Reasons To Look At Property Development

In the beginning, let’s begin by explaining what we mean by property development. In simple terms it is the acquisition of real property (property or land) with the aim to increase value through renovation or extending the property to make a positive return on investments. It’s really that simple. But, doing it correctly isn’t always as simple.

While there are many potential benefits to investing in property but it is equally essential to be aware of the negatives and the potential dangers for novice or novice developers. This article will discuss the advantages and disadvantages of property development , and highlight the benefits of working with a reputable company offering property development Sussex…

Pros

1. Potentially high yield on investment

The main benefit of property development is its possibility of generating a substantial return from your investments. However, identifying a development opportunity that will provide the desired amount of returns can be a challenge particularly for new developers.

2. Typically, the length of investment is shorter

Speed is an essential aspect with any property development project and the objective of all developers is to finish the construction and then sell the property in the shortest amount of time in order to guarantee the greatest possible profits and a steady annual return. If you do it correctly property development could yield higher returns than other types of investments, such as bonds and shares.

3. Greater stability

Through time, property has proved to be a much more stable investment , when compared with other options for investment. Despite its ups and downs real estate market generally is generally more stable than other markets, like the market for stocks. This is likely caused by the fact it requires a longer period of time to market (whilst shares can be sold in less than a second) and also the property market is nearly always in high demand.

4. Investment leverage

This means that when you purchase a property you are able to buy more for less. You put your money into the property and the bank lends you the additional money in the form of mortgage. Leverage is a great way to maximize the return on investment as you experience an increase in your income.

Banks loan much more to borrowers purchasing property also indicates the safety of investing in real estate. Banks have a higher confidence when lending mortgages to buy property than they do in lending to other markets.

But, many first-time property developers are unable to obtain another mortgage when they already have an existing mortgage on their home, or their deposit is not generating an adequate loan-to- value ratio to guarantee the investment property they want.

Cons

1. It’s not particularly fluid.

If you’re looking to get quick access to your money however, property development might not be the right choice for you. This is because unlike buying shares it is not possible to sell the property in a flash. Development of a property could be a lengthy process that can take months. Then there’s the time required to sell the property. Only after the property is been sold, will you be able to have access to your funds.

2. Setbacks and unexpected issues

In the absence of expert guidance and advice property developers frequently face unexpected problems that increase the construction and development costs of their projects. The increase in cost will directly affect the investment return and, if the cost is significantly higher than the budgeted amount and even cause an expense.

3. The project is delayed due to delays in its completion

In the process of completing a project for development, it’s crucial to meticulously (and realistically) determine the amount of time the period it’s likely to sell. The longer the property sits available for sale and the longer it is, the more you’ll be making in financing or mortgage payments which will result in a decrease in profits and decreasing annual return.

4. Barriers to entry

A lot of first-time developers do not consider the expenses associated with buying and selling an investment property. Recently, changes made to the stamp tax on second-home ownership mean that if you buy an investment property while you have your own property, you could face massive stamp duty charges. All of this should be taken into consideration when calculating your costs.

Final Word

Like any other financial venture it’s essential to set your goals prior to deciding whether or not to invest. A property investment could be an excellent way to increase your portfolio, but like any other type of investments, it’s essential to investigate and seek advice from a professional when you’re not sure about an aspect of your investment.