A Guide To Starting Your Own Property Development Business
This guide will help you better understand the path to becoming a full-time property developer. Our guide is designed to provide a comprehensive overview of the key considerations and steps required to successfully launch a career as a property developer. From obtaining funding and creating a solid business plan to conducting thorough market research and developing an exit strategy, our guide will provide valuable insights and advice to help you navigate the journey towards becoming a property developer.
What is a property developer?
A property developer is a property professional who engages in the business of building or improving properties with the aim of increasing their value for a profit. This can include constructing new buildings, renovating existing property or converting properties for different uses. As a property developer, you are responsible for overseeing the entire project from start to finish, including securing planning, arranging funding and coordinating a team of construction experts such as builders, architects, estate agents and surveyors.
The goal for a property developer is to generate a profit, which can be achieved through selling the improved property to a new owner or to generate an income by renting it out to tenants. For those developers considering developing properties for the purpose of renting them to tenants you may find our buy to let mortgage information useful.
What are the different types of property development?
Renovating existing properties to increase their value. This can include anything from refurbishing a kitchen to building a loft extension.
Converting properties to different uses, which can significantly increase their value. For example, converting an old commercial building into residential apartments.
Acquiring and selling land. Some property developers may choose to focus on buying land, preparing it for development by gaining planning, and then selling it on to other developers.
New Build. Developing property from the ground up into houses and/or flats.
It is important to note that property development is a complex and nuanced field, requiring a deep understanding of local markets, regulations, and a wide range of specialised skills. This overview is intended to provide a general understanding of some of the most common ways in which property developers generate a profit.
Why become a property developer?
Becoming a property developer can be a viable career option as there is a high demand for new housing in many areas of the UK. The current housing supply deficit, along with government targets for new home construction, can present opportunities for those with the funding and a solid business plan. So, we have identified that there is a need for the product you will deliver.
As a property developer you will work for yourself and that often leads to self-motivation and satisfaction. The rewards can be significant. Developers building multiple units (20+) per year will likely have company profits in the millions.
Other developers may choose to refurbish property and retain them as an investment property, providing them with a passive rental income for life.
To summarise, the benefits are a good income with the satisfaction of working for yourself and the enjoyment of doing something you enjoy and are passionate about.
Related: You may also wish to read How To Get Into Property Development
What qualifications does a property developer need?
While formal qualifications are not typically required to enter the field, it is important to have a strong understanding of construction, of the local market, building regulations and the various specialised skills required for successful property development.
Some developers may naturally progress into developing their own property having built houses for other people for several years, but not all developers need to be hands on.
What are the risks of being a property developer?
It is important to be aware of the potential risks and challenges that property developers may face as there are many. We have highlighted some below:
- A downturn in the housing market, which can negatively impact profits
- Rising interest rates, which can increase mortgage or loan repayments and affect cash flow
- Delays or budgeting issues during a project, which can reduce profits
- Rising costs of materials or supply chain disruptions
- Difficulty in obtaining funding for projects
- Legal issues such as disputes over planning permission or land ownership which can be costly and delay projects.
It’s important to have a deep understanding of the field and the risks involved before deciding to become a property developer.
15 steps to becoming a successful property developer
- Conduct market research: Understand the local property market and identify areas with high potential for development. Know that what you intend to build is right for the local market in terms of accommodation and price.
- Create a business plan: Develop a clear plan for your property development business, including your goals, target market and projected financials.
- Build a network: Connect with other property developers, real estate agents, and industry professionals to learn from their experiences and gain access to potential deals. There are lots of property developer networks across the UK, go along to one.
- Obtain funding: Investigate different funding options, such as traditional bank loans, crowdfunding, or private investors, to finance your development projects. Use a development finance broker as they specialise in property development finance.
- Get educated: Learn as much as you can about the property development process, including planning, construction methods, building contracts and macro-economic factors.
- Get a team together: Assemble a team of professionals, such as architects, engineers, and contractors, to help bring your development projects to life.
- Get a mentor: Find an experienced property developer to mentor you and guide you through the process.
- Understand the legalities: Get familiar with the legal side of property development, including contracts, permits, and building regulations.
- Start small: Begin with a small development project to gain experience and build your experience before moving on to larger projects.
- Establish a budget and stick to it: Create a detailed budget for each development project and stick to it to avoid financial troubles.
- Be prepared for the unexpected: Property development is a complex process, and unexpected issues can arise. Be prepared to handle unexpected challenges and adapt your plans accordingly.
- Be aware of the current market trends: Stay informed about the current market trends and adjust your development plans accordingly.
- Be aware of the competition: Understand your competition and what they are doing to stay competitive in the market.
- Invest in technology: Stay up to date with the latest technology and tools to increase efficiency and streamline the property development process.
- Get to know the local community including estate agents: Building relationships with the local community and agents and understanding their needs and preferences can help you identify potential development opportunities and gain support for your projects.
Fox Davidson Property Development Finance Brokers
Fox Davidson are property development finance brokers and have helped many clients progress into full time property development. We provide insight and advice to help first time developers. Please do get in touch to see how we can help you get into property development for the first time.