Property development has proven to be a profitable investment over the past couple of decades, either through buy-to-let or through renovating properties to sell. However, careful management of the project is required to get it right and make a profit. Beginner property developers need to carefully research all aspects of the task before committing. As a member of many major property development alliances and federations, and as an active participant in global property events, Ali Seytanpir understands the complexities of the market and the steps that must be taken to successfully start a property development business.
Having the finances in place is one of the first things to consider when establishing a property development business. The types of finance available will differ depending on various factors, such as whether it is a buy-to-let or buy-to-sell project, whether a business is going to be run from the property, what the specific plans are for the project, and more. The short video attachment shows the values and pitfalls of letting or selling. Lenders will usually require potential property developers to have a minimum deposit of 25% of the property value. Most often this relates to the original purchase value, although certain lenders offer against gross development value, which is the projected value of the property at the time it is ready to be sold. The higher the percentage of equity the property developer has, the better deal they will be able to access for the remainder. However, these types of loans are typically structured based on personal circumstances so cannot easily be searched for.
Location and Property Type
The location of the property will play a key role in its saleability once renovations are complete, or in how likely it is to attract tenants in terms of buy-to-let. The ideal location is one which is up-and-coming, with a strong likelihood of a rise in property values. Look for areas that are beginning to see strong growth where there are plenty of other new developments underway or in the planning stages. The embedded infographic shows some of the key things to look for when choosing a location. The type of property you wish to develop will also play a role. For example, if you are planning to create a luxury family home, there is no point in doing so in an area that is predominantly occupied by students. Have a target market in mind when looking for a property to buy and tailor your refurbishments to suit that target market once you have purchased.
Skills and Contractors
The scale of the project you have in mind may be tempered by your own skills and limitations and your relationships with contractors. If you are planning a major renovation you will need builders and other tradespeople to help you. Inexperienced property developers can easily fall into the trap of getting fleeced by contractors. Make sure any work required is signed off on a fixed-price contract before beginning and be scrupulous about obtaining references and recommendations. If there are areas where you possess the skills to carry out work yourself then great, but chances are you will need to enlist outside help for all or part of your renovation project, so make sure that help is of the desired quality.
Once your property has been renovated to the desired standard, applying the finishing touches can make or break how much profit you can make. The PDF attachment contains a series of tips for decorating a property so that it will be most likely to sell at the targeted price point.