If you’re in a growing area and want to get your feet wet with flipping homes, becoming a property developer might be the avenue you’re looking for. While this industry can be highly profitable, you have to have to know what you’re doing to get off to a good start. Here are a few things to keep in mind.
understand the financial investment
One thing people often underestimate how expensive property development can be. Sure you can contract out all (or most) of the work and oversee a lot of the process but that only means more costs for you. Make sure you have substantial savings and a strong credit record. You’ll want the ability to get approved for real estate loans. Whether it’s to mortgage properties or to refinance properties that you plan to buy and hold you want to always have access to the funds needed to complete each project.
This also means having the ability to understand and navigate all the costs involved in the actual development side of the transaction: repairs, renovations, contractors, and materials.
Whether you want to pursue properties that only need aesthetic renovations or if you’re looking to rebuild properties that are in need of extensive repair, there will be a lot of moving pieces involved. While you don’t have to be a licensed builder to get it done, you will need a strong network of contractors and tradesmen as seen here. From electricians, plumbers, roofers, heating and air specialists and carpenters, you’ll want to have a list of contractors that are licensed, bonded, and reliable. This may take some trial and error so start by getting referrals. Even if you haven’t yet worked with someone new, it will be comforting to know that someone else that you trust has had a good experience.
market knowledge is the key to success
To be profitable in real estate development, you have to buy right. This means that you need to have a thorough understanding of the real estate market. There are many resources designed to help you analyze the local real estate trends here, but there’s nothing like your own personal understanding of what’s happening in the market.
Look for areas that are up and coming, areas that will be next in line when popular areas become saturated or priced out of range for the average buyer in your market. This is where the most profit can be found. You also want to get familiar with foreclosure auctions, bank-owned properties, estate sales, and short sales. Just a little knowledge in these areas can go a long way.