations in the housing market (in other words, less financially risky) than a short-term, quick turnover approach.
In addition to considerations around financial risk and ROI targets, consider how much time you’ll personally be able to dedicate to a property development or investment, and to what extent you’ll need to delegate to a trusted property management team.
3. You need to know all you can about potential properties and locations
Buying in the most expensive postcodes isn’t a quick route to a positive ROI, but developing in less popular locations can be more risky. Successful property investment requires a knack for spotting balance.
Factors that make a property or area desirable will vary depending on your target market, but proximity to schools, transport connections, leisure infrastructure, parks and other activity spaces is always important. Knowing where these sorts of developments are starting to flourish takes research and - crucially - detailed local knowledge from your agent or project management team.
It’s hard to overstate the importance of the latter: insider knowledge of market trends, the history of an area, and its shifting demographics over time can be very difficult to access from afar. Always make sure you’re partnered by a team with an intimate understanding of potential locations for your next property development project.
4. You need to know exactly who you’re buying for
Finding the ideal location for a property investment means understanding who it’s for. What sort of lives do your prospective buyers or tenants lead, and what factors are most important to them in choosing a property?
This is essentially a question of supply and demand, and it’s vital to get the balance right. There are dozens of potential variables to consider, including:
- The likely ages, professions, and family status of target buyers or tenants
- What number and type of rooms/layouts will be most practical and cost-effective for your target groups
- Which facilities and amenities might increase a property’s value to them (parking, outdoor space, transport links, leisure pursuits)
- Whether planning permission might be needed in future, and whether it’s already in place if so
- What sorts of decor and appointments might best suit your potential buyers or tenants, and its likely impact on costs (both up-front investment and longer-term maintenance)
On a closely related note, property developers and investors also need to be keenly aware that they’re not necessarily buying for themselves. It can be very tricky to leave our own tastes and preferences out of the decision-making process when looking to invest in property, but it always pays to consider the potential desires of others above our own.
This is one of the many reasons it’s vital to have a trustworthy and experienced property management team on your side.
5. You need to know when a deal isn’t a deal
Some of the most common pitfalls in property development and investment relate to ‘bargain’ opportunities, which typically look far better at first glance than they ever do over time. Sensible grounds for caution often include:
- Property investment opportunities that stretch your budget to the absolute limit, or beyond
- Deals that need to be moved on more quickly than you’re comfortable with (again, it’s not a process to be rushed through)
- Property development opportunities that seem implausibly cheap - many will require a tremendous amount of work, which may end up devouring far more time or money than you’d realised or budgeted for
- Properties that have suddenly been slashed in price - look carefully into the reasons for this, especially around location issues
- Investment opportunities requiring immediate attention, but without a trusted property management team on hand. In today’s market, most tenants and buyers quite rightly won’t accept quick DIY fixes, or work delegated to non-professionals
There’s clearly a lot to take on board when shaping up to tackle the complexities of a property investment venture - and never more so when the property in question is overseas, That said, when approached with a bit of sound planning and robust research, the potential rewards of development projects like these can be fantastic.
Smooth portfolio expansion and growing ROI is of course always the ultimate goal...but it’s also hard to overstate the immense personal satisfaction you’ll derive from a successful move into this consistently exciting and dynamic marketplace.