Background
Becoming a property developer is a serious business. Get it right and the rewards can be substantial but get it wrong and your property venture and in fact your life generally could end up in financial ruin.
Our guide outlines the opportunities and challenges of poverty development. It provides you with the germane issues to consider as you ponder on becoming a property developer.
Being a property developer is a game that gets your fingers burnt if proper precautions are not taking. Everyone seems to think that they are property developers these days just because their properties have gone up in value in a rising market. Property development is adding value and developing value; not just sitting back and waiting for the market to rise.
State of the Market
The property market is a very complex and a dynamic one. To be successful in it one has to be on top of various factors that determine where the market swings:
- Location
In the choice of property, for a property developer/investor location is germane. Location determines the rate of value appreciation and when location is good every other thing flows.
For a developer/investor, a good location doesn’t really mean the best area in town. It you buy in the center of the best area, then you are going to pay the highest price and that doesn’t leave you any room to make profit. A good location is instead those environs of best areas which in time has the potentials of becoming part of those best areas.
While, choosing location, nearness to places like schools, transport, markets, etc, are necessary pointers. The secret of a successful property developer is the ability to buy in what most people would consider the worst possible locations. While in fact they are great locations for development property, and making tons of profit. Just learn to spot these places earlier in time.
- Buy at the right price
Always aim at the lowest possible price at the time of purchase. No matter how fantastic the property in terms of location and possible value appreciation: never be tempted into looking at the future alone.
You make money when you buy a property not when you sell it. Thus, it is essential to buy at the right (cheapest) price for any property. Knock off every kobo you can from the going price. This goes straight into your pocket, hence even from the point of buying you have started making money.
When you pay higher, however good it may seem, you will be cutting down on your profit because the margin will become so slim. It is imperative that you build in your best chances of making good profit by buying even bellow the market price.
The way to swing things in your favour is to find someone who needs to sell more than you need to buy.
- What, When and Where must be right – the trinity
In Selecting an Investment Property what to buy is as important as when and where to buy. They are all interrelated.
- Choice of what:
The choice of what to buy should be determined by Capital Growth and Affordability. That is, what is the possibility of value appreciation on the property within a record time; are the factors that guarantee this in favour of the property? Then, you have found what to buy.
Choice of when:
When to buy is nowhere near as important as actually buying. A trap some investors fall into is waiting for the market to fall so as to grab a bargain. Inevitably, what happens most times is further increment in prices. They will begin to cry had I known. Even in a falling market same calibre of investors will say: “I think I will wait for it to hit rock bottom”, all these times missing opportunities to enter the market and grow their wealth.
Consider always the fact that it is impossible to know when prices are at rock bottom. The choice of when to buy must almost always be at every confirmation of the choice of what to buy, that is, the potentials of capital growth and affordability.
- Choice of Where:
This is the biggest of challenges faced by property investors, that is, where to buy. The where and what of a choice property are virtually determined by same variables. Potentials for capital appreciation are always at the center stage as it is the target of every investor both in the short and long run.
It is our recommendation that you always look at such fundamentals as the historical data, the pattern of capital growth, as well government policies or developmental programmes to establish whether or not the location(s) you are looking at are worth consideration.
Challenges
Property investment is one with maximum profit. The benefits of getting involved cannot be numbered. We have dwelled on some of them already. However, in contrast, the challenges are few. These include huge capital requirement, commitment to details, resilience and patience.
Tips:
Be thorough.
Profit and loss are either of the two consequences of any business. Property investment is a business and in fact a very risky one. Buying a particular property can bring you fortune or misery enough to last you for a life time. For this reason alone, as a property investor research thoroughly before you buy. Find out how much other properties go for in the same locality, stamp duty, development regulations, approval issues and search fees.
Consider also the effect of any restrictive covenant(s) and what is the cost of any refurbishment? Work out further, who will be a possible target buyer of such property, realistically, how much you may get and whether the profit margin is worthwhile. Consider also the possible time lag for return on investment.
BE THOROUGH, AND VERY THOROUGH.
Conclusion
Property investment is very capital intensive and you have to get your sum right. If it was easy, we would all be millionaires already. But the very few of us patient and thorough and diligent enough to pay attention to details will surely reap the fruit of a career in property development/investment.
Contact Palydom now or email us at info@palydom.com, for a FREE, No Obligation consultation regarding any of your property related issues or requirements.