Candea Development Discusses Common Mistakes Made by First Time Property Developers
Within the last five years, housing development has become one of America’s fastest-growing industries- and for good reasons. With market projections currently over 150 billion, housing development is seeing many newcomers flock to find their place in this exciting and dynamic industry. Candea Development is a construction and management firm founded by brothers Armand and Alan Candea that has reshaped the housing development market in Chicago over the course of the last 14 years. Since its foundation in 2006, Candea Development has successfully developed and sold hundreds of properties while upholding its mission to revitalize historic homes and build properties that add value to diverse Chicago neighborhoods. While there is a tendency for us to hear about successful development projects, there are many that wind up hindered by the numerous oversights that can occur during the process. Armand and Alan Candea know first-hand the difficulties associated with starting a housing development firm and how costly these issues can be for developers. In light of this expertise, this website will serve as a resource for the next generation of property developers hoping to learn some of the most important facets of the industry. For newcomers just starting their housing development journey, the Alan and Armand Candea of Candea Development offer the following advice.
Cost Estimates and Budgeting for Projects
Many first-time developers start their journey when they see a specific property for sale. They will buy the property on a ‘gut feeling’ and the belief that they know what improvements the property needs to make a profit. While this is a very common story, it is generally not an advisable way to start any project for a variety of reasons. It cannot be understated that research is the most important foundational step in any housing development project. Before putting any money down on a property, property developers must research a property’s history, neighborhood population growth, and comparable sales (or comps) to fully understand potential profit and be able to create a comprehensive budget for developing. Once a property developer understands the full scope of a project and has created a potential budget, they can then make a fully informed decision on whether to purchase the property as an investment. The ideal profit margin for an average property ranges from 16-20%. If a property has a potential yield lower than 16%, it is best to seek out other opportunities. This is because, if the property has further unexpected costs throughout the development process, a yield lower than 16% can quickly be reduced 10%.
It is common for new property developers to have very limited budgets for projects. This is to be expected considering the amount of work that goes into the process; however, it is still essential to know which steps in the development process can be budgeted with savings in mind and which cannot. An area where saving more now may cost you more, in the long run, is labor. When finding electricians or tradesman, understand that with lower costs often comes less experience and perhaps less satisfactory work. If you hire someone whose rates are far lower than others’ in the field, you may end up paying twice for their work to be fixed or redone by a company that provides higher quality services. Always be attentive when vetting labor for projects and consider that prices may be lower than the median for a reason. Also, remember that the goal is for someone to purchase and live in the property that is being developed, and this can be complicated and even unsafe if essential work was not performed properly. For these reasons, Candea Development always recommends that new property developers not look to save a buck when hiring tradespeople for housing development jobs. An inexpensive tradesmen’s work will most often need to be redone, or at the very least, need to be repaired. Save time, costs, and company reputation by prioritizing good work the first time around.
More Bedrooms More Buck
One of the more common mistakes new property developers make is to increase a property’s number of bedrooms. While adding bedrooms is one of the fastest ways to increase a property’s value quickly, it can also take away from valuable living space and make a property less desirable for prospective tenants that have less use for the bedroom space. Candea Development recommends that property developers research other properties within the neighborhood and look at what surrounding properties are missing before making firm decisions on what to add to a property. If, for example, most properties in a neighborhood lack any outdoor or closet space, adding these to your own property can increase the value and desirability of your property when it comes time to sell. One feature of properties that add tremendous value, but is often overlooked, is curb appeal. Property developers should focus their attention on curb appeal, as it is one of the more successful and inexpensive ways to add value to a property while also attracting potential buyers. Simple changes such as refreshing the paint on the façade of the property or eye-catching landscaping, for example, are quick ways to impress buyers looking for curb appeal.
During the first year of their company’s foundation, Alan and Armand Candea made a variety of mistakes before Candea Development became the well-established and successful business it is today. While the brothers recognize that these mistakes allowed them to grow as business owners and further solidify their skills in the space, they also believe future property developers can learn from their mistakes without repeating them themselves. Within this blog, Candea Development will discuss the intricacies of business ownership, the property development process, property trends, the most common mistakes made within the industry, and various other topics designed to aid property development newcomers.
If you are interested in learning more about Alan and Armand Candea, Candea Development, or various topics relating to the property development industry, return to candeadevelopment.net for future updates.