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 could end up in financial ruin.
Gary McCausland, property developer and presenter of Five's 'How To Be A Property Developer', writes for Primelocation.com and provides his top ten tips on how to maximise your chances of making a successful career in property developing.
Read more: http://www.primelocation.com/guides/landlords-developers-and-investors/how-to-become-a-property-developer/#ixzz0py1jMJ2u
1. 'Location, location, location'... the myth
Being near schools, public transport and green areas is essential when it comes to selling a property, but being in the nicest street with the smartest postcode isn't. Some of the richest property developers in the world specialise in buying in what most people would consider the worst possible locations, when in fact they are great locations for developing property, making tons of profit. The trick is learning to spot these areas, because often the only way is up!
2. You make your money when you buy, not when you sell
You make money when you buy a property rather than when you sell it. Thus, it is essential to pay the right price for a property. Every pound you can knock off the asking price is money straight in your pocket. If you pay top dollar for something, however good it may seem, you are not going to be able to make a decent profit because the margins are so slim. Look out for properties that have planning applications in with the local authority. They might accept a good offer subject to planning permission, and if they eventually get planning permission, you get the upside!
3. Going, going, gone!
4. Do your homework
Property development is a risky business. You could make a fortune, or you could lose everything and end up in debt for the rest your life. You have to do your research thoroughly before you buy. Find out how much other properties go for in that area, how much stamp duty, searches and fees will be. Are there any restrictive covenants and what is the cost of any refurbishment? When you have done your sums, work out exactly who you will be trying to sell to, how much you will realistically get and whether the profit margin is worthwhile. Property development is very capital intensive and you have to get your sums right. If it was easy, we would all be millionaires.5. The right seller
When you are looking to buy a property you need to find a motivated seller, someone who will give you a good price because they really need to sell. Estate agents will have background information about why someone is selling. Anyone moving abroad, getting divorced or going bankrupt will need a quick sale, which is when you will get a good price. Check out the tiny ads in newspapers and on the internet as motivated sellers often try to sell the property themselves. Remember, the more desperate they are, the better deal you will get!
6. The right buyer
7. Keep looking
Just get in your car and drive about. I found my first house, which got me started, driving through Richmond. I came across this rundown, dilapidated old house and knocked on the door. An elderly gentleman answered and I told him I was interested in buying his house. He said he'd been thinking of selling up and we did a deal privately. I gave him a good price and avoided paying the fees. Lots of properties ripe for development can be found just by driving around. If they are derelict, the Land Registry will help you trace the owner.
8. Watch the market
9. Avoid the most common mistakes made by amateurs
Remember, property developing isn't like cooking a recipe from a Jamie Oliver book. It's much, much more important and difficult, and if you get it wrong, it could potentially leave you broke for the rest of your life, or even bankrupt! Dabble in this game at your peril.
Everyone seems to think they are property developers these days just because their house has gone up in value in a rising market. My advice - get real! Property developing means adding value and developing value, not just sitting back and waiting for the market to rise. There are so many pitfalls.
Don't pay over the odds and think you will make it back in the long run. Remember, you make your money when you buy, not when you sell.
Always protect yourself against the downside, which means, in a worst case scenario, can you still come out with the shirt on your back? If not, stay away. Someone once said to me, "You never regret the deals that you don't do", and they are right, because there is always another better deal just around the corner, so never be in a rush to buy. 'Buy at haste, repent at leisure', and in property, if you get it wrong, it becomes a headache and a money pit that can last for years!
Also, be careful of buying anything with structural issues, HAC, asbestos, etc.
Always be sure of the area you are buying in, especially noisy neighbours. They can ruin a sale. Make sure the legals are OK. Are there any restrictive covenants, is the garden included, etc.?
10. You never have to pay the asking price
"The more motivated the seller, the better the price".
The way to swing things in your favour is to find someone who needs to sell more than you need to buy. One of the most valuable lessons I have ever learnt is to be always on the look out for a motivated seller. Typically, motivated sellers are people going through divorces, people in financial difficulties, or the families of the recently deceased, who want a quick and painless sale.
Whatever your situation, the fact is, if you can find a motivated seller, you can usually find a bargain. And the more motivated the seller, the better the price - and every penny saved at the front-end is money in your pocket at the back-end!
Read more: http://www.primelocation.com/guides/landlords-developers-and-investors/how-to-become-a-property-developer/#ixzz0py1uApSP
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