While most buy property at retail prices and just wait for capital growth, those in the know are investing in property development projects from the start. Property development is a smarter way to make money. You can develop a property to rent and build a property portfolio or sell quickly to turn a profit. Either way, done right, property development is an excellent opportunity for investors to put their money to work. Before you jump in, this is what you need to know about this lucrative investment strategy.
Are You Developing or Just Investing?
If you’re a seasoned property developer ready to make a more substantial investment, you’re on the right track. While putting up your own money is scary, if you know what you’re doing, you can mitigate a substantial amount of the risk involved. As a property developer, you will be able to fine-tune your strategy based on experience, which will ultimately improve your return on investment. If you are not a property developer but you are looking for a good investment opportunity, you’ll be glad to know that you can get in on the action by working with a reputable property developer.
How Much Money Do I Need?
How long is a piece of string? You can put in as much money as the project requires, you can merely cover the deposit needed to secure the loan, or you can find a figure somewhere in between the two. In the end, once the loan (if any) is paid off, your returns will be proportional to that of your investment. Remember, you are technically paying the equivalent of the wholesale price for a property development; your returns are higher than they would be if you merely bought a finished property and waited for capital growth. So, even a small investment may be worthwhile.
How Do Investors Make Money through Property Development?
When you’re getting in on the ground floor, you have to take on a lot of risk. Risk doesn’t only account for things beyond your control; it accounts for how thorough your due diligence and feasibility studies are too. The more research and preparation you do, the better. Through feasibility studies, you can gauge the profitability of a project and its viability. When you invest in a built property, all this risk and research is taken on by someone else, which is why you won’t see the same returns as you may through investing in a property development project. Your profit also hinges on how you choose to end the project. If you sell the property quickly, you may be able to avoid paying capital gains tax, but if you retain the property, it can form part of a long-term real estate investment strategy.
Property development is an intelligent solution for investors. It requires a lot of planning and due diligence, but in the end, you stand to make higher returns than you would through more passive investment methods. If you know your way around the property development industry, you have the edge over other potential investors too!
