Why be a property developer?
One of the most appealing things about property development is that anyone can do it. Technically you do not need any qualifications or training to get started. Anyone can become a property developer simply by buying a house then selling it on for a profit.
If you think you could be the next Sarah Beeny, or you simply enjoy DIY, property development might be a good choice.
Plus of course, if you get it right the financial rewards can be substantial, particularly when you start to build a portfolio of renovated property that has been sold on or rented out.
What are the risks?
It is not worth even considering property development unless you are in a very stable financial position.
Taking on a property to develop is a serious commitment, and if you get it wrong, you could end up in a lot of debt with a property you cannot shift.
Most lenders like Invest & Fund will require a first charge on the property development project and other security such as a debenture and personal guarantees.
What extra expenses should you expect?
Developing a property will almost always incur unforeseen costs, so you will need to set aside cash to make sure you are able to cope with them.
Here is a list of some of the additional costs you need to budget for.
· Hiring contractors
· Having a structural survey done
· Fees you may have to pay to external agents
· Structural issues like subsidence or even asbestos
· Maintenance and repairs
· Legal fees
What if you have existing debt?
Developing property represents a huge financial commitment because it involves the initial outlay of buying the property, then the significant expense of doing up that property and arranging for it to be sold or rented out.
If you have any debts or your daily finances are being squeezed in any other way, now is not the time to start trying your hand at developing property, as you will only plunge yourself into further debt.
Research properties before you buy
To give yourself the best chance of success, you would have to know the market inside-out:
· Find out how much other properties go for in the area
· Decide on who your target buyer is
· Calculate stamp duty
What else should you consider?
Property development involves a significant amount of research and capital before you can get started and will require a huge investment of both time and money.
If you decide it is for you, start off small with your first property, and only move on to bigger projects as you gain experience and confidence.