Developing property is risky business, though your returns can be spectacular, the losses can be devastating to your finances. We explore the pros and cons that could turn your investment dream into a nightmare.
The popularity of home buying shows has led to a boom in property development as a means of investing.
These shows provide examples of just some of the possible outcomes when buying a property to develop and sell on and often don't give you the full picture.
If you're considering investing your money into property rather than savings and investments then it's important that you understand how the risks can sometimes outweigh the benefits. We examine the pros and cons of property development below:
You can make a good, quick return by buying a cheap property to develop
You can make your own mark on a property
You can cut development costs by doing the work yourself
The Capital Gains Tax you would have to pay is now just 18 per cent
If you buy at auction, you know the property is yours as soon as the gavel falls
It takes time to develop property, so the market may have fallen by the time you come to sell
You will need to manage the development yourself or pay someone else to do it which will eat into your profits
You need to work to strict budgets to make a profit
There are often unexpected expenses you need to make contingency plans for
It can take a long time to sell a property, and you will still have to pay the mortgage
You may have to pay the mortgage on two properties if you cannot buy it outright
You could make a loss
Although there are more cons than pros listed above, it all comes down to your personal circumstances. If you walk the path of a property developer then it's best to be prepared for both the good and the bad.
If you still aren't' sure whether you should invest properties, you should read our guide Do You Have What It Takes To Be A Property Developer?
Whether you are looking to move up the property ladder, downsize or just relocate we can help you find the right mortgage when you move home.