Many people are attracted by the prospect of investing in property, but that doesn’t necessarily mean that they know what they’re doing when they first get started. Sure, you can learn and pick things up as you go along, but there are some things that are certainly worth knowing before you dive in. It will mean you’re better armed and ready to succeed from the outset.
The world of property development is pretty complicated and difficult to understand when you’re coming at it as a newcomer. None of the mistakes property developers make when they’re starting out are inevitable. These things can always be avoided and mitigated if you know what you’re doing. There are plenty of ideas that can be embraced if you want to avoid them, and that’s what we’ll discuss below.
So read on now if you want to learn more about some of the things that you should know before you step into your role as a property developer.
Understand the DIY Work Involved
When you invest in a property, you’ll probably want to choose a place that is not in perfect condition. You will find much better deals for homes when you opt for choices that are in slightly worse condition and that require a little work. But when you do this, you need to understand that there is going to be a lot of DIY work involved, so are you ready and able to deal with that in a cost-effective kind of way? That’s the question you need to be asking yourself and pondering before you get started.
Calculate Your Returns
You need to know how much money you’re going to get back from all this before you go in. And to know that, you first need to run the calculations. Numbers might not be your strong point, but they need to be if you’re going to be a successful property investor. Make sure that you understand the basics of calculating your returns, whether selling on or renting out a property, before you actually dive in. Of course, things will change along the way, but you should still calculate as much as you can beforehand.
Remember the Importance of Location
When buying a property, whether you intend to use it as an investment or as a home, you need to remember the importance of the location. You might have the best home in the city, but if it’s in an undesirable location, it will become much harder to sell and a lot less valuable. So you should try to keep this in mind when you’re looking to invest in a property for the first time. Don’t fall in love with the interiors without also thinking about the location you find the home in.
In their guide to the best areas for investment in the UK, RWinvest suggest North-West cities such as Liverpool and Manchester as some of the best for long-term property investment strategies currently. If looking at Liverpool specifically, for instance, the city not only offers some of the best rental yield averages in the country — with its L1 postcode the only one in the country to reach averages of 10% — but the ongoing regeneration in the city also makes it a prospect for potential capital growth in the years to come.
Start Relatively Small
When you’re starting out in property investment, even if you have plenty of money at your disposal, you should start small. That first project will be all about learning and finding things out. There will be problems and things will go wrong, so it’s better if they go wrong on a smaller scale. Taking risks is so much easier when you don’t have huge amounts of money at stake, so be sure to start small and you can take things from there later on if you want to take on bigger projects.
Decide With Your Head, Not Your Heart
Your head and your heart will often be in conflict when you’re doing your job as a property investor. You don’t want to buy homes that are your ideal vision of what a home should be because you’re not the one who’ll be living in these spaces. Therefore, you need to be looking for what future tenants or buyers are going to be interested in because they’re the ones whose opinions matter. It’s your head not your heart that you should be listening to.
There Are More Different Types of Property Than You Think
Don’t just assume that you have to buy houses or apartments when you’re looking to invest in property. There are so many other different types of properties out there that you can invest in if you want to. For example, there are commercial buildings such as offices that can be invested in, and this is actually a very profitable type of investment in many big cities. Then there are places like Viderium.com that deal in data centers. There are many more options out there than you think, so be sure to explore them all.
Don’t Fail to Plan properly
If you fail to plan, your plans will fail. That might sound like nothing more than a cheesy little soundbite, but it’s scary just how true it is when you’re trying to run a business. Planning really is one of the most important things you can do, and if you get it wrong you will be very likely to fail in your plans as a property investor. It’s all about planning because there’s so much to do and even more that can go wrong for you if you’re not being careful. Don’t forget that because you’ll regret it later if you do.
Don’t Get Desperate
Investing in a property for the sake of it is never the way to go about any of this. You need to be focused on the end goal and not worried about how fast things are moving in the short term. Never rush into buying a property just because you’re desperate to get started and to get the ball moving, because that’s pretty much always going to lead to problems for you later. You should buy properties based on their merits, not how desperate you are to make a purchase.
Research the Properties
You should always look to research properties in depth before you jump in and make a purchase. Look at the area, the history of the property, the repairs and upgrades that will need to be done and the local property market. All of these should be assessed and analysed before you even think about trying to make a purchase in a particular area. If you don’t, you will find that there are problem that you didn’t even think about beforehand, and that’s when you run into trouble.
Look Into the Local Property Market Too
The local property market was something we briefly mentioned above, but it’s not a minor issue so it’s something that bears repeating. You should have a good look at how the property market is currently functioning and how you should be interacting with it in order to find the best possible deals. You don’t want to pay over the odds, and you ideally don’t want to invest in a local market that’s currently on the decline. Instead, try to invest in an up and coming area.
Your Instincts Will be Useful to You
You should pay attention to your instincts when you’re buying properties for investment purposes, especially when you start to get the hang of it and how this all works. Your instincts really can serve you well and show you the way forward, so don’t ignore them completely. Calmly assessing the situation and finding the best way forward is important, but that doesn’t mean your own instincts can’t play a part in your decision-making too. People who’ve been doing this for a long time know when to trust their instincts.
Manage and Allocate Your Cash Carefully
You will only have a limited amount of cash at your disposal for each property project that you take on, so you should try to allocate your resources in the most careful and considered way. You don’t want to spend all you have on a few things when there are so many other matters that have to be attended to. As you gain more experience as a property investor, you will learn more about how to allocate your cash on each project. So don’t worry if you struggle with this at first.
Don’t Waste Any More Time
Wasting time will only lead to problems for you, and if you keep putting off making that first investment, you will never get it done. Of course, this doesn’t mean you should rush into things, but it also doesn’t mean that you should keep hesitating and putting it off forever like some people end up doing. Approach it logically and when you’ve assessed the options, make the plunge and start learning from your mistakes along the way if you need to. The longer you put things off, the more likely you’ll be to never get started at all.
Property investing is one of those things that is definitely worth your time and energy if you’re willing to commit yourself to it. But if you’re not willing to do that, you’ll probably fail because this is not the kind of thing you can do in a half-hearted way. Approach it in the right way and you’ll see the returns you’re looking for in no time.
