September 28, 2022
Property development involves transforming old and unloved buildings into fresh, new homes. You can rent them out for long-term returns or flip them for a fast profit. Property development in the UK is a popular way to earn a living or to invest in savings. The market is fast and fluid, with competition for properties high. Get it right, and you could generate significant sums.
Becoming a successful residential property developer takes years of hard work (and thousands of pounds). A massive range of books, courses and online guides on how to be a property developer can help you. In this blog, we’re going to cover the basics.
In this guide on how to become a property developer, we explore whether property development is correct for you and some simple steps to get you started – including finding the right property.
Is property development right for you?
Property development involves buying a property from a private sale or auction, doing it up and then renting it out or selling it. The UK property market is growing, with transactions up 5% yearly. Competition means higher prices, with properties increasing almost 10% in value in the last year and rental prices rising 3%. So whether you’re renting out a property or hope to sell it, the returns could be far higher than leaving the cash in the bank.
That’s the good side. On the flip side, to achieve returns, you’ll have to ensure that the property you have purchased is restored to a high standard, whether you rent it out or sell it. When you buy a property, you’ll need to be confident you can afford to do the work – or you could face crippling bills.
To maximise returns, you’ll need to manage the work yourself, which can be challenging if you’ve never done it before. As well as managing trades, you’ll have to keep your eyes on the figures, ensuring you stick to the budget, not bust it.
The bottom line is, investing in property can generate significant returns if you do it properly. But mistakes can cost you thousands of pounds, so be sure you know what you’re doing before you buy.
5 steps to get started
1. Build a business plan
It can be easy to be led by the heart, but property investing is a business. So create a business plan. Business plans are structured ways to approach the management of any project and are simple to complete. You can find a template here.
Property isn’t cheap, so let’s start with finance first. You’ll need to arrange finance to purchase the property (from savings or loans). If you’re investing in properties to develop, finance can be harder to arrange as risks are higher. If you’re new to investing, it’s worth speaking to an expert, such as a broker, who can help you arrange finance. You’ll need to learn about bridging loans, interest rates, secured loans, and the difference between a residential and buy-to-let mortgage.
Money is only the start of the process; you’ll need to develop a plan for managing the work, marketing the property and making a sale (or arranging a lease). It’s easy to be led by the heart, but you must continuously engage the head before bidding or buying a property.
2. Identify areas, properties and potential options.
Before you start shopping for properties, you’ll need to do the maths. Firstly, decide whether you want to sell or rent a property. Then, check local listings and estate agents to get a feel for the market. Finally, you’ll quickly grasp whether your investment will pay off or not.
Your estate agent will become a firm friend as you search for a new property. You’ll want to take your time to identify what properties are popular, and those that stick around on the market. Over time, you’ll begin to understand what the market wants.
3. Set budgets
Don’t put the calculator away yet. Before bidding on a property or buying a development project, set a repair and restoration budget and determine whether you’ll still make a profit once the work is complete. Always set a contingency for unexpected costs because trust us, there will be some during the development process. Project management is a critical part of the process.
As well as renovation costs, consider other expenses you will incur, including borrowing, legal fees and agency costs. Draw up a list and be sure to double-check, as every penny extra can impact your profit.
4. Have a vision
Obviously, you want to make the most significant profit possible, but rookie errors like skimping and saving on your fixtures and fittings won’t help. Instead, think about your area and the requirements of homebuyers or renters. Is affordability the biggest issue, or is it quality that matters?
The point isn’t purely about aesthetics but about choices – and they must be driven by a vision. A vision sounds great, but it’s an idea of what you’re trying to achieve that influences every choice you make. Property developers have a picture of the finished product they’re attempting to create – and crucially, the audience they’re trying to attract, making every decision a little easier.
As well as a vision, as part of your property development business plan, you need an exit strategy.
5. Start small and build experience
You may have the capital to invest in a 4-bed wreck, but do you have the skills, experience and capabilities to deliver it? For your first project, you should start small. That way, you’ll build up an understanding of the process, the challenges involved and the opportunities. It’s the pain-free way to become a successful property developer.
We all make mistakes (and you’ll make a few), but making a few slip-ups on a one-bedroom flat will have less impact than the same issues with a 4-bed detached property. As you develop more properties, you’ll develop the skills and contact so you can tackle anything.
Opportunities in Yorkshire
The Yorkshire property market is fascinating, with opportunities for first-time property developers and experienced investors to make healthy returns. The area has a mixture of the rural regions and inner-city properties that offer a massive choice of dwellings to choose from – and you can find them all at Simon Blyth.
Summary
Simon Blyth is Yorkshire’s leading independent estate agent. We have a vast range or properties for sale through our website or at one of our regular auctions. If you’re interested in any of our properties, joining our mailing list or receiving an auction catalogue, contact us today.