In 2020, the housing market experienced a surprising mini-boom in the wake of the first COVID-induced lockdown. Real estate investors and property development companies like EPTA Development Corp are looking for new opportunities in this promising market. The number of property sales rose steadily throughout the year, along with house prices. Although industry experts are forecasting a dip in sales as unemployment levels rise and the stamp duty holiday comes to an end, the future looks bright for British property developers. If you want to take a look at some new developments, look at the work that the Marandi Foundation has been involved in.
If you’re considering dipping your toes in real estate waters this year – be that on a small scale to supplement your income or as a full-time change of career – this guide will cover all the basics of getting started in property development in 2021.
Create a Business Plan
Even if you’re planning to start on a small-scale while maintaining your current job – this is how many developers get started – creating a business plan will provide the opportunity to think about your short, medium and long-term goals. Developers who take the time to put this solid foundation in place are much more likely to succeed.
Consider what type of property you want to focus on and who your target market will be – retirement homes? High-end properties for young professionals? Family homes? Will you be “flipping” properties and selling them on or building a portfolio of rental properties? How will you fund these projects – bridging loans, personal savings, commercial mortgages, house part-exchange schemes, buy-to-let mortgages? This may seem like a lot to think about before you get started, but property development is a big commitment, and if you rush into it without adequate planning you could risk losing your savings and racking up a lot of debt that will take years to repay.
There are plenty of free sources of information writing a solid business plan, including the government’s website. If you have big plans or are investing your own money and assets, it may be worth seeking professional advice from a financial planner.
Set up a Company
One of the first, and most important decisions you need to make, is what kind of company structure is best suited to your business.
There are three main options – sole trader, business partnership or limited company. Many people opt to create a limited company because it limits your personal financial liability and allows the business to benefit from tax advantages. If you operate as a sole trader, there is no separation between you and your business. As a result, you will be personally liable for any debt the business incurs. It is easier to set up as a sole trader than a limited company and there are fewer financial restrictions, but it can be a risky position to put yourself in. Establishing a business partnership offers a halfway house of sorts – you find a partner to share the responsibilities of sole ownership. However, if you opt for this route, be prepared to share the decision-making too.
There is no one-size-fits-all approach to setting up a property development company. You must choose the structure that best suits your business finances and goals.
Do Your Research
Whether you decide to focus on buy-to-sell or buy-to-let, conducting thorough market research before putting down any money is key to success. You need to develop an excellent understanding of the local property market – what’s available, what buyers are looking for and what budget you need to buy property in your target area.
Seek out untapped areas where you will have the opportunity to buy at a reasonable price and reap the rewards as property in that location becomes more popular. It may be tempting to invest in the local property “hotspot” – the area where everyone wants to live and prices are sky-high. But you’ll pay a premium for these properties and will have to compete with more established developers.
Instead, take the time to pinpoint nearby areas that are “up and coming” – still affordable but with the type of properties and local amenities that will appeal to your target market. Online property portals like Rightmove and Zoopla list recently sold prices which you can use to gauge which areas and types of property are increasing in popularity and becoming more in demand. Take a walk around the premium property spots and consider what makes them so popular – are there any nearby neighbourhoods that can provide buyers with a similar offer at a lower price? Consider transport links, access to schools and nurseries, green spaces, shops, leisure facilities and the availability of fast home wi-fi.
Build a Network of Useful Contacts
Make friends with the estate agents in your target location – they will be the first to know when a fantastic investment property is about to go on the market and they will have first-hand insight into what buyers and renters are looking for.
If you’re planning to build or renovate properties, creating a list of reliable, professional and trustworthy trade people will prove invaluable. You need a team you can call upon at the eleventh hour and that you trust to get the job done to a high standard.
Depending on your personal finances, you’ll probably also need to make connections with financial advisors and various sources of funding. Finding a reputable firm with a Development Finance Broker, LDN Finance for example; is vital if you’re aiming to scale up your business in the future and take on more ambitious development projects.
There are plenty of networking events designed specifically for property developers, but you can branch out on your own too. Establish an online presence, not only with a company website but also on relevant social media platforms such as LinkedIn. This can be a great way to make new contacts, build the company brand and monitor industry trends.
Undertake Essential Courses
To embark on a successful journey in property development, it’s essential to lay a solid foundation of knowledge and skills through comprehensive coursework. Start by immersing yourself in real estate investing courses, where you’ll gain insights into market analysis, property valuation, and investment strategies. Understanding these fundamental concepts is paramount for identifying lucrative investment opportunities and making informed decisions.
Once you’ve grasped the essentials of real estate investing, transition into property development courses. These courses delve into project management, zoning regulations, and construction processes, including essential skills like bricklaying , carpentry, plumbing, and electrical work. Mastering these areas equips you with the tools needed to navigate the entire development process seamlessly, from acquiring land to overseeing construction projects.
Through detailed modules, you’ll delve into project management methodologies, learning how to effectively plan, organize, and execute development initiatives. Understanding zoning regulations is critical for navigating legal requirements and ensuring compliance with local ordinances, enabling you to secure necessary permits and approvals seamlessly.
Moreover, you’ll gain valuable insights into construction processes, including hands-on training in essential trades such as bricklaying (a City & Guilds Level 2 Bricklaying Qualification course could yield fruitful results), carpentry, plumbing, and electrical work. Mastery of these skills equips you with the practical knowledge and expertise needed to oversee construction projects with confidence and precision.
Furthermore, delve into finance and accounting courses to understand budgeting, financing options, and risk management. Proficiency in these financial concepts is crucial for effectively managing project finances and optimizing returns on investment.
Lastly, hone your negotiation and communication skills through specialized courses. Effective collaboration with stakeholders and adept negotiation skills are essential for securing deals and fostering successful partnerships.
By investing in a diverse range of courses covering these critical areas, you’ll establish a robust framework for achieving success in property development. Each course serves as a building block, contributing to your expertise and confidence as you progress in the field.
Crunch the Numbers
It may seem like fun to follow in the steps of Sarah Beeney and other TV personalities who make “flipping” a property look a breeze – add a new bathroom suite and a trendy colour palette to a run-down property then sell it on for a vastly inflated sale price, easy right? But running a successful property development business means following your head, not your heart.
Before investing a penny in a property, you need to calculate the projected return on investment (ROI), whether you’re buying to let or sell. This means calculating all the expected purchasing costs and potentially renovating a property and deducting this from the expected sale price. If you’re buying to rent, the ROI will be the annual mortgage costs minus the annual rent divided by the cost of purchasing and improving the property.
Calculating the ROI of an investment can be a tricky business as it’s not always possible to know in advance exactly how much it will cost to bring a property up to standard for the sale or rental market. But a healthy ROI is the only way to be successful as a developer. If maths isn’t your strong point, get some professional help. The cost of paying for professional financial support will pay for itself if it helps you avoid an expensive tax error or unprofitable renovation project. Even if you do consider yourself something of a numbers person, employing an objective financial consultant, one who is not invested in the company in any way, is often a good idea.
Buying property to develop is a big commitment in both time and money. It can be a challenge to balance full-time employment while starting up a business, but this is how many established developers begin their journey. As a property developer, the key to success is to take your time laying strong foundations – ensure you are financially secure, create a solid business plan, do your market research, and make sure that the numbers add up before investing a penny. Property development can be an exciting and lucrative business if you take the time to do it right and 2021 looks set to be a fantastic year to get started in the industry.
