Your plan varies on so many different things that it’s not easy to give a one size fits all answer.
To help though, we can break it down like this.
There’s three different types of properties you could buy and each have their own reasons;
One to live in (place of residence)
One to invest in (investment property)
One to profit on (development site, flip)
Buying any property is a big decision, but let’s look into it in a little more detail.
When buying a house to live in, seeing capital growth and the potential returns on the money you paid for the property is nice if you had to sell but the reality is, the home was chosen because you wanted to live in it because you just want to live there.
Everything else is an upside.
When buying a property to invest in, you’re buying with the intent (or hope) that it will increase in value (capital growth), that the rent (cash flow) will help to cover the mortgage repayments (debt service) and provide some security (income) for retirement.
But buying a development site or a property to flip (renovate and add value to) are different beasts altogether.
They must be bought for a price that will allow you to renovate or build in a way that will provide at least some kind of return (hopefully as high as possible) when it comes time to sell (or rent out).
While you would most likely already know this, it’s still good to bring it to the surface to help you digest everything that will follow.
Now, the type of developer you want to be will help dictate what steps you should take and what type of plan you should make and follow.
To set up a plan, you have to ask yourself questions.
Any and all questions relevant to you and the type of development you’ll be taking on.
Firstly, and pay particular attention to this question;
Have I sat down and thoroughly worked out a 5 – 10 year plan factoring in all likely and unlikely situations both inside and outside of my control?
Then ask yourself questions like;
What type of development am I looking to take on?
How much experience do I have?
How much money do I have?
How much will I be able to borrow?
Can I handle stress, uncertainty and potential loss?
What am I hoping to achieve?
Can I afford repayments and fluctuations in repayments?
Can I service holding costs?
Do I have adequate and surplus savings or cash on hand to pay costs, fees and taxes as they present themselves?
How is the current market? How has the market been doing in the years gone by? What’s the market expected to be doing? What’s likely to affect the market?
How is the current political climate?
How’s the current economy?
First time or ‘green’ developers might ask themselves things like (while this is also handy as a refresher for experienced or more seasoned developers);
Do I have kids or are kids planned and how will they be affected?
How will my family be affected during the build?
How much time can I give to my project?
How do I feel about the sacrifices that will need to be made over the short to long term? These can include things that you might need to cut back on like holidays, new cars, expensive purchases etc.
By factoring anything and everything into the equation will help you to manage the way you handle and overcome situations, objections, challenges, speed bumps and pot holes along the way.
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This information is of a general nature only and does not take into account your objectives, financial situation or needs. We are not financial, legal or tax advisers. You should seek appropriate professional advice specific to you before acting on this information.
