If you want to stand a better chance of reaching the maximum profit from your property development project you must remember that this simple rule: The most important thing when buying to sell is to keep the image of your target market in your mind at all times.
Be sure to work out your figures after viewing any property you are serious about.
It is not as complicated as you may think. The most simple and comprehensive way to work out the maths is to subtract the associated fees and costs, renovation and purchase costs from the potential selling price of your property.
It’s easy. I’ll show you how. To get to this stage calculate the following:
The realistic resale value of the property.
The cost of renovation works to the property.
The sum total of all associated fees and costs you will incur during the project.
The Realistic Resale Value
You don’t want any nasty shocks so you must be realistic. Ask yourself what your property will be worth in peak condition. Finding out the realistic resale value or ‘ceiling price’ of a property can tell you instantly whether you have a deal. It will guide you towards buying for the right price, reveal how much the property will be worth once it looks its best and help you work out your potential profit margin.
So, before investing in a property, ensure that calculating its realistic value is your prime concern.
Build a profile of the property. Be realistic and base your profile on the location, building type, number of rooms, features and layout.
Next, contact three local estate agents. Ask how much newly modernised properties of this profile have recently sold for in your area. See how the details of these properties match your profile.
Calculate a resale value from the comparables that match your profile. If the sale of a comparable property took place more than two months ago, get an up-to-date opinion of the resale value of a similar newly renovated property. Then get two more estimates to substantiate the first.
Once you have worked out your realistic resale value, look at the administrative costs and budget. Buying a property always costs more than the purchase price. You will need to take into consideration all of the legal costs involved.
There are also extra fees such as the cost of the survey; Land Registry costs; site services- gas, water, electricity and taxes. Don’t forget to include other administrative costs specific to your project, for example, the costs of selling the property once developed, planning and building control fees.
Living In Your Development
If you are short of cash you could certainly consider living in your development. This may sound like a simple option but it does have its pitfalls. For example, are you really going to be able to continue to live in the property while the work is being carried out?
This can be noisy, dusty, and intrusive and you may find yourself without facilities such as hot (or cold) water, use of a loo or a basic kitchen while the work is in progress, and this situation could last for weeks, even months.
As with all developments you want to be very sure that the work you do is actually going to raise the value of the property.
It is vital to do your research first. Don’t assume that if you do what you want this will automatically increase the value of the property. Even if you were to convert the loft or add an extension, you might find that the costs involved would exceed the amount that it adds in value to the property.
Your thorough research before embarking on the property development project will stand you in good stead of reaching the maximum profit margin possible on the property that you will be selling on.