Mistakes to avoid with ground-up builds
Embarking on a ground-up project can be incredibly exciting as you get to see your idea for a property or number of properties become a reality. It is both fascinating and rewarding to see a property being built from the ground up.
Plus, it can be a smart investment, whether you plan to sell or rent the property upon completion.
These projects can also be daunting and highly complex, which means that mistakes are often made, particularly for those new to the sector. With this in mind, this post will look at a few of the most common mistakes to avoid with ground-up builds. Read on to find out more.
Not doing proper market analysis
Much like a new business, market analysis is key for making smart decisions. Therefore, it is vital that you take your time to develop a strong understanding of local demand, buyer demographics, resale values, crime rates and local developments.
You can then use this information to build a property that will appeal to your target buyer or renter. This is even more important when working on a commercial build, as the demand for commercial premises is very different from housing, whose demand can be much more easy to assess.
Being unclear on your investment strategy
You should never break ground without having a firm investment strategy in mind. This could involve building the property to sell, or to rent out for long-term income and appreciation over time. This strategy will help inform your decision-making throughout the project.
Missing important red flags during a risk assessment
Risk assessments are vital for identifying issues that could impact the project and your overall investment. Common risks include poor site conditions, legal issues, material shortages and economic issues.
You should also gauge public opinion, as this will be influential when applying for planning permission.
A risk assessment will help you identify these risks, but you must take action to mitigate them. This way, you will be prepared if you encounter any issues during the project.
Failing to produce a robust financial analysis
A robust financial analysis is key for ensuring the viability of your investment and also for securing funding for the project.
Development finance can be used to purchase the site for development and the costs of building the development, but development finance lenders will expect to see a clear plan.
A specialist mortgage broker like Commercial Trust can help you secure finance suited to your needs and circumstances. Working with a broker makes the process of researching your most competitive financing option very simple. A broker can save you time and money through their detailed knowledge of the lender marketplace and take all of the administration work involved with getting the deal to completion off your shoulders.
Your property may be repossessed if you do not keep up with repayments on a mortgage or any other debt secured on it.
Not conducting thorough due diligence
You must also conduct thorough due diligence before getting underway. This can include looking at the history of the land, verifying ownership, establishing any flood risk and ensuring there are no legal complications. This can help you avoid unexpected costs, legal disputes and development challenges.
Being unclear on planning regulations
You must also be aware of planning permission requirements, as these can vary depending on where you are and the kind of development. It can take a while for planning permission to be approved, which is why you should always look into this early on in the project.
These are the most common ground-up build project mistakes that you will want to avoid. By avoiding them you will lay the foundation for a successful and profitable investment project.
