While it’s true that anyone investing capital and time into a fluctuating market faces some degree of risk, the property market in the UK is known as one of the most stable in the world and is a great place to make money and gain experience in building, renovating and converting buildings.
Here is our list of the top five tips for property developers:
1) Know what adds value to a property
If you are renovating an existing property, rather than building from the ground up, then it is important to know which elements of the home will have the greatest positive impact on the selling price.
Going into detail on the likely uptick in price will allow you to make a more informed cost-benefit analysis of your renovating decisions.
2) Know the details of your project before applying for financing
Many of the best private development financing institutions will offer a checklist of exactly what you need to have researched and have ready by the time you apply for a loan.
Key things to know in detail beforehand are:
- The purchase price of the land
- The timeline for the build (including any contingency time)
- The gross projected value of the finished project
- A clear exit strategy from the loan, via selling the completed project or refinancing
Even if you are a first-time developer without much previous experience, showing a potential investor that you have conducted thorough research on the project you wish to have financed will go a long way.
3) Work with a reliable builder, rather than a cheap builder
This one may sound obvious, but the temptation to partner with or hire a building firm that offers the lowest prices will be very strong.
When it comes to balancing the budget books to present to a potential investor, you will need to want to keep projected costs down, but also show that you have researched a quality team of contractors and architects.
There are several ways to find a reliable contractor to partner with, but you can mainly rely on good word of mouth and personal recommendations to avoid partnering with a cowboy firm.
4) Know the local market and its history
Do thorough and continual research into the changing house prices in the area you wish to develop.
Websites such as Zoopla have functions whereby you can look up the history of house prices in an area, rather than just current asking prices.
This way, you can judge the upward or downward trajectory of selling prices before you commit to a longer-term project.
5) Always aim to stick to your budget
Being financially disciplined is perhaps the one key tip for being a successful developer. When dealing with such large sums of cash, staying within the boundaries of an agreed budget is an essential skill.
If you are not able to stick to your budge, for whatever reason, whether there is an unforeseen delay to planning permission, construction or sale, then there are ways to avoid financial worries.
Bridging loans are a financial tool used successfully by developers and alternative finance companies to allow delayed and over budget developments to reach completion successfully. They can be costly but they help prevent the danger of forfeiting on a loan.