In times of uncertainty, especially from an economic angle, investors have always looked to asset classes that can offer some form of stability. Property is one of them, and it has provided many investors with an opportunity to grow their wealth. While government regulations have a role to play in the attractiveness of the property market, it is still regarded as a long-term investment route that can offer good returns when approached in the right way.
Like any entrepreneurial venture, property development has no guarantee of reward. However, with the right strategy, there’s no reason why investors can’t enjoy the fruits of their investment. As Tahir Butt, London-based entrepreneur knows, even where the general economic conditions might be tough, the UK’s property market shows signs of growth in the medium term.
The Essentials
One might be inclined to sign up for a property development course to get started. These can certainly offer good knowledge of what is involved, but they won’t cover everything a beginner should know. In many cases, these courses may lay out this knowledge in a series of stages or steps, but dig deeper and it’s likely that they won’t cover all of the necessary details.
Having a business plan ensures a beginner sets out what they want to accomplish and how they envision getting there. A plan is necessary, whether the goal is to run the property development investment as a business or personal venture, as it identifies the target market, the type of property to develop, where or how to get funding, and the construction and completion details. If there are any external parties (for example, investors) with whom a beginner developer wishes to engage, the plan must be concise and informative.
Which Model Works?
A key decision to make early on is which business model – buy-to-sell or buy-to-let – to proceed with. With buy-to-sell, developers purchase a property that typically needs renovation work (whether upgrading or converting) and later sell it for a profit when they complete the necessary improvements. A rule of thumb with this model is that properties that require more work have more risk and potential profit.
On the other hand, buy-to-let investors purchase a property to rent it out. The rental payments can be used to offset any loans obtained to buy the property and provide profit to the owner. This model is great for providing long-term income, but it requires developers to attend to tenants’ needs as they arise and to be prepared for void periods where the property may not be occupied.