Want to build your property portfolio, but not sure where to start? In this article, we'll explore the key steps you’ll need to take to become a successful property developer.
Even if you plan to start your property development business slowly, or possibly even part-time, you will still need a robust property development plan to pave the way to success.
There are many facets to consider when putting together your plan, however, a key area in which many property developers forget to invest is in the development of a proper website, specific to your new business. There are plenty of free tools available to help you build a website - just have a look online.
Another important aspect is the resources. If you are likely to need extra pairs of hands to get your new business off the ground, do your research into HR agencies that can help you onboard the right people. You will also need to employ a payroll service, to ensure you remain on the right side of the law – they’ll be able to guide you on what exactly you’ll need to do to stay legal.
Finally, if your budget allows, factor in promotion. If you’re a whizz at InDesign or Photoshop, you may be able to knock up some flyers or digital display adverts, but we recommend employing a specialist to help craft an impactful design.
Are you buying to sell, or buying to let?
One of the key elements to factor into your planning is how you plan to end your business venture. Are you treating this like a long term investment, or are you hoping for your new venture to go long term? A buy-to-let strategy might be more suited to your needs, given the flexibility a larger portfolio will afford you when looking to purchase additional properties.
If you’re in it for a one-off payout, then a buy-to-sell strategy might work best for you.
However, remember – the more properties you hold in your name, the more you’ll pay in tax. There is a sharp increase in stamp duty for landlords of more than one property, so be sure to do your research before taking the plunge.
It’s common knowledge that location is one of the most important factors to consider when purchasing property.
Look for areas that are on the up and buy early: this is your best chance of turning a profit. Try to avoid choosing areas that are already highly sought after, as you’ll be paying a premium, even if the property requires extensive renovation work. An easy way to identify whether an area is in a period of growth is to look at how many housing developments have sprung up over the last five years.
While it may be tempting to jump straight in at the deep end, don’t rush into any business decision without carrying out thorough research first. Watch out for estate agents that push you towards a ‘great deal’, or tell you that many other buyers are interested. That may be the case; however, you shouldn’t ever feel pressured into any purchase – take time to get to know the location and the market before making a decision.
Conducting market research is essential to avoid paying over the odds for your property. You will find that often, you will make more when you buy than when you sell, so don’t be afraid to negotiate hard to get a good price.
Once you’ve made an offer, don’t scrimp on the survey. Make sure you invest in a thorough property survey from a reputable company as early as possible, and watch out for any signs of subsidence, damp and leaks. You will also want to do your research into the neighbouring properties and their inhabitants before completing the sale.
If you’re planning to rent your property, make sure it meets the minimum health, safety and security requirements.
This includes proper locks on windows and doors, fire alarms and perhaps even CCTV. Some larger, higher value properties may also require a security response system.
Having proper home security in place will also act as an incentive, as some home insurance policies will offer discounts if certain measures are in place. if you have a buy to let mortgage, you may find you lender has guidelines on the types of insurance you’ll need to have in place.
Another investment you’ll need to factor into your budget is the installation and maintenance of a quality boiler and central heating system. The last thing you want is for your tenants to phone you up late at night in the middle of winter, with no heating and hot water. When you’re researching properties to buy, make sure to check all pipework, too, as this could be a large unexpected expense should something go wrong.
Are you planning to rent your property to students to maximise your income, or are you after young professionals who are more likely to look after the property?
When searching for a property, have your prospective renters at the front of your mind. Tailor your development to the demand in your area – whether it’s a leafy suburb or a city rife with students.
If you’re planning a complete renovation, consider the type of specification you want to offer. There’s no point in kitting out your house or flat with the latest tech if you’re hoping to attract students wanting a bargain.
It’s no secret that becoming a successful property developer requires a substantial sum to get off the ground. Be prepared that until you sell your first property, your money will be tied up in a mortgage, meaning you may not be able to expand your portfolio at the rate you hoped.
It’s absolutely essential to make sure you have enough money before starting your property development business. Factor in the usual costs – estate agents, legal fees, stamp duty and financial advice, and if you can, get a 10% contingency budget in place should the worst happen. If you’re planning a total refurb, you’ll need plenty of cash there too – even with the most thorough of surveys, there are bound to be unexpected costs along the way.
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