6 OF THE BIGGEST MISTAKES MOST PROPERTY DEVELOPERS MAKE


Having been around in the building and development game all my working life, I keep seeing the same mistakes being made, some by seasoned developers!

1. They get too attached to the deal and forfeit baseline profit margin just to get a deal.

The backbone of any business is a realistic profit margin and every deal needs to be financially viable otherwise banks won’t even touch you. Three out of 5 developers go bankrupt and this is largely down to getting too attached to the deal.

2. They over estimate GDV (Gross Development Value)

It is all too easy to try and convince yourself that you will achieve optimistic re sale prices. What every professional developer needs to do is work on actual data of sold house prices in the exact area of the development. Taking risks on a hope that a property will sell for an inflated price is just ridiculous.

3. They are too in love with the idea of being a developer but lack any actual experience or expertise.

There are thousands of wanna-be developers that have watched too many hours of homes under the hammer and think it’s an easy business. The reality is that property development and land purchases are an incredibly detailed and policy rich process that takes years of learning to fully understand. If a developer approaches you with no track record, be cautious.

4. They work in the wrong order.

There have been countless times that I have driven past a small development site and seen either sites with no movement for weeks or comical mistakes like plasterboard going in before the roof or windows are finished. All these little mistakes end up costing big money and have the potential to very quickly eat away at the bottom line.

5. They submit very poor planning applications.

Some planning applications are quite simple, depending on the exact location of the land – but this is quite rare these days. Most new sites require a very thorough planning application which takes time and considerable cash. You have to imagine things from the side of the planners at your council, if there are flaws all over the application, they can easily refuse it. However if your application pre answers all of their concerns before they even think of them, your chances of success are ten times more likely.

6. They under estimate build costs.

This is probably the most common trait when constructing new homes. The build cost needs to be kept under 100% control at all times. Every single process of the build can cost a little extra and it all adds up to a significant amount. Again this is where true experience pays off and having the right project manager and site manger in place.

Remember, successful development of land requires a lot of skill, experience and due diligence on the numbers and facts. At Pure Estates in Milton Keynes we take a great deal of care and attention in every single new site, from the initial appraisal of the land, through to the final brick being laid.

The devil is in the detail as they say!

If you have land or a property with development potential, send us an enquiry and we will contact you straight back for an informal conversation.