Most people see property development as a great way invest money; and rightly so! However, new developers are prone to mistakes, so to help you avoid the most common pitfalls, follow the three tips below:
Don't Avoid Research
Research is a prerequisite to any sound investment, but it is even more important when it comes to real estate. The reason for this is that you need to have a thorough understanding of the local property market and where your buy-to-let house will fit in. This means you need to understand exactly what risk is involved in your investment. The majority of new developers miss this fact and assume that investing in any property is a great way to make a tidy profit. However, with the condition of the current property market and the lack of low-interest lending from banks, you aren't always guaranteed a substantial return on investment.
However, investing in bricks and mortar is still a great way to add value to your portfolio if done correctly. But make sure you spend considerable time researching the local market and your target demographic – you don't want to tie up tens of thousands of dollars for minimal return!
Don't Underestimate the Effort Required
Many budding investors purchase properties without really thinking about how much hands-on work is required in renovation and management. But buying a property is much more than investing capital and selling it on for a profit. Rather, you will need to assess exactly what level of renovation is required and how much time (and money) this will cost you.
In addition to renovation costs, you need to seriously consider how you want to manage the property going forward. If you opt to be a private landlord, you will avoid paying leasing fees and will have a greater control over your property. However, opting to go private means that you will have to deal with your tenants directly, and will be responsible for all maintenance and repairs required. As such, you need to weigh up the benefits and drawbacks of using a leasing company in order to make the best decision for your current situation.
Don't Assume One Size Fits All
Too many property developers assume that they will be able to purchase a property and lease it easily to the next person that comes along. However, you need to think about your target tenants and how you can modify the home to suit their tastes.
If you are investing in an area close to colleges, you will likely be looking at students as your target audience. If you are investing in a neighbourhood with good schools, you will be looking for young, growing families. Whichever area you choose to invest in, make sure you renovate your home with your target audience in mind. If you fail to do this, you can easily be left with an empty property that will lose you a great deal of money over time!
Contact a realtor, like Almost Home Real Estate Services, for more help.
