Starting Your Business
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How to become a property developer
You’ve got a great eye for detail, knowledge of design, and the business acumen to make waves in the property world. You should be a property developer – but where do you start?
The property market is one that goes up and down, but with recent estimates predicting a steady rise over the coming years, now is the ideal time to get in on it. So don’t just sit there scratching your head, wondering how to go about it. Follow these tips on how to go about building your own property development business.
Develop a business plan
Before you even think about renovation, you need to develop a business plan. At its most basic, your business plan should detail your targets and goals, and what you expect to achieve from your property development business. It should also outline all the steps that you’ll need to take in order to achieve these objectives – that way, you’ll have a clear sense of direction rather than find yourself struggling to find your way.
Buy-to-sell or buy-to-let?
One of the fundamental decisions you’ll need to make before starting up as a property developer is whether you want to buy-to-sell or buy-to-let. If you buy-to-let, you’ll have the opportunity to build a portfolio of properties to supplement your current salary – and maybe eventually become your full-time job. Buy-to-let mortgages are fairly straightforward to get, but it’s worth bearing in mind that HMRC treats any income that you earn from renting a property as a salary, so it’s liable to income tax.
Buy-to-sell, on the other hand, is a more short-term way of boosting your capital. But it’s also risky since the price you can sell at depends on market conditions. Having said that though, the return on investment is higher than buy-to-let, so think about what you’re looking to get out of your property development business before you decide which route to take.
Pick locations wisely
Without using that far-too-often quoted cliché, location really is everything when it comes to property development. But don’t make the mistake of buying in a location that’s already sought after; instead, you want to keep an eye out for areas that are on the up and will therefore see a surge in people wanting to live there to give you the best chance of making a decent profit.
Do your research
It’s essential to research the market before you delve into the world of property development to make sure that you don’t pay over the odds. In property, you make your money when you buy, not when you sell, so be prepared to negotiate the asking price until you get the right deal. Use sites like Zoopla to help you compare property prices in different areas so you can see what sort of level you should be going in at.
It’s also important that you get to know the market and the area, so don’t rush into buying a property just because of the estate agent’s sales spiel. Take the time to research everything initially so that when you find a property that ticks all the boxes you can move quickly.
Things to think about…
• Structural issues can affect the cost of a property, as can other things like noisy neighbours – so choose wisely.
• Make sure that you tailor your developments to the area that they’re in. For instance, is it a family or student area?
• Funding is essential, and banks have specialist property finance advisors to help you out. You’ll need to make sure that you have the necessary finance to tide you over until you sell your first property.