Property development: How well do you know your target market?
Property developing is about so much more than just knowing how to build or renovate a property or to secure a “good buy”. Knowing your target market inside and out is one of the most critical parts of successful property developing that’s often mentioned by developers, but can be quickly forgotten as the project progresses. Getting your project bang on for the market is the best way to secure a top price and move the property as quickly as possible, no matter whether it’s for sale or rental.
Firstly, consideration of the target market should come into play before you even secure a property or piece of land to develop. When you start considering certain areas, you need to think about who buys in those areas. Are they families? Retired empty-nesters? First home buyers? Young professional couples?
All these groups have very different needs when it comes to the fundamentals of the property. Families might need more bedrooms and bathrooms, a backyard for the kids and family pet, and to be away from busy streets for safety reasons. Whilst first home buyers may look for a small property with a single bathroom, very little land, be accepting of a strata group, and expect middle of the road fittings and fixtures in order to meet their tight budget. The type of target market may therefore influence your choice of land or property, and will certainly impact on the specification of properties you would build in that area.
Although some developments can be turned around relatively quickly, don’t forget that many developments can often take years or more to complete. Thus when you’re looking at the target market buying in the suburb, you need to do your best to predict a few years down the track also. If you plan to hold onto the property or some of the property you develop, you would need to project even further to ensure you’re creating the right product for buyers and tenants in the longer-term. For example, whilst a neglected suburb may currently attract mostly students and singles, with an influx of funding, development and government assistance rejuvenating the area, in 3-5 years you may find it’s now becoming the new trendy hotspot for young professional couples.
Your target market should always remain in the back of your mind even after you’ve secured the property, decided on your plans and commenced building or renovating. Far too often I see many developers keen to put their “personal mark” on the property which is usually a recipe for disaster. Remember, you will not be living in your development, your target market will. You may absolutely adore that $5,000 rainfall shower head from Italy and to be fair, so may your family buyer. The difference is, your buyer will not be prepared to pay for it! It’s just another cost that strips back your ultimate profit. Or that beautiful kitchen with the high-gloss red cupboards! Yes, it might be “so you” and will certainly leave an impression, but will probably put off more people than it attracts. Standing out amongst your competition is important, but creating a property that appeals to just a small percentage of people risks making your property harder to sell. Harder to sell means it sits on the market for longer, chews up your profit with holding costs, and ultimately forces you to have to accept a lower price just to move the property.
Fittings, fixtures, furnishings and general decoration should all be chosen in light of your target market and not to your personal tastes. And even though furniture may not be part of the sale, it sets the scene and can help a prospective buyer to see themselves living there so don’t underestimate its value. A few bold paint colours, high gloss white porcelain tiles, and the latest designer furniture may be appropriate for an apartment targeted to successful young professionals, whereas neutral warm paint colours, floorboards and carpet, and ‘kid-friendly’ furniture might be more suitable for your typical family home. Take a look through home opens in the area of similar type of properties, talk to agents, and work out what gives buyers that “must have” feeling. If you create a property that stirs the emotions in buyers, you’re likely to have a few people willing to compete furiously to have it. The end result? A quick sale and a high price.
Developing property is about making money and not taking a big gamble just so you can live out your long lost career for interior design. As long as you always put your target market first, you should be able to develop a highly saleable or rentable property.