How Easy Is It To Invest In Property Development
Have you seen the latest craze to hit our TV screens lately? Watching people make a complete hash of renovating fixer uppers, looking for that property tycoon lifestyle, without really having done much, if any research into any kind of property investment.
Having said that, the victims, er I mean new developers, will always be in the money. Well, it just makes for better TV don't you think?. Suggesting some omissions somewhere methinks. For instance, I'm sure the new developers weren't gifted their fixer-upper from the property fairy, are the repayments actually factored in, surely there are federal and state taxes to pay. Or were they given a free property through some tax liens. I'm also thinking that most people on the show still have a day job. Did they get paid leave, or is that a cost to factor in too - loss of earning?
Anyways, it has good entertainment value. And I'm sure most intelligent people won't base their property investment decisions on a TV show. Will they?
Back on Earth - is there still life in the old fixer upper concept. Within reason of course? Regardless of how you acquired the property. Buy it, inherit it or wangle some tax lien certificates.
Before you even lift a hammer you need to know the numbers. Inside and out, upwards and back. Do your research. What are good condition properties in your chosen area going for? If you don't what you can sell for, you'll never know if you can make a profit. The difference is not always great enough to make renovation worth while.
Next step is determining the cost of renovation. This will generally be considerable especially if you've bought one of the run down tax lien properties. It's all too easy to mis judge how long these renovations take, and how much they cost. Not only can it be difficult to get quality tradesmen within your desired timescales, but where local government approval is required, you can look at adding several months to a project timescale. And then there's the costs associated with applying for planning permission. Not inconsiderable either. So next we need to account for how you'll actually buy the property. The vast majority of developers use mortgages. And unless I'm mistaken, mortgages still cost money. Once you take ownership of a property you also become liable for a whole bunch of fees and charges. Government taxes, utility fees, insurance etc. These charges continue right up to the day you complete your sale.
Apart from this, you have the always unknown factor of house price fluctuations. Even the most beautifully renovated houses are affected by changes in the market. House prices can drop pretty dramatically.
Always plan for every eventuality. What if it doesn't sell right away. Properties can take a while to sell. It's just one of those things. I once had two flats on the market for nearly a year, with no interest whatever from potential buyers. Then, weirdly, they were both sold the same weekend. Even the best agents in the world can't magic a buyer out of nowhere. Sometimes you just have to ride it out. Property development is never straightforward. Sometimes you just have to sit tight and hold on.
Getting Started
You could start by identifying new estates with money flowing into them. This is identified by at least a few houses in the street having smart front doors, tidy front gardens, and expensive curtains, blinds or shutters at the windows. Another sign of regeneration is late-registration cars parked in the road. Another way to find an upcoming area is next door to "the last big thing". Money attracts money so look if popular areas are expanding. A prime example being when south London went crazy, people looked at neighboring villages. Suburbs of suburbs if you will