You may have wanted to get into property development for a while, but now the time is here, where do you start and how do you manage several properties at once?
There’s no one-size-fits-all approach to property development, in much the same way as all properties tend to be different and have their own quirks of style, build, and location.
Nevertheless, there are some things that every property developer will need to do if they want to get ahead, on time, and on budget. Having a checklist in place, such as the one provided here, will help to make sure there is nothing you haven’t considered or forgotten about.
Do your research and write a business plan
It’s important to think about what you are hoping to achieve from your property portfolio. Are you trying to sell the properties and perhaps use the money from the sales to continue this on an ongoing basis, or do you plan to rent them out and have a monthly yield, which may make it harder to budget but does almost guarantee you an income?
Whichever it is you plan to do, you need to make sure that the location in which you are buying or building your development properties is one where people are actively looking to buy or rent. If the market is fairly stagnant in that area, it won’t matter how beautiful your end result is if there is nobody who wants to live in that particular spot.
Test the market, check out local estate agency listings and speak to people who live there already. That will help to give you a steer as to whether it’s families wanting to buy, students in rental accommodation or young professionals getting their own place.
Complete all the paperwork and get permissions
For any major work to be done to a property you may need to seek planning permission from the council. Before you purchase any property, you can sound out the council’s planning committee to see if they would be open to the ideas you put forward, putting you in a better position to decide whether it’s a viable option.
Building regulations set out any conditions that may be imposed on the work you’re intending to undertake and include the likes of the height of windows from the floor. Don’t think you can just do whatever you like when you own a property. For something that is Grade-listed, for example, the rules surrounding it will be even more stringent. If you are lucky, you may be able to release yourself from any covenants surrounding the property and its area, but you will need to provide proof of this to your solicitors.
If you are building a completely new property, you will also need to provide detailed plans of any work you are going to do, including where services such as electricity, gas and water are going to run. A build guarantee document will also be required. This will need to be done for all properties you are building. So, if you are planning a multiple property build, make sure you have it all in place before you start ground- breaking.
Whenever you are buying, renting out, or selling a property, there needs to be an Energy Performance Certificate in place. Anything you do the house will need to ensure it isn’t reducing energy efficiency. However, if you can increase the efficiency of the property in the materials you use and the work done to it, then that will work in your favour when you come to sell or rent it.
Clear out the property
Many property developers will buy fairly rundown houses on which they hope to make lots of money by restoring them to their former glory. Often, these will be bought at auction, as a result of bankruptcy or lack of probate. This can mean that they are still full of the previous owner’s possessions, such as white goods, and lots of rubbish that will need clearing out.
Sadly, this doesn’t mean you can just hire a skip and throw everything into it. Electrical goods need to be disposed of safely. Something like a fridge contains hazardous chemicals and pollutants meaning it can’t just be sent to a landfill and must be taken away by a qualified person.
If you are buying multiple properties to develop and manage, you may find that half your time is spent clearing them out to make them habitable before you start any of the actual building work, so don’t forget to factor this into your time and budget for each one.
Know your budget and timescales
Budget and time are the two most important aspects to consider when developing a property. The last thing you want to do is run out of money before the work is completed. Be sure to have a healthy contingency built in, for any unforeseen issues that may arise. This can include delays in the building work happening, which puts your timescales in jeopardy and pushes everything backward.
Note that nothing ever goes directly to plan in property development, however experienced someone is in the field, so don’t be disheartened. Just make sure you have planned in some extra days and extra money so that you can keep on top of things as much as possible.
Detail everything in a project management programme, or even something as simple as a spreadsheet and Gantt chart, so you have an at-a-glance record of everything that is due to be happening and at what time and cost. This is even more important if you have several properties on the go at once.
The right tradespeople and materials for the job
Unless you have all the relevant skills yourself, you will likely need to get in some tradespeople to help you develop your properties. Use word of mouth from other developers to get in people you can be assured are reliable and won’t cut corners to cut costs, or charge you over the odds.
If contractors and suppliers know this is your first job, then they may try to take advantage of that. Don’t be afraid to crack the whip if you feel that the job isn’t being done to agreed timescales or to your satisfaction.
However, if you do find some decent tradespeople who you feel able to work alongside, then it is worth checking their availability for your other properties and see if you can contract them in for a prolonged period of time to work on several of your houses, either concurrently or consecutively.
Sustainability is a watchword in all property projects in the UK, as we aim to combat climate change. It is therefore worth considering the materials you are using in the build and seeing if sustainable alternatives are available and using those instead. This will endear you to the planning committee and will likely see them accepting future proposals from you, as well as to anyone who plans to buy or rent the property after you have finished it.
Property development and management is not for the faint-hearted, but if you get it right it can be a very rewarding career path, both financially and mentally. It makes sense to start with just one property while you get a feel for what’s required, but there’s nothing to stop you from venturing out into a full property portfolio later on.
The process should get easier as you progress, although there will always be things that happen that you won’t have encountered before. Thinking on your feet, staying calm and logical, and taking advice from others in the field will all help you to realise your property development dreams. And don’t forget to check out some of our other blogs for more tips to help you on your way.