Property Development or Fix-and-Flip Deals: Which is Better for Your Strategy?
You’re ready to make money in real estate and watch your bank account grow to new levels. But how? Should you focus on building new construction or on rehabbing existing properties?
The truth is, property development can be an extremely lucrative option if you’re presented with the right market and the right opportunity. And it’s a great way to generate equity as well. Fix-and-flip real estate can also be a good way to go if you’re looking to make a significant return on your investment.
So, which is better for your strategy? The answer isn’t black and white, as it ultimately depends on a number of factors, including your personal goals and your industry experience. These strategies are different, so we’ll take an in-depth look at both below. But the reality is that both real estate development and a fix and flip business plan offer great promise if you know what properties to look for.
A Glimpse at Property Development
In years past, people treated real estate development like a niche career field. Only people with robust real estate experience and cash reserves were active players in this industry. However, in today’s world, property development is becoming increasingly popular due to current efforts to gentrify neighborhoods, improve the stock of housing, and promote urban consolidation.
Of course, this field does carry a great deal of risk, but it can also be rewarding for those who have development and construction experience—if you pursue opportunities in a hot market.
It’s also a viable option if you’re willing to overcome the learning curve associated with developing your own project. By the same token, it’s a good move if you find it easier to build something from the ground up versus working with an existing property. You’ve got to have patience, though, as developing properties takes time.
Growing Markets for Development
Desirable areas in large cities can often be good places to target for property development. That’s because the demand for brand-new homes—especially apartments—and their supporting infrastructure in these areas is continuous. Co-living accommodation is an especially growing trend, where people live in communities that are supportive instead of in isolated homes. So, smart developers in the years ahead will jump on it.
Funding for Development
A perk of going the development route is that, if you’re working with a traditional lender who is relatively conservative, you may find it easier to secure financing than you would for a flip. You can get great terms if your development prospect happens to be very good. Part of the reason why conservative lenders like development is that new development usually features fewer unknowns compared with flipping. Plus, the returns can be easier to predict with new development versus fixing and flipping a property.
Funding Future Investments
Let’s say you choose to treat your development like a long-term real estate investment. The value of the investment will keep increasing over time. Then, you can use it to fund other projects down the road.
What’s especially great about this strategy is that it offers you some “insurance” in the event that the market experiences a shift at some point. That’s because you can hold onto your properties and then simply rent these properties out to generate cash flow until it’s a good time to sell them.
A Glimpse at Fix-and-Flip Deals
What’s great about a fix and flip business plan is that you can make a profit relatively quickly compared with developing a property. In fact, it’s not impossible to earn significant returns in just a few months.
However, it’s critical that you do market research prior to buying a property to flip. Looking at homes that have sold recently should provide you with a glimpse at what buyers are searching for in an area. For instance, although modern designs might be in demand in certain areas, traditional designs may be big winners elsewhere.
Personal Development during Fix-and-Flip Deals
Another reason to choose a fix and flip business plan over property development? Fix-and-flip deals are generally a great way to get your feet wet in real estate investing if you don’t have much of a background in this industry.
What You’ll Learn
During these types of deals, you’ll learn firsthand about budgeting for unanticipated costs, like holding costs if you cannot sell your fix-and-flip property as rapidly as initially expected. Other unexpected costs may include those related to contractor disputes, material delivery delays, construction delays, and building permits.
In addition, you’ll learn about real estate in general. This may include learning about how foreclosures or short sales work, for example. You’ll also learn about the different financing options that are available to investors like you. Yet another skill you’ll have an opportunity to hone is negotiation, as you’ll be doing a lot of negotiating to get the best deals on properties and materials.
Boost Your Network Both Development and Fix-and-Flip Deals
A common benefit of both property development and a fix and flip business plan is that you can grow your real estate network relationships like never before. That’s because you’ll develop many new contacts, such as other investors, insurance brokers, building inspectors, contractors, attorneys, and real estate agents. All of these contacts may prove helpful for future investments.
Start Making Money through Property Development or Fix-and-Flip Deals Today!
If you’d like to increase your earnings this year, you can’t go wrong with developing properties or flipping houses. The challenge you could face, of course, may be how to find the right properties and approach transactions involving development and flipping.
The great news is that you do not have to figure it all out on your own. Get in touch with me, Joe Fairless, to find out more about the unique benefits of property development and fix-and-flip deals. I may be able to help you build your investment strategy; acquire the resources you need to make it a success; and capitalize on it, full speed ahead.
Are you a newbie or a seasoned investor who wants to take their real estate investing to the next level? The 10-Week Apartment Syndication Mastery Program is for you. Joe Fairless and Trevor McGregor are ready to pull back the curtain to show you how to get into the game of apartment syndication. Click here to learn how to get started today.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.