If you’re wondering how to become a property developer, then you’ve come to the right place. You need more than the ability to find a cheap property, do it out and sell it on. Property development requires a lot of planning. Here you can learn how to become a property developer.
6 Tips on How to Become a Property Developer
First things first, to become a property developer, you need to decide whether your plan is to buy-to-let or buy-to-sell. There are advantages to both; it just depends on what you personally want to get out of property development.
If for example, your goal is to quickly increase your capital then buy-to-sell is the route for you. This short-term strategy will enable you to make a faster return on your investment. In fact, the sooner you renovate a property for a quick sale, the more profit you’ll make.
On the other hand, if your plan is to provide an income which can one day replace your current salary, then buy-to-let is for you. This long-term strategy allows you to build up a portfolio of rental properties, so you can achieve capital growth with the rental income from tenants. As long you have a deposit of at least 25%, you should have no problem getting a buy-to-let mortgage.
Consider ROI and the Rental Yield
Whether you’re planning on undertaking a buy-to-let strategy or a buy-to-sell one, rental yield is crucial. Why? Well, even if you’re planning on selling up, you could be sitting on a property that just won’t sell.
If you’re wondering what rental yield is, it’s the return that a property investor is estimated to achieve through rent on a property. To calculate rental yield, you measure the annual rental income against the property’s value. A good gross yield is considered to be 10% and, of course, this can increase if there are multiple occupants such as students.
When selling properties, a 30% ROI is what you should aim for to effectively generate profits.
Location, Location, Location
The location of where you purchase your properties is the key to becoming a property developer. However, don’t make the mistake of buying in a location that’s already doing well. Instead, find a location that’s on the rise and make a healthy profit by buying early.
Don’t Pay More Than You Need to
While this may sound like common sense, you may be tempted to pay over the odds for a property in hope of selling it on for more money. However, in property development, you make more money when you buy a property than when you sell, so negotiating on the price of a property is essential.
Don’t rush into buying a property. Even if you feel pressured to, it’s important that you get to know the market and the area before buying.
Once you’ve found a property in the right location, that’s when you need to start acting fast. The quicker you can turn a property around, the sooner you can make a return on your investment.
Bear Your Buyer or Renter in Mind
It might be tempting to create your dream property when you’re doing up houses, but it’s important not to get carried away. Always consider your target buyer or renter to ensure that you appeal to them and stay within your budget.
Ensure You Have Property Development Finance in Place
As a property developer, you’ll need to be in a stable financial position. If you’re not, then it’s worth talking to property finance experts who will be able to advise you on that all-necessary finance you’ll need.
Now you know the all-important things to consider in order to become a property developer, why not help yourself achieve your goals by enrolling onto one of our property development courses
? You’ll learn a range of skills, as well as everything you need to know to start a career as a property developer.