Top 10 Questions to Ask Yourself Before Becoming a Property Developer

Making the decision to become a professional property developer and invest in property is no easy step. Is it one that requires a lot of thought, consideration and time to ensure you are making the right decision.

If you too are struggling to decide if property development is the right route for you, then the following FAQ can help put all your concerns to rest:

1.What is property investment?

There are many misconceptions about property investment and what it exactly entails. The most common route you will encounter – and hear of – is renovation, where you buy a property with the purpose of doing it up and selling it.

However, whilst this niche was profitable during the property boom of 2007, this investment technique unfortunately is less effective during economic downturns. That is unless you have got the cash to turn the property around fast and quickly get it back on the market.

The other route however – and the one we recommend to you – is buy-to-let. With buy-to-let, you can invest in property based on the areas tenancy demand and ability to produce positive cash flows, and generate month on month incomes simply by leasing your property development to tenants. There is no need to sell…

2.What makes property investment different to stocks, bonds or shares?

The fact that it will never go into zero values! Although stocks, bonds and shares can help you to experience annual returns of up to 25%, they are also prone to dipping down to -8% leaving YOU out of pocket.

With property it is a much different story. Even in a recession, properties can still produce annual returns of up to 25% – if you invest correctly – making it a much safer, more stable investment route.

3.Do I need capital to invest?

No. Equip yourself with the right strategies, and it is possible to invest in property using little if any of your money and purchase properties without putting your own home at risk.

Investment strategies such as No Money Down or No Deposit Down are specifically designed to help you invest with minimal costs involved. All you will have to worry about is your legal fees and stamp duties; yet even then it is possible to negotiate such property discounts that your property will essentially pay for itself.

4.Do I need experience?

Despite what the media would like you to believe, you don’t have to have prior property investment experience to make a profit from property.

The key to achieving long term successful investments is to: equip your property portfolio with the right investment strategies; negotiate the right property price discounts, but more importantly ensure that you only invest in properties which can produce the positive cash flows and tenancy demand you need.

Attending a property development course can help to equip you with such investment strategies. Just make sure that you thoroughly research these property development courses first, check their history/case studies and only sign up to a course that can offer you at least 5 investment strategies.

REMEMBER: Not all investment strategies will work in all financial climates, which is why having plenty of choice can come in handy.

5.How do banks lend money for investment property?

Unlike applying for a mortgage where your lending amount is based on how much you earn, buy to let investment is assessed very differently.

Here, all lenders require is that your property is able to generate 125% of its mortgage repayments through buy to let. Meaning choose wisely and it is possible to invest in bigger and better properties, than you normally would be able to if it was based on your salary.

6.What are the best properties to invest in?

There is no fixed rule to this exactly, although residential properties do primarily win in the investment stakes against commercial property and land.

When you are researching potential property developments, the key points to take into consideration are the properties tenancy demand; the mortgages deals available and the positive cash the property can generate. As long as there is the demand and the property can produce at least £300 in positive cash flows, then it doesn’t matter if it is a terraced, semi-detached or detached.

This information aside, economic circumstances can make one property type more popular than the other. During the recession for example, studies found that tenants preferred living in terraced properties compared to all other property types because they were better designed and more energy efficient.

7.What is positive cash flow?

Positive cash essentially represents the income left over from a tenants rent after the properties mortgage repayments have been deducted. So, the larger the properties positive cash flow, the more profitable the property is.

8.Is it possible to invest in all financial climates?

Yes. If you are looking to enter specifically into the buy to let investment market, then with the right investment strategies, brokers and negotiating skills, it is possible to invest come property boom or economic crisis.

Take the recent recession. During the last 2 years we have been confronted with property price discounts of at least 20%; base rates of only 0.5% and a tenancy demand that has increased by 24% alone during the last quarter of 2009.

However, even with the property boom of 2007, property investment was still powerful asset as it encouraged rapid capital growth which in turn prompted rental increases and larger positive cash flows.

The financial climate does not have to play a factor in your decision to invest; only help you to determine which of your investment strategies will be most effective.

9.Is it possible to invest abroad?

Your property portfolio does not have to remain restricted within one city, region or country. UK, USA, Europe or Australia… with the right strategies all properties can be transformed into credible property lets.

The only thing you should be cautious about when investing abroad is familiarising yourself with their property laws and investment regulations. Every country is formatted using a different system, and will employ different methods for lending, organising repayments and structuring property leasing.

10.Do I have to give up my day job?

No, far from it. The great thing about property is that you can easily research, invest and build your property portfolio in your spare time – for as little as 1 hour property per week – and continue working your day job.

You can even employ a property manager to take care of your properties, and ensure that your rent; maintenance issues and tenant problems are quickly resolved without need for your assistance.

