This same concept shows how important it is to pay close attention to product selection. If I’m in an area designed for multi-residential, I have choices. I can do units or townhouses; I can do one, two or three bedrooms, I can do an economical or a high-end product. Don’t take a stab at what you think buyers will want. Spend time researching the demographics of the area, find out what’s selling and for how much and that will point you towards the right product type. Drill down to the make-up of your building. Look at the profit forecast if you build 10, two-bedroom units and compare that with a profit forecast of building five, three-bedroom units and two, one-bedroom units.
The cost to create these might be the same, but the sale of the finished product may be completely different and if you choose the right product to suit the local buyer, you may get a massive uplift in your return. For example, you might build two, two-bedroom villas that will sell for $500,000 each delivering revenue of $1 million, but if the market is crying out for four-bedroom villas, you might build one, four-bedroom villa and net $1.2 million because people are willing to pay a premium for a product with low stock availability.
So, the learning here...don’t just jump on the first deal you find that promises a profit.
Make your money work as hard as possible: figure out which deal will make the most amount of money, for the least amount of hassle, in the least amount of time.