Dealing with property is a pretty solid plan for economic enrichment and stability; while you do depend on the market to some degree, it's still a pretty reliable way to make a good profit, especially if you build up an extensive portfolio. And you know what they say - there's more than one way to skin a cat, so let's take a look at how you can profit from property development. Here is some information on owning property from GOV.uk.
Purchase Land And Build To Rent Or Sell
The first option is to essentially start from zero and build from the ground up - literally. You may happen upon a perfect piece of land that's also affordable where you can develop your ideal project that will result in a handsome profit. This will require you to take on some hefty construction work to prep the land, build the property, finish it, add any necessary fixtures, etc. From here, you have two options: rent or sell.
- Rent - renting is great because it's a long-term solution and a long-term source of profit. Whether you're building homes, office spaces, or commercial spaces, you will be able to yield profit from this development for years to come. However, keep in mind that there is also maintenance involved here, as well as property taxes, when you own.
- Sell - selling is a much shorter term deal, because you aren't holding onto the development for longer than you need to. The profit you are able to make here will depend on the market, that's true. However, you save the long-term headache of maintenance, and the tax is going to be lower.
Purchase Property To Let
One of the most accessible property development options is to simply purchase a ready made property with the intention of letting it. There is still effort involved here, of course - finding properties that are just right, negotiating the price you want, and then doing all the renovation and finish work necessary to get these properties in tip top shape and ready to secure tenants, whether they're private residents or businesses in need of a commercial space.
Again, maintenance costs will be an issue to content with here, but you are unlikely to hit hard times, because the renter market is pretty steady. People who can't afford to buy need somewhere to live. You may want to look into buy-to-let mortgages for this option - read up on them at The Money Advice Service.
Purchase Property To Sell
If you're purchasing property to sell, you are basically in the business of "flipping" houses. What that is, is buying a cheaper property to refurbish and invest into in order to upgrade it and increase its value significantly. That way, you can then sell it on for a higher price and make a pretty good profit, depending on the added value of the property and what the market is like at the moment you are selling.
The advantage of this is that, if the market is favourable, this can be a short-term commitment where you make your investment and then recoup it with added profit in a matter of months. The downside, however, is that sometimes you will have to wait to find a buyer, or you might even need to sell at little to no profit, if the market is not the most favourable.
Keep The Costs In Mind
Regardless of which option you choose, cost should always be a concern. In order to calculate how much profit you will actually be able to make and whether it's a good deal, you have to be very aware of your projected costs. Depending on what your project is, here are the costs you can expect and should keep in mind:
- The cost of the property itself, whether land or a building
- Construction-related costs and refurbishment costs - this includes both labour and construction materials necessary for this endeavour
- Fees for any professionals such as planning consultants, engineers, or architects
- Detail and finish costs related to any fittings and fixtures necessary in a house, like furniture, decor, bathroom, kitchens, etc.
- 10%-15% contingency budget for any unexpected costs that are almost a certainty
In conclusion, there are many ways to profit from property development projects; you just have to take into consideration all the moving parts and choose the most suitable option for you. An estimation of your projected profit will be in order, and you can work that out using a profit calculator. If you know what the costs are, what you can expect, and how much you can stand to make from your project, you will have no unfortunate surprises.