Real estate development is not the most beginner-friendly field. However, many developers start on small projects and learn from there. Still, many commit some crucial mistakes that could put them in debt for years to come, or lead to severe legal action that could end up crippling their operation. Thankfully, there are tons of ways that firms can avoid these mistakes, and they’re simpler to avoid than many might think. Here are some common mistakes budding property developers commit.
Lack of Research
While “location, location, location” may sound like an overused cliche, it doesn’t make it any less true. If you want your project to be successful, then starting with the right location is paramount.
These days, researching areas is easier than ever, and there are tons of resources that will give you a quick snapshot of any area based on local facilities, median income, and crime rates among other things. But you’ll get a better idea if you work with a professional. Supplementing that information with information from actual residents and shop owners will give you a clearer image of the neighbourhood.
Make sure that you check the quality of schools in the area by using league data tables. Also, make sure that you check the state of the job market in the area, and if there are future opportunities. Other things to keep an eye on include transport links, leisure facilities, and parking areas.
Ignoring Important Numbers
To calculate the feasibility of any project, you have to understand every single cost. And also make sure that you give yourself some wiggle room. There isn’t one single successful developer that doesn’t do this.
Some of the costs include site purchase price, acquisition costs, and development costs. Development costs can be particularly tricky.
Commodities prices can have a huge difference in development prices and can fluctuate greatly. One of the commodities developers constantly have to keep an eye on is cement. However, you can use a concrete calculator to find out costs.
Whether you need a screed calculator or a concrete mix calculator that will allow you to check prices based on which mix that you need, you can calculate it at mixit.co.uk. This UK concrete calculator will allow you to calculate the cubic amount of material that you need. You will then be able to contact the MixIt experts who will advise on which type of mix that you need, and how much you can expect to pay.
In addition to acquisition costs, development, and purchase price, other numbers you should keep an eye on include interest on borrowing, gross realisations, selling costs, and additional taxes.
Not Looking at Planning Permission
You may think you just found the perfect lot, but there are tons of other things you’ll have to consider. Depending on the lot or jurisdiction, there are tons of additional permissions that you might need to start a project.
If you’re thinking of making some major changes, then you need to look at things such as water drainage searches, local authority searches, and environmental searches. You should also look at listed building status, as well as local applications, including results.
Not Looking at Hidden Costs
Hidden costs can easily drive up any project, and affect its feasibility. This is why you need to be aware of them and plan accordingly.
Some of the hidden costs you should account for include legal fees, survey fees and valuations, and materials wastage. Other things you should look out for include non-recoverable VAT on particular purchases such as delivery charges and equipment rental, land registry fees and stamp duty, site lock up and office facilities, and service connections.
You also should always consider your own expenses and time when evaluating total costs. Every minute that you spend working on a property is time that could’ve been used to make money somewhere else, so make sure that this is part of the calculations as well so you can understand the true cost of an opportunity.
Neglecting Your Team
You are nothing without your team. Those who don’t realise it early end up learning it the tough way. This can translate into stolen material. Or absenteeism. Or simply dissent. This can lead to lower efficiency and higher costs.
This is why you have to make sure that you make your top players feel comfortable. Notice when someone is doing the extra mile. Reward them with bonuses on performance. Give them a good benefits plan. You’d be surprised at how much good morale can translate into productivity, and help your firm stand out.
Conclusion
Whether you’re a new or experienced developer, there is always room to learn. If you are or were about to commit some of these mistakes, make sure that you take the time to make informed decisions, and learn from the mistakes of others.