Mistakes to avoid as a property developer

avoid making these mistakes as a property developer

Common mistakes in property development and how to avoid them 

Becoming a property developer comes with a lot of responsibility. Although many boast that property development can be straightforward, it takes a lot of time and practice.

So many developers make the same mistakes over and over again. We are here to help you be different from the rest.

Our list of common mistakes and how to avoid them will hopefully mean that you can soar as a property developer, and ensure that you are maximising your profitability and doing your job the right way.

1. You begin a project without a clear or in-depth strategy

A lot of new property developers will fall into the trap of being tempted by a discount or believing someone who tells them that a property will go up in value.

This is a mistake because this will cloud your judgement and will restrict you from achieving your original ambitions for the property you are developing.

HOW TO AVOID THIS:

  • Make sure you have a clear and detailed strategy before you buy a property.
  • Ensure that you have considered property development finance options, or the way you will fund this project.
  • Your plan should also include an exit strategy. Read more.

2. You don’t consider the location

This is one of the easiest and most fatal mistakes to make is to disregard the location.

Many property developers are tempted by the size of a plot, or the quality of a property. However, location is a predominant factor which will increase the GDV of your project.

HOW TO AVOID THIS:

Consider location as a central part of your project plan.

Make sure that you factor in:

  • Transport links
  • Educational and professional establishments
  • Infrastructure
  • Amenities
  • Centrality

3. You don’t consider each and every cost

Don’t be tempted or distracted by figures in the headlines about potential capital growth or gross yield.

Make sure that you factor in all kinds of costs: buying, development, management costs, along with your property development finance options before you commit to buying. Learn more. 

4. You purchase a buy-to-let that has a negative yield

If you are becoming a property developer for the purpose of making a passive income through a buy-to-let, then you should avoid purchasing a property that will cost you money each month.

This means that you must consider the following costs:

  • Maintenance costs
  • Management costs
  • Rises in interest rates

5. You forget to consider opportunity costs

This is a critical mistake to make if you forget about the opportunity costs.

Many developers hop on the property bandwagon because they want the opportunity to make money, however before leaping to conclusions, make sure to gain a full understanding of the opportunity costs so that you can fully maximise your profits.

6. You disregard cash flow and its importance

You must ALWAYS consider cash when running a business of any kind. Property development is a business, so you should centralise the importance of your cashflow.

Make sure to document how much you are bringing in, and how much you are paying each month.

Keep up with your finance repayments too. Keeping detailed accounts of each incoming and outgoing payment will allow you to keep on top of your finances so that money doesn’t get lost or you forget to pay.

Always remember to seek professional advice when beginning on your property development. 

 

Previous Article