Investing in property has the potential to reap financial rewards. In her first monthly edition of Moneywise, STEFI NANFAN offers advice on how to make this big step into the market ...
If you want to become a property developer, there's a lot of work ahead of you and deciding to invest your money in this way is just the beginning.
However, now you have made the decision, where do you start? What are the issues you need to consider? What will it cost? Will you get a good return on your money? How you can be sure you're getting a good deal on the purchase of any property and the alterations you need to make?
The answer is a simple homework, homework, homework. Developing property can bring great financial rewards but it could also bring you uncompromising disasters and sleepless nights.
To begin, research your chosen area methodically and rigorously.
I wouldn't suggest simply wandering along the high street and expecting estate agents to tell you of any bargains out there. Most of the real bargains are often not brought to the market, but simply exchange hands off-market.
Large developers will also often have a deal with any given estate agent to market a property with them once it has been refurbished. This, of course, puts you at a distinct disadvantage from the outset.
Take time to research your market and nurture relationships with estate agents. The more knowledge you are armed with, the more likely you are to be taken seriously by estate agents.
Finding the right property for refurbishment is intrinsic to getting your first development right. Ideally, your property will be one which you haven't paid too much for. Looking for the right home will take patience and perseverance. But your extensive research will pay off. Do this and you will discover it is possible to make money regardless of the market trend.
The biggest downfall of potential developers is underestimating the cost of refurbishment works and setting an unrealistic timescale. Time does cost money but mistakes can cost you more. An extra month's mortgage payment will cost you far less than, say, not complying properly with building regulations and having to redo part of the work you've already carried out.
Be patient in finding the right property for refurbishment. I have come across many first-time developers who have paid too much for a property in the first instance. Once their refurbishment costs have spiralled out of control, they could be left facing financial ruin.
But if you make sure you do your research, you can ensure you won't make the same mistakes.
In the next issue of Moneywise I'll be offering advice on marketing your property once it is ready for sale.
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