Money in Property

Take a look at the Times top 100 rich list and you’ll see that the vast majority of millionaires have made their money through property. Even in recent years as the economic environment proves challenging for many businesses, London property developers are still turning a profit from their efforts. If you’re interested in understanding how this can be done this site aims to give you the knowledge you need to start your property developing journey.

Like any business property development carries a certain amount of risk and their are plenty of sacrifices you’ll need to make on order to reap the rewards that a successful developer can enjoy; like financial freedom, a great lifestyle and financial security. I’ve written this site based on my own experiences of developing London property since 1993.

I would describe myself as an expert, I’ve made plenty of mistakes but looking back it’s been an amazing journey that I just couldn’t of planned. These years of effort have now given me financial security and independence from a 9-5 job. It’s great. I’m not a builder, architect or surveyor but I’ve always liked property. Looking back it was this desire and interest that drove me to constantly look out for the few deals that I’ve made that changed my life for the better.

Becoming a Property Developer
Being a property developer is not for everyone. You need drive and commitment that can prove exhausting for many. But if you can become meticulous in your research, tenacious in your buying & planning and focused in your build you’ll see amazing results.

Finding your first project
As a developer you’ll be looking for more than a property that requires modernisation, you’ll be looking for motivated buyers. Finding motivated buyers can be hard through an intermediary like an estate agent as they will always have the best interests of the vendor. Try looking at auction properties you can find a list here. You can also try property finder services but bear in mind there is always a fee associated with these search services that will put pressure on you making a profit. I’ve always found that the best deals have come to me directly, where I’ve seen a property that requires modernisation and I’ve just posted a letter through the letterbox or done some research through the land registry and approached the owners directly. This approach doesn’t always work, but for every 50 letters I send I’ll probably get 1 favourable response.



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Buying at Auction
Buying at auction used to be only for those in the know but with today’s badly performing interest rates there are plenty of people going to auctions to find a “bargain”! Beward. I’ve seen plenty of property going for well over the market price at auction because so many people believe going into an auction room automatically means they are going to get a great deal. You don’t. Do your homework, look at recently sold prices on zoopla to make sure you have enough margin to carry out your development and see a profit for your efforts at the end. Don’t fall in love – every buying decision you make must be based on you ability to turn a property around and see a profit at the end

Finding motivated buyers
If auction rooms are not for you then there is always private treaty (estate agents). Buying through an estate agent can be less risky than an auction as you have time to do your research and you’re not contractually committed once you make an offer. If you’ve identified an area to research get to know the estate agents. Be their friend, you’ll need then on your side. Pretty soon you’ll get all the properties in your price range but it’s important to be diligent and make sure your agents know you understand the market and you’re not in it to pay market rates. If you see something you feel you can add value to make sure you ask the agent the following questions “Why is your client selling?” “How quickly do they need to sell?” “have they found another property they want?” These are key questions in understanding