Common Mistakes To Avoid As A Real Estate Developer

February 27, 2023by Sterling Homes0

Property development can be a very exciting and challenging career choice and also a highly rewarding one if you play your cards right. Like any business, real estate development also has its risks. You can call them pitfalls of a property development if you prefer.

However, the opportunity to make massive property development profits over a very short frame of time makes it the oldest and one of the most sought-after property development strategies.

Overlooking The Feasibility Check
A feasibility study tells you whether the price you are set to pay for a property is really accurate. A common mistake is to underestimate the cost of constructing your project while overestimating the price you can get on your completed buildings. Undertaking a feasibility analysis right at the beginning helps you make a purely objective, accurate financial assessment.

Choosing the wrong location
As with any property investment venture, the key to succeeding in property development is doing your research beforehand. You can do everything right once you’ve acquired a site, but the project could for be doomed from the start if you haven’t chosen the right location for your development in the first place. The first thing to ask yourself when researching an area for development is whether there is enough demand for property in that location. If there is already an oversupply of properties in the area, this will push property prices down and significantly limit the amount of profit you can expect to make from your development project, potentially leaving you with a vacant property that isn’t attracting attention from buyers.

Poor financial planning
At the end of the day, the aim of a development project is to make a profit. Whilst most investors go into development with the intention of making a quick return on investment, one of the key property development mistakes made by amateur investors is overcapitalizing on cost. The last thing you want as an investor is to pay for a project that won’t pay you back in returns, or worse, blow your budget before the development is finished. Before jumping into a development project, it’s extremely important to factor all expenses into your budget, and this includes leaving yourself a buffer in case any unexpected costs come your way. If you’re not left with a significant profit margin once you’ve factored in costs such as approvals, building expenses, and taxes (to name just a few), you may need to re-consider your development strategy or find a site that better fits your budget.

Lacking A Qualified Team Of Professionals
A property development team of skilled professionals lays the foundation for a profitable, successful property development venture. You need a solicitor, architect, financial expert, town planner, etc to advise you on various aspects. Choosing the wrong people for these key roles can result in either skewed numbers or plans that set your project on the track for disaster right from the beginning.


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