The 7 Worst Mistakes To Avoid As A Property Developer
Last updated 20/08/2019
Read on to inform yourself about these mistakes.
That’s the best way to prevent them!
1. Wrong area
This is the first and possibly the worst mistake that you can make as a property developer.
Buying in the wrong area means that you could have put months of hard work and hard earned cash into making a gorgeously renovated property - only to be stuck with something that won’t sell for anywhere near it’s worth.
Luckily, it’s also a pretty easy mistake to avoid, as long as you put in the research.
Here’s a short breakdown of what most tenants will be looking for, so you know what to base your research on.
- A quiet area
- Commercial amenities
- Convenient transport links
- Good schools
You should also look at how other properties in your chosen area are doing.
Pick a few comparable properties in a .5 mile radius, and have a look at what they’ve sold for, after how long.
Check for properties that have been sitting on the market for a while - is there a problem with the property, or is the area running out of steam?
It’s also a good idea to look at how many jobs there are currently and are being created in the area, and the area’s average income.
Even if the prices are currently good, this could predict a downward trend over time.
Instead look for areas with a good average income where supply is below demand.
This will push up prices and your potential profit.
If you’ve noticed that prices are starting to fall by just a slight margin, it might be tempting to get started more cheaply by developing there.
You might be optimistic that the market will naturally pick up, or that tenants will fall for the unique features your property will offer.
This is not a great option.
You should always look for good potential appreciation on your property in the coming years.
2. Money, money, money
It can be easy to get swept up in the purchase of your house, and making costly renovations.
You may think you need to borrow more money than you actually do.
- Plan your budget early and make yourself stick to it, even if it means you have to save on some features.
- Avoid making the mistake of borrowing more money than you need or can afford.
- It’s always a good idea to shop around for mortgages and not to accept the first offer that comes your way.
A word of warning: Saving doesn’t mean scrimping. It can be easy to get anxious when spending money.
But if you’ve planned properly, there’s no need to worry.
As long as you make sure all your purchases will increase your profit, you’re spending money in order to gain more.
It can be tempting to use budget friendly fittings and fixtures to save cost, but it is a mistake that many a property developer has had to learn from.
Chances are they will need to be replaced early on. Invest in items that are functional and made from quality materials.
Cutting corners will only slash your pocket in the long run.
3. Bad workmen
FInding your perfect property team is essential for every developer.
No amount of skill or expertise means that you can go it alone.
Unless you are very handy with DIY, chances are you are going to have to enlist the help of some tradesmen.
Don’t make the mistake of using cowboy builders just because they are cheap as they may leave you high and dry.
As with all things property, research can only help you.
Take a look at their reviews and reputation.
Good tradesmen will save you a fortune in the long run, so trust them to do the jobs they’ve been doing for years.
4. Over the top
Try not to release your inner ‘changing rooms’ and go too over the top when developing a property.
Your personal taste doesn’t matter.
You’re developing the property to appeal to as many people in your market as possible, so always put their needs and wants before your own.
All you need to do is make it clean, simple, and modern. Then it will have mass appeal, and your buyers have free reign to do the hard work of decorating themselves.
You also need to make sure that your exterior looks just as appealing as the interior to a potential buyer.
5. Bedroom wars
Make sure every bedroom you put in your property has a place and purpose.
Don’t make the mistake of packing it full of small bedrooms that your buyers will have a hard time using.
Your buyers won’t be too pleased.
Instead you should focus on the living space and making sure your property has a nice flow to its layout.
6. Wrong forms
You need to know your way around paperwork in this business.
If you don’t, it can be one of the most costly mistakes you could make.
Not to mention it could lead to just another set of forms or even knotty legal battles.
You’ll need to have your planning permission approved quickly and without complications before you undertake anything major.
Look at every form you’re given as if it’s vital - because it usually is.
Make sure not to overlook anything and always back up your records.
Just as with the tradesmen, it can’t hurt to enrol the help of an extra professional if you’re unsure of any processes.
7. Don’t get greedy
You’ve spent time and hard earned money into developing your property. In your eyes, the blood, sweat and tears are built into the bricks and mortar. So your rose tinted glasses will naturally tell you that it’s worth a million pounds.
But it might be hard to get the market to agree.
There’s no use getting greedy with your sale price.
You won’t be able to rake in the pounds if the price is ridiculous.
You might as well have developed in the wrong area, or chosen to refurb a property with more problems than you bargained for.
Be realistic to make sure that your efforts will result in the sale and reasonable profits that you deserve.
Timing is everything, so get expert advice on what your property is likely to be worth, that way you’re not seeing your dream sit empty.
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