Property development is a hot topic, and it sounds simple on the surface: buy a property, do it up and either sell it on or rent it out to make a profit. However, there’s a lot more to it, and while there are some big profits to be made, property development is not without risk if you go in blindly.
Our team of experts at Williams Sillitoe not only know where to find the best property development opportunities, but can also advise potential buyers as to what’s involved, the potential with each building and what the risks are. This means you’ll have a complete overview of what each property offers and whether it’s the right property for you to develop.
What Is A Property Developer?
A property developer is someone who buys a property with the view to renovate or improve it, to make it more valuable on the property market. They might work on a single property at a time or multiple buildings together, depending on their financial situation and time constraints.
Most commonly, you’ll hear about property developers working on residential properties, either to live in, rent out, or sell on for a profit, but this isn’t the only option.
Commercial property developers do the same thing, but with properties used for businesses to buy or rent. By making them as appealing and valuable as possible, they provide a bigger return through a sale or over time as a rental.
Can Anyone Be A Property Developer?
There’s no qualification or certification needed to be a property developer – but there are things you should know or be skilled at to make it as profitable as possible. At first, it’s being able to see the potential in a property and acquire it without paying too high a price. This means taking into account:
- The condition of the building
- The work you can feasibly carry out
- The type of property
- The location
- The potential of the area.
You will most likely need help to carry out the different work that needs to be completed, and this means a cost in both materials and labour. All of this needs to be balanced against how much you expect to earn from the property, making a business plan or strategy a good idea.
As time goes on, you will learn to do more of the work yourself, which helps save money and increase profits. If you can manage this, and adapt to different needs, then as long as you have the money to get started, it is worth considering.
Why Would You Become A Property Developer?
One of the most obvious reasons to become a property developer is to make money off the properties you renovate. This can be from a sale or over time through rental agreements.
Working on one property at a time should give you profit, some of which will be used on your next investment, while the rest will be yours to keep. If you have a budget you can work from each time, and can identify quickly the buildings that make you the most money, it can be a reliable source of income.
For others, buying properties cheaply, even from auctions, and renting them out can provide multiple revenue streams over time. While there is the ongoing management and maintenance, you also build a portfolio of properties that can be sold should you ever find the need to do so.
What Are The Risks Of Property Development?
If the goal at the end of any project is to make a profit, you need to account for a lot of factors, starting with the cost of the property, accompanying legal fees, the cost of materials and manpower to do the development work and costs associated with the sale or ongoing management. Without planning for this, you could find the profit a lot smaller than you imagined – or even make a loss, which will hamper your efforts with the next property.
Also keep in mind the property market can change very quickly, and this is difficult to predict. If there’s a drop, you could find it very difficult to make a profit on the property you’re currently working on. At the same time, if you don’t accurately estimate or predict the value increase you’re looking for, then you might make a loss. There are risks to property development, but you can take steps to mitigate them.
How To Become A Property Developer?
If you’re thinking about becoming a property developer, it’s important to know what you’re getting into. It can be lucrative, but only if you know what to expect, and the hurdles you’ll face.
You will first need to be in a good financial position to buy the property and spend the money needed to renovate it. Even if you intend to do all the work yourself, there will still be costs involved.
Also keep to a budget, and, if needed, a timeframe. Treat it as a job rather than a hobby so you’re not spending more money over time than you have to. Work out how much you can spend, the costs involved, and what you expect to make so you can determine if the profit is worthwhile. Don’t jump at a property on a whim – think it through and be sure you won’t make a loss – or it might be the only development you work on.
What’s Involved In Property Development?
Property development involves a lot of different steps, depending on the condition of the building you’re looking to purchase. It might need structural work that takes longer to complete, or it can benefit from new carpets and furnishings. Perhaps the building is old and the wiring needs to be done again, or there are insulation or roof problems. You need to be prepared for any situation, and know what to do to improve it and get the place ready to sell again.
Property development can involve any of the following issues, as well as many more:
- Repairing or replacing walls
- Fixing insulation problems
- Fixing floorboards
- Painting and decorating
- Buying appliances and fixtures
- Replacing carpets
- Repairing windows
- Fixing roofs
- Replacing doors.
Understanding what needs to be done is a core skill, and having the knowledge – or contacts – to get the jobs done fast and to a good standard is a part of being a successful property developer. We’re not suggesting you be able to do everything, but what you can do will help you save on costs.
Don’t Forget About Planning Permission
When carrying out work on a property you will need to think about planning permission. Not all tasks or ideas you have will need that permission and approval granted from the local authority, but larger jobs will. This could be structural, or changing the use or purpose of the building.
However, the type of building you’re developing will impact this, too. Older buildings that have more history and heritage might be harder to get planning permission for big projects, and this can really change what you can do – and how much money you can make – when it comes to property development.
Before submitting your request for planning permission, make sure the plans you have are thorough and complete. Show all the work involved, how it will be handled, time frames, and what the outcomes are. The benefits to the property, the people using it, and the local community, can go a long way to getting approval from the local authority.
What To Consider When Choosing A Property To Develop
While the different issues a property needs to be addressed are a part of choosing which one to buy, there are other aspects to keep in mind, too. These include:
- Searching for properties
- Buying properties
- Selling properties
- Renting properties out.
These parts are often forgotten about, and can slow down the start of a project, or the search for a new one. They take time and can bring unexpected costs if you don’t take them into account from the beginning. This would eat into your profits if you forget about them.
Beyond this, consider:
- The area the property is in
- The value you can add
- Transport links
- Who would live in the property.
This can determine whether a property is worth all the work you need to put into it. If the value won’t increase much – or there won’t be much demand for a place far over the average price of other homes, it won’t be easy to sell, leaving you with a property you can’t do much with.
What Do You Plan To Achieve After Developing A Property?
Before buying a property to develop, think about your goal at the end. Is it to sell on, rent out, or live in? This will not only determine what you do to it, but also what kind of return you can expect. If you’re getting a mortgage, this also matters as to the deposit you’ll need or the terms you can get, so there’s a lot to think about.
If you plan to sell or rent, find out what is selling in the area and what prices are being paid. If you’re going to look for a high price, you might find it hard to sell on – and the same applies if you set the rent too high. Forward planning is everything, and even before buying a property to develop, you should know what you want to happen once work is done.
Want To Know More About Property Development?
Once you know how to get into property development, and everything else that’s involved in it, you can decide if this is the right decision for your situation. While there are plenty of benefits, it’s not wise to ignore the risks, either. Seeking the advice of experts can help make sure you know exactly what you’re getting into as stopping part-way through a development can be even more costly than you imagine.
That said, the skills you’ll hone offer another reason to choose this path, especially if you are financially stable and are confident in what you can do to transform a property, whether residential or commercial. There are plenty of end goals to choose from, and knowing this in advance will help you decide what properties to develop. If you’d like to know more about property development opportunities, contact a member of our team at Williams Sillitoe today and find out what you can do.