First of all, let’s start by explaining exactly what is meant by property development. In brief, property development is the purchase of real estate (property or land) with the intention of adding value by renovating, refurbishing and/or extending to generate a positive return on investment. It really is that simple. However, getting it right isn’t always quite as straightforward.
Whilst there are numerous potential financial gains to developing property, it is also important to understand the other side of the story, and the possible risks involved for inexperienced or first-time developers. Here we explore the pros and cons of property development whilst highlighting the advantages of working with an experienced development company…
1. Potentially high return on investment
The biggest advantage of property development is the potential to generate significant return on your investment. However, identifying a property development opportunity that is likely to deliver the desired level of return can be extremely challenging, especially for first-time developers.
At Hubb Property Group, we specialise in sourcing undervalued and under-utilised real estate opportunities in emerging and high-demand locations, transforming them into high quality homes to achieve maximum financial return. Our long-established relationships with property experts across the UK allow us to source run-down properties, Below Market Value (BMV) opportunities and secure off-market deals.
2. Often shorter length of investment
Speed is a critical factor with all property development projects and the aim of every developer is to complete the development and sell the property in the fastest time to ensure the highest possible profit and annualised return. If you get it right, property development can deliver profits faster than other types of investments such as bonds and shares.
Hubb Property Group offers investors the option of selecting the most appropriate investment opportunity based on their individual requirements and desired length of commitment. For investors looking for a faster turnaround, short term development options start from just six months; this includes the purchase, funding, development and sale of the property. Longer term investments are also available with typical investment terms between six and 18 months.
3. Greater stability
Over time, property has proven to be a more stable investment when compared to other investment options. Despite it’s up and downs, the property market as a whole tends to be a lot less volatile than other markets, such as the stock market. This may be due to the fact that property takes a longer time to sell (whilst shares can be sold in a second) and the fact that property is almost always in demand.
Hubb Property Group offers investors a unique opportunity to take advantage of the team’s skills and experience and to invest into their choice of development projects, generating potentially significant returns on their investments. All development funding is secured with a Debenture. Click here to find out more about Debentures.
4. Investment leverage
This simply means that when purchasing property, you can purchase more with less. You invest your funds and the bank loans you additional funds in the form of a mortgage. Leverage helps to maximise your return on investment when you experience growth.
The fact that banks lend significantly more to borrowers when purchasing property also signifies the security of investing in property. The banks demonstrate much higher confidence in lending mortgages to purchase property than lending for other markets.
However, many first-time property developers struggle to acquire a second mortgage if they already have a mortgage on their own home, and/or their deposit does not generate a big enough loan to value ratio to secure the desired investment property. Hubb Property Group have access commercial loans that are not available to independent developers, making the borrowing process straightforward, fast and reliable. By investing with Hubb Property Group, you simply decide the amount you wish to invest (minimum £10,000) and the rest is taken care of by our team of property investment experts.
1. It’s not very liquid
If you need to gain instant access to your money, property development may not be the right option for you, as unlike investing in shares, you cannot sell at a moment’s notice. Property development can take a number of months, plus there’s also the time it takes to sell; and once the property has sold, can you access your money.
Hubb Property Group offer short and medium term investments, from six to 18 months. As with all development funding projects, your investment funds will be released along with your interest when the sale of the property completes.
2. Unexpected problems and setbacks
Without expert advice and guidance, property developers often come up against unforeseen issues which push up the build and development costs of a project. This increase in costs will have a direct affect on the return on investment and if the costs are much higher than budgeted, it can even result in a loss.
The team at Hubb Property Group has over ten years’ experience in property development and buying and selling real estate. Using their extensive knowledge and working with a carefully selected team of experts, thorough due diligence and in-depth independent reviews of each and every project are completed to substantially reduce the risk of any issues or setbacks.
3. Delays in completing the project
When completing a development project it’s important to carefully (and realistically) calculate the time in which it’s likely to take to sell. The longer the property is on the market, the more you will be paying out in mortgage or financing payments, thus decreasing profit and reducing the annualised returns.
Hubb Property Group work with a well-established network of estate agents and property experts who will often proactively contact prospective buyers before the development is completed generating early interest to encourage a quick sale.
4. Barriers to entry
Many first time developers overlook the costs associated with purchasing and selling a property. Recent changes to stamp duty for second home ownership means that if purchasing a development property when you already own your own home, you may face significant stamp duty charges. This should all be carefully factored into your cost analysis.
Hubb Property Group work with a team of financial professionals and advisors to accurately calculate all costs involved and projected returns.
As with any financial venture, it’s important to determine specific goals for your investment before you decide to invest. Investing in property may be a good way to grow your assets, however, as with all types of investment, it’s important to do your research and seek professional advice if you’re unsure about any aspect of the investment.
If you’re interested in investing in property, Hubb Property Group offer simple, hassle-free investment opportunities starting from just £10,000. To find out more, contact us for an initial chat on +44 (0)117 422 0122 or email email@example.com