Why Road Frontage on Commercial Property is So Valuable

How many feet of road frontage does the property have?

This question is among the most important when assessing the value of commercially zoned property in a city or county. For some, the reason as to why this question is so important may seem rather obvious. However, there are multiple reasons why investors, developers, builders and business owners want to have large amounts of road frontage on their commercial properties.

For business owners, it is best for them to have their stores located conveniently to their customers. If they are on a main highway or road, they will have great visibility to the traffic going by. This can quite possibly bring customers into their stores that they normally wouldn’t see through their normal marketing. Also, a customer new to the location can find the store much more easily when in the line of sight. Visibility on major road frontage is a huge advantage for the business owners and their stores.

Another reason why business owners like to have their stores along major road frontage is because of the ease in which customers can enter and exit the property. If they are forced to drive through large parking lots, wind behind other major stores, and park on a land locked parcel, there is a possibility that the customer would go to a more easily accessible competitor.

Now, this may be pushing it a little, because a business should be able to bring customers in on its own through effective marketing and good business practices. However, it is definitely more pleasant to access a place of business that is right by the road, rather than search your way through parking lots, other businesses, and who knows what else. The easier the access, the more enjoyable the experience is for the customer.

The two main reasons for business owners to have their stores on major road frontage are visibility and ease of access. Let’s look at why investors, developers, and builders all want the properties they are involved with to have the greatest amount of road frontage possible.

These three people, investors, developers and builders, are the foundation for commercial real estate. They have the money; they have the vision, and they, ultimately, are responsible for building our communities.

More often than not, these people will choose properties to invest in that have the most amount of road frontage, or create the roads so that the office complexes, retail centers, and strip malls have the visibility and ease of access that business owners look for in a profitable commercial property.

The underlying advantage for these investors to develop and build properties with major road frontage is the fact that these commercial properties, known as out parcels, are far more valuable than the land locked in parcels behind them! The difference between these property values can be quite drastic.

For example, recently I was assessing a 56 acre raw tract of land in Rome, GA. It had over 2,000 feet of road frontage on a major highway! The front of the property was zoned commercial, while the back was zoned multifamily. After speaking with the broker and looking at comps (comparable sales), it was clear that the out parcels would be valued at approximately $600,000 an acre developed. (They could be worth more if we were able to get national brand stores on the property). However, those in parcels, without the road frontage, would only be valued at $225,000 per acre. This is a $375,000 decrease in value simply because those in parcels are a few hundred feet away from the actual highway.

This news greatly cut into my overall profit margin.

Not all cases are this extreme. However, it is always true that an out parcel will be more valuable than an in parcel. That is why investors, developers, and builders all want property with major road frontage. It is simply more valuable!

Business owners and investors alike will gladly choose a property with major road frontage over a land locked parcel, or a parcel with little to no road frontage. Use this important fact when you assess properties and the value that they hold.

Three Basic Sales Tips for Property Developers

Investing in real estate business is a great risk for any businessman because it can affect anyone’s financial status for the rest of their lives. A huge amount of money is at stake, and there is a very little room for errors. Wise decision-making and full on determination are the keys to success in this kind of business endeavor.

As real estate or property developers, one must be able to communicate his ideas and express his creativity through project proposals and presentations. A good property portfolio can provide a stable structure for gaining the clients’ trusts and may be beneficial for the company itself for the years to come.

To be a successful property developer, here are some basic sales tips on how to maximize your opportunity in the property development category.

Find the Right Location

The most important thing to consider in every property development is the location. You have to remember that the best location is where you can make tons of profit. It doesn’t necessarily have to be in areas with the nicest postcodes. The ability to buy properties in the worst possible locations and turning them into impressive locality can make any real estate developer successful in this field. A good property developer should possess a keen eye in spotting highly profitable locations to develop.

Provide an Impressive Portfolio

It really pays to be creative. Every real estate or property developer should have a presentable and informative project portfolio that will showcase the company’s mission and vision in a particular location. The portfolio should communicate the ideas and the proposed future appearance of the property to be developed. One way to express creativity in presenting the company’s project proposals is by using 3D rendering and architectural models.

The use of today’s technology, especially 3D rendering, is an ideal way of marketing the proposed future buildings and properties that are yet to be constructed. Having realistic models of the properties being developed can give the clients a clear basis for the calculation of their budgets.

Do Some Research

As with all risky business endeavors, property development could make you rich and famous or could put you in debt for the rest of your life. You have to make things right the first time. A very capital-intensive business such as property development needs thorough study and research. If you want to invest on unusual property locations, you must be willing to take bigger risks. Taking bigger risks could mean greater profit.