Whilst profit margins are not quite what they once were within the property market it is still a shrewd area within which to work as the desire for new properties is never going to end.
Property development is an area which can prove profitable if you know what you’re doing and keep your wits about you. Whilst a lot of developers are looking more into creating improvements within existing properties to maximise returns it can be frustrating sometimes to see people falling into the same basic pitfalls which can destroy much of the profits they could have made, if only they had or had not done certain things. Make sure it is not these sorts of things which you are doing so let’s run through a few of the same mistakes.
Understand What Your Buying
Have a proper builder’s appraisal done on any properties before you purchase. Seriously, it sounds so obvious but you might be surprised how often it happens. People think they need to act on buying a property because the demand for it is so high and will just take a punt. You could have bought an absolute dud and that could set you back financially for a long time.
Understand the Demands in the Area
You might find a property that is at a really competitive price but is simply not going to generate the demand you were hoping for. Certain neighbourhoods or regions will have specific types of houses which are simply not in demand for whatever reasons. For example, you might find a 5 bed property at a really competitive rate but people living around the area or moving into it simply aren’t buying houses with that many bedrooms. Buyers are understandably cautious to not overspend no matter how good a deal may be so understand your market and only buy something which will be easy to sell on.
Consider What the Property is lacking
Sometimes a property may have a certain feature lacking which will greatly diminish its desirability. This could lead to demand being lower than you would have initially expected. Consider if there is an efficient way to resolve this issue and make the property more valuable to yourself and people looking to buy. Does the property really need that big front garden when there is limited parking space? Could a study be converted into an extra bedroom? Work out the market in your area and then cater to it. A small investment could lead to some real improvements on your returns.
Location Will Always be Key
As house prices fluctuate so rapidly you need to ensure that the property will be competitive in terms of what you pay against what you sell it for. For example property development in Sydney may not be as profitable as property development in Melbourne given that Melbourne was one of the few places in recent times where the house prices did not drop but rather rose by 1.2%. We hope that you will look into all these factors before venturing on any new development projects.