develop a property          
Developing Property

Developing property can be a hugely rewarding and challenging career with the potential to make serious amounts of money. However without the necessary research and know how it could be a very risky investment that could leave you in a whole lot of trouble.


Taking on a property to develop is a serious personal and financial commitment because it involves the initial outlay of buying the property, getting the work done and hopefully selling it for a profit. There is no guarantee you can achieve this and the worst case scenario is being left with a property you can’t sell and on the verge of it being taken over by the finance company.


The guide below highlights the key factors that would turn a development into a good little earner. They are not in order of importance because property development requires a combination of factors to achieve success.

Key points to consider for a  Property Developer

Location! Location!! Location!!!


A key element in property purchases is the location. Look for areas that may be up and coming or on the fringes of good areas, instead of buying in the best areas. You will find that the best areas will attract a premium and thus, not leaving any room for a decent profit. This does not mean you shouldn’t look in these areas as you may sometimes be able to find a hidden gem that has been missed by some others.


Areas near schools, transport links and open spaces are good places to buy as they will be easier to sell. Bear this in mind that you need to do your research to figure out what is a good location and what could be more troubled than what it’s worth.


Buying in near locations where the big developers are concentrating their projects is usually a giveaway sign that the area is up and coming. Other possible signs of up and coming areas are improved transport links, rejuvenated areas and even proposed new shopping centres.


Buy at the right price


It is essential to buy the property at the right price. This is probably the most important factor that will decide if you are going to make a decent profit or not. If you pay top money for a proposed development, however good it may be, the chances are that this will eat into your profits as the margins may be so slim. Buying at a right price also gives you a cushion in the event of unexpected costs.


The best method of calculating the right price is to work backwards. Firstly, calculate what you think the property is worth and then take away your costs leaving you with a figure at what you should be buying at. If the price is too high try and negotiate, if it fails then walk away. Never feel pressured by the sales talk of agents trying to paint a pretty picture of the potential profits. Work out the resale value and costs, if you are not happy with the profits don’t give a second thought.


Do your homework


Research all the avenues properly because property development is a risky business from which you could make a fortune or lose everything.


Your research must include property prices, location, associated costs, what work is needed including any major issues with the property. Work out who will buy this property, how much you will realise and whether the profit margin is sufficient.


Do not be afraid to learn about the job as well because knowing the basics of the trade order and processes in the development stage keeps you ahead of the game.


Plan your development from the start to the finish with timelines and finished dates. This will keep you in check and motivate you during each step of the development stage.


Remember you can never do enough research but everything you learn is not wasted information. All the researches you made are tools that can be used for other future developments.


Work out your figures


Calculating the figures for costs and possible sales values needs to be looked at in depth. Although quick calculations on the back on an envelope can give you a rough idea you need to go through the sums with a fine tooth comb.


You will need to have a detailed cost plan in place, Including all costs such as purchase, renovation, planning, architecture, interest and selling cost. Do not forget to include a contingency fund for those unexpected costs that may arise.


Your projected sales figures are calculated after you must have looked into the current market position by searching through the websites to see what properties similar to yours are in the market for sale. Search through the cost prices and never be afraid to ask the agents in the area as most of them would be willing to offer free advice knowing fully well that they may have a chance to instruct the sale of your property. In a rising market, never calculate your sales figures on what they may be in the future but you have to value your property base on the current price scale and if it goes up, then more profit for you.


While calculating your figures expect a worst case scenario and be happy with it just in case your development goes pear shaped.


Finding Properties

Always be on the lookout for potential developments just by driving around and keeping an eye out for sites could help to find that ideal property.


Keep good links with agents, once they know you can act quickly they will be keen to give you first hand information on any available property.


Auction houses are a great opportunity to buy cheap properties but do your research and do not get carried away in the frenzy of a buzzing auction room.


Talk and connect with people in and out of the industry about what you do. You never knew what deals may come your way. Our latest project came about after a casual chat with my neighbour.


Do not be in a rush to buy a property.  If you lose a deal, so what, there will always be another one around the corner so keep looking.


Developments can include anything from a simple reformation to a more complex new building. Take on project(s) that you know you are capable to financially, technically and strategically handle.


Have a good team


Your team should be more of core importance. This includes all of your trade personnel, office staff and even your financiers.


Can you get the services of an electrician, carpenter and plasterer in a few phone calls? If not you could find yourself in a delayed project.


Are you able to raise funds quickly without any complications? Finding finances after the credit crunch has got progressively difficult, so having a finance company in place gives you the ability and confidence to act on deals that may arise.


Keep the buyers in mind


Always bear in mind the end users of your property. If it is aimed at students, it is not prudent spending a fortune on high quality fittings, but a high end apartment for a professional person would expect more. Design your budget on the type of properties and the buyers alike. If it’s a family home, good decor and an attractive garden may win that sale.


Never try to imprint your tastes on the property; it is about what would appeal to the potential buyers.



Motivate yourself


During any development, you will stage where the project sees drastic changes and other times where it seems like nothing has been done. It is essential to keep yourself motivated having clear vision and passion to see this through to the end.

Give yourself plans and timeframes to achieve certain stages in the development which will keep you motivated through the build.


You should start the project with a clear vision of what the property would look like at the end and keep this in mind at all times.


The Market


Keep an eye on the market. Track the movement of home prices, interest rates, inflations, supplies and demands.


All these factors will affect house prices and ultimately your profit figures. If the housing market shows signs of slowing down then take this into consideration. If you are looking at your next development you should take note of these when calculating your figures.


If in the event of a downturn in the market you find that you are unable to sell your development, keep your options open. The rental market at the time may be buoyant but if you could possibly refinance your development you could get yourself out of the tricky situation.