Why You Should Just Build A Block Of Apartments And Rent Them Out
Something strange is happening in the property development sector. Apartments are going up all over the place and, in many cities, they all look virtually the same. It seems like everyone has had an identical idea. Why is this happening?
It comes down to the idea that property moguls should stop looking for deals and just build themselves. Prices for housing in worthwhile areas are now so high that opportunities for returns are scarce. That’s why many people are building to rent instead of buying to rent: it just makes more economic sense.
Why Build Just To Rent Out?
Of course, whenever you develop property, you have two options. You can either sell it on immediately and then bag the difference between your costs and revenues as profits. Or you can put up units and rent them out, generating income over time.
Renting out actually provides you with more money long-term than you could get in a single lump sum from private investors. But there’s another reason why self-development is a great idea: yields.
When you have control over the building process, you’re able to fix the price of units. This way, you can create cheap, high-quality accommodation that actually outcompetes a lot of the housing stock in the immediate area.
As Candea Development points out, this strategy is something that hundreds of real estate investors are using right now. Why buy when you can build something even better at lower cost?
How Much Capital Do You Need?
Of course, the downside to these schemes is the sheer amount of capital that you need to put up an apartment block. We’re talking millions of dollars. However, if you can gather those kinds of resources, then you put yourself in an excellent position. If banks believe that the project is feasible and will generate returns, they’ll let you borrow even more.
When it comes to renting out apartments, scale matters. You want to cram as many people into as small a space as possible, without it seeming like they’re living on top of each other.
You’ll also want to take advantage of some of the newest techniques in building design, architecture and layout. Concepts, such as wide doors, no-step entry and subterranean parking lots tend to be popular among renters.
How Much Money Can You Make?
Once you have a successful project up and running, the amount of money you can make is enormous. Total development cost of a block of flats might be $5 million to you and $20 million overall.
Total costs might be $0.5 million per year, and revenues $1 million. In other words, you’re getting $500,000 per year on your $5 million investment, which isn’t bad.
If you do decide to go into property development, you’ll need to know what you’re doing. If you don’t, you can always work with partners who understand the landscape. Property is a millionaire factory, so the sooner you can begin a scheme like this, the better.