How to choose a property developer
So, you have decided to invest in the property market? You are looking at a hands-off investment approach and a reputable development company? Finding a trustworthy developer is easy in principle but perhaps not as easy in practice. We will now give you a few pointers to help you find and property developer/investment consultancy that you can trust.
Reputation is the key
Any investment company lives and dies by its reputation therefore you need to look at the history and the feedback of any potential property developer/investment consultancy. Factors to take into consideration include:-
- Use a property investment consultancy to find the best developers and make use of their due diligence and fact they will need to maintain their own reputation going forward
- Speak to past investors for their feedback, opinions of the developer and comments on the quality of work
- Visit the site of the proposed property development and ensure that all is in place
- Legal agreements – always ensure you have them checked over by legal advisers
- Use Google and other information portals for any press comment
- Check out the more popular property forums for practical advice and feedback – it is not so easy to control negative feedback with the Internet
What types of investment do they offer?
This is very much a situation of “horses for courses” because some property development companies will specialise in particular types of investment. It is therefore vital that the developer is perfectly matched with the development and type of investment to maximise investor returns. There are a number of considerations which include:-
- Check out the specific returns from individual developers
- Compare and contrast potential returns against the sector average
- The early bird catches the worm – early-stage investors tend to get the best deals with developers very keen to raise funds;- as more investors come on board the need to enhance investor deals is reduced
- Financing options – don’t automatically assume you can’t afford the investment as there may be staged financing opportunities
- Match the investments on offer with your investment criteria such as student accommodation, care homes and hotel rooms
Is there an exit strategy?
It is all good and well finding the “best investment” in the world but if there is no exit strategy and no easy way to liquidate your investment in the future this could significantly reduce any potential returns. The more potential exit options available the greater chance of maximising your return and releasing your funds for other investments in the future.
An exit strategy is often overlooked by less experienced property investors but it is a vital element of any investment strategy. If you are not able to liquidate your asset as and when required why would you invest?
New Build v Renovation
New build developments and renovations can look identical when they are finished but there are a number of factors to take into consideration. A new build student accommodation, hotel or care home may take some time to attract customers compared to the redevelopment of an existing property which has a reputation from years gone by. For example, the renovation of an existing, tired hotel with an excellent trading history could be considered a safer investment than a new hotel build with no trading history.
You need to take into account the relative attractions and security of these different developments and the investment payback period.