Don’t be a Pioneer!
If you’ve ever watched a good old fashioned American Wild West movie, you will no doubt be familiar with the brave pioneers who set out across the vast interior of America in a bid to make their fortune or to find a bit of land to call their own. The movies are full of tales of struggle against all manner of difficulties and overcoming incredible adversity before (generally) finding success and a new life.
Whilst I admire these pioneers for their spirit of adventure, their strength and courage to overcome the difficulties they face, I certainly have no desire to replicate their battles in finding success in the real estate development world!
So one of my key success criteria for real estate investing and development is to ensure that I am not being a pioneer. So what exactly do I mean by this?
Basically, my approach is to ensure that there is already a proven demand for the product that I am looking to bring to market.
If I am looking to build a new dwelling, I look to develop dwellings that there are similar to those that have already sold in the area.
If I am looking to renovate a dwelling, I look to confirm that renovated properties have sold quickly, with higher than median prices.
If I am looking to buy a dwelling to hold and rent out, I look to confirm that this type of dwelling is in demand as a rental.
I don’t want to be the first to bring a particular type of product to the market. For example, if an area is dominated by single family homes on 600m2 blocks, I will not be looking to build a unit block in the area. If all smaller dwellings are single level villas, I won’t be looking to build a double storey townhouse.
Now I am not saying that you can’t be successful by building a new type of product if you identify a need for it – certainly you could find many examples of people who have been very successful at doing exactly this. I just find that it is easier and reduces my risk if I follow in the footsteps of others, than to forge a new path by myself. This is particularly true when you are starting out, with so much to learn, there is no point in adding any additional risk.
For every successful character portrayed in the Wild West movies, I’m sure there were another 10 that headed down the same path, only to turn around again and head back to their old life! So take a lesson from the movies, and if, like me, you are looking to minimise your risk, make sure you keep an eye on what is selling well and quickly in your chosen area. Then consider bringing similar products to market if you can, rather than looking to be a pioneer by building something entirely foreign to the existing market.
Over To You!
Take a few minutes to have a think about your current plans. Is there evidence of good demand for your end product in the market? Or are you treading a new path? If so, think carefully!