How Can I Get into Property Development?

Written by Joseph Mews

How Can I Get into Property Development?

Property development is one of many routes you can go down to reach your financial goals, and has become increasingly popular in recent years. While investing in a Buy-to-Let property is often the most common route, for those who want to have full control over their investment, property development can be more suitable.

Essentially, property development is a flexible business process which includes everything from ‘flipping’ properties – purchasing a (typically run-down) property, renovating it and then selling it at a higher price point – to buying a piece of land, starting from scratch and eventually selling the developed plot.

But with so much to consider, including financial responsibilities, mortgages and potential returns, how can you get into the world of property development? Joseph Mews, a leading UK property development and investment company, discusses some key considerations:

Pros and Cons

Like with any investment avenue, property development comes with its benefits and drawbacks. In comparison to other routes, developing a property specifically to sell can often be a short-term strategy if you’re willing to commit to the project and the property sells for a competitive price.

 

Additionally, from being involved in the development from start to finish, you’ll be able to put your own stamp on it, especially if you’re doing a lot of the work yourself. While doing the work yourself means you don’t have to employ someone for their services, if you’re not fully prepared for this process, it can quickly become a drawback.

Being a property developer requires extensive organisation and planning skills because if your project overruns, you run the risk of entering a falling market. To begin with, you may have had a deadline in place in order to optimise the market, but if you come across difficulties during the build, the market could have already fallen. In turn, this could have significant impacts on your profit.

Building or redeveloping a property is a lot of work, bringing with it a lot of unexpected tasks and subsequently, many unexpected costs. For this reason, investing in a property directly through a development company can be far more favourable, as you’ll have a better idea of what to expect. Furthermore you often find you have access to tools, such as the Joseph Mews Investment Calculator, that can offer insight on upfront costs, tax and everything in between, making the process even easier.

Starting a Property Development Company

If you’ve considered your investment options and are set on developing a property, you’ll first need to put together your plan. Here, you’ll want to consider everything – the more specific, the better. Establish your short-term goals, a time frame for any long-term milestones, your income and all potential costs. This will then give you a good idea of what you can afford and whether this aligns with your financial goals.

From here, the next step is to decide which sort of company you want to go for. This is one of the biggest decisions you’ll face on your journey to becoming a property developer, but if you’ve got a detailed plan in place, it’s often much more manageable. For example, if you have intentions of turning an initial investment into a full-time job and want to scale your portfolio, you could consider a business partnership or limited company.

With each project comes more responsibilities, so by choosing one of these avenues, you’ll have the business support of more people to make any and all decisions manageable. Additionally, with a limited company, you could benefit from tax relief against costs and materials. However, you can also start your property development company as a sole trader, where you would essentially be self-employed.

Following this you’d source your first project. Similar to investing in a Buy-to-Let property directly from a developer, you’d need to look for locations with either prospective buyers or tenants in mind. For example, you’ll want to consider location, transport links and amenities to maximise your chances of eventually attracting your demographic.

Financing your Project(s)

Regardless of which avenue you choose when entering the world of property development, there are significantly more financial considerations than if you were to invest with a developer. While purchasing a property or a piece of land outright with cash is preferable, the majority will need to consider their finance options.

Naturally, the finance option you choose will depend largely on whether you’re wanting to develop a property from the ground up, or are looking specifically for a renovation project. For those looking for the latter, bridging loans could be an option. This type of loan might be suitable if you’re looking for a new property to ‘flip’ but haven’t yet sold your current property.

If you want to start from scratch, then there are property development finance options available. There are a wealth of loans that cover heavy refurbishment, but more often than not, acceptance and rates largely depend on the success of your previous projects, as well as the strength of your business plan. With this often demanding a lot of time and planning, getting a Buy-to-Let mortgage and investing directly with a developer is often more appealing.

The world of property development comes with many considerations, from weighing up the pros and cons, to sourcing a property or a piece of land, and financing your project. While ready-made investments are often more straightforward, the opportunity to get involved in each stage of the process and make the property your own is an exciting prospect for many.

Despite the wealth of considerations, by effectively planning your development and seeking advice from professionals, the process can often be much more manageable.

The above is intended as a guide only. Like with all major financial decisions, those considering property investment or development should seek guidance from a professional.



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