Hi there,
I've been reading these forums quite a lot and have learnt valuable lessons, thank you to all of you who have been posting here. It really gives folks like us a kick start into the property market.
I am only just getting into the property market. I am currently renting and Im unsure of where to start investing.
I have enrolled on a property development course and im hoping to go into a joint venture to start developing. I understand this is where the biggest profits are.
I am just concerned at whether i should buy my first house now and then save up to develop as i could use the equity from the house or whether i should keep renting and start developing using a joint venture.
I have no experience, have a full time job that i cannot leave in a field that has nothing to do with property and i was wondering whether property development is time consuming and whether id be able to keep my full time job to fund it.Im so confused, please help!
Mubz
Hi,
Thanks for your post and well done on embarking on your real estate investing career.
Property developing sounds easy enough, yet there are many pitfalls. Still, the name of the game is to try and get as much information on the key unknowns.
For example, you know what your purchase price will be, you can get a fixed price contract, but what sinks people is the unknown end sales price and a lack of cash to cover costs when things don't go to plan.
For this reason, I recommend that you continue to rent while you do your first development so you can have access to as much working capital as possible.
If you buy a home then some of your working capital will be eaten up as equity which cannot be borrowed against, because lenders will only offer (say) 80% of purchase price. The other 20% + closing costs sits there.I hope the course goes well. Education is important.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
hi steve
can you please elaborate what are the end sales costs other than the actual property price?
thank you
harryUsually you have to pay for a marketing campaign – advertising costs – Hiring furniture for open inspections
If you are using a real estate agent you have to pay a certain amount of sales commission as a percentage of the sales price.
Another cost is the holding costs possible incurred – being the loan interest while you are waiting for council approvals and then having to then resubmit the application to the council and having to wait for another period of time.
What Steve is getting at is the following formula
Achievable Market Sales Price = Profit + purchasing cost + Building cost + holding cost + council application costs + architect costs + sales commission + advertising costs+ any other costs.
You cannot force the market to increase the sales price if your development costs increased by more than you planned for.
This can be the difference between a profit and a loss in some cases.I haven't gone into development as I do not have the cash flow to cover the holding costs.
hi duckster
thanks for the advice
harry
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