In the current economic climate, managing a business of any kind comes with an increased degree of risk. However, property development remains a relatively stable investment. After all, the demand for housing will only ever increase while the market prices will follow suit. Even if there is a temporary fall in prices, there will be a recovery like there was after 2008.
Nonetheless, growing a property development business isn't easy. If it were, everyone would do it. If you've recently started a business in this field or need to get things back on track following recent problems, avoiding the pitfalls is key. In this contributing post, here are four pitfalls you must not ignore.
Choosing The Wrong Development Strategies
Property development and real estate businesses don't succeed by potluck. Investors and entrepreneurs must build a watertight strategy. To do this, you'll want to set defined objectives that can be monitored regularly. This will allow you to identify shortcomings before they cause major problems. Moreover, it'll deliver motivation throughout the process ahead.
Knowing whether you want to be a landlord, house flipper, or project manager for new constructions is vital. As well as understanding how to build and manage your portfolio, however, it's equally crucial to have an exit strategy. The timing of relinquishment will impact your bottom line and growth opportunities.
Not Costing Everything
There is a lot of money to be made in this environment. Nevertheless, it shouldn't be forgotten that the associated costs are huge too. When taking on a new construction, accurate calculations for lumber takeoffs and other materials is vital. Meanwhile, you should factor in all planning permission costs and admin fees associated with the build.
Anyone flipping properties should consider the building surveys. Similarly, landlords need to save some funds for repairs. Your responsibilities to maintain safe living standards need must be adhered to. Otherwise, tenants can withhold rent, which would naturally hit your ROI in a very real manner.
Overlooking The Need For Clients
Many people take the mentality of 'build it and they will come'. In reality, though, you still need to reach out to clients. Whether that means reaching out to investors or looking for tenants, you will need to appreciate the value of online advertising. Even when aiming to target local audiences, digital marketing is the way to go.
Awareness from the intended audience will put you on the path to success. However, it's equally important to present yourself when talking to direct tenants and homeowners, as well as B2B clients. The asset itself won't earn any money if you aren't able to capitalize on the investment opportunities. Clients are the key.
Going It Alone
People really are the heartbeat of the process, and not only because you need clients. Whatever area of the industry you're in, the support of a reliable team will make a world of difference. It can range from finding engineers and laborers for building projects to using web designers and accountants. Every job should be completed to the best standards.
Even if you had the skills to take on all of that work, you wouldn't have the time. Successful recruitment and team management should, therefore, sit very high on the agenda. Leveraging growth from their skills will pay dividends. Better still, it'll allow you to enter the market with confidence.
I also brought in real estate expert Brita Kleingartner of The Rental Girl and lender Andy Christenot of Movement Mortgage to discuss what you need to know as a first time homebuyer, what are TICs (Tenants In Common) and why they may be the perfect starter homes AND what else you should know if you want to invest in real estate. (Video is not perfect because it's supposed to be a class for clients.)
In my Financial Freedom for Creatives Club, you get a chance to meet and talk to all kinds of financial experts (CPAs, investment advisors, estate planning, insurance and real estate agents, brokers and lenders) who specialize in creative professionals and entrepreneurs! If you'd like to be on the waiting list to hear more about the club, just click the button below!