What is a property developer?
A property developer improves a property to increase its value. This can be done by building new homes, renovating existing properties, or converting a property from one use to another. As a property developer, your role is to oversee the project from start through to finish.
Some of the projects a property developer can do:
- Building new properties: as demand for new properties in the UK is high, building properties from scratch and selling them on the open market is popular with many developers
- Renovating existing properties: this can involve refurbishing a kitchen, home or adding a loft extension to increase a properties value.
- Converting properties from one use to another: changing the use of a property can significantly increase its value.
What skills are required to be a property developer?
Property development can be a stressful profession therefore you need to be able to handle pressure and uncertainty as well as:
- Flexibility to work on a range of different projects
- Good team work and management skills
- Solid understanding of numbers and finance – you’ll have to produce projections and update them
- Excellent communication skills and managerial skills
- Ability to evaluate a variety of factors
- Ability to work in high pressure environments
Steps to become a property developer in the UK:
Step 1: Research the market:
Before starting a new property project it is important to do your research to identify opportunities and know the exact situation in your chosen area. You’ll want to know what buyers in the area look for; how much are other properties in the area going for, and who is your target tenant or buyer?. Look for locations on the fringe of popular towns and cities and speak to local estate agents
Step 2: Design a development plan:
Once you have done your research on the market, you’ll want to make a development plan. It should reflect your research into the industry and include basic aims and goals of the project. In the UK it’s often more tax efficient to set up a company for investing in property. There are two ways you can do this; operate as a limited company or create a Special Purpose Vehicle company (SPV). Your plan should address the following:
- Market research
- How you’ll fund the venture
- What your project return will be
- Who is involved in the project
- How you’ll find contactors
- Your exit strategy
Step 3: Sort out your finances:
Starting a new business or project costs money and so it is important to know how you’ll fund the project. There are many ways you can do this. First if you have cash to hand you can use this money to fund, although this is not the most viable option for most. Another option is a buy to let or a buy to sell mortgage- if you want to buy a property and either rent it out or sell it, then a standard mortgage won’t be suitable. Bridging loans are often used to buy a property, renovate it and then sell it paying off both the interest and loan amount in the process. Depending on the size and scale of your development project a personal loan can be used to fund it.
Step 4: Add value
Adding value is key to success when it comes to property development. Look for things like loft space that could be extra bedrooms, large gardens etc so that you can get the most out of your property development project.
How much does a property developer earn in the UK?
Because property development can be undertaken as its own profession or as a side business, the salary for a property developer is very dependent on property investment. If you invest in higher risk it will lead to higher reward type properties and ultimately higher rewards. Property development has the potential to be an extremely lucrative profession.
What are the risks of property development?
One of the most appealing things about property development is that any one can do it. However it is important to make sure that you are financially stable before considering to become a property developer. Taking on property development is a huge commitment and if you don’t have enough funds or research your market carefully, you could end up in debt and a property that has no value.
The property market is unpredictable so it is important that you don’t go by gut instinct when making decisions, instead follow your plan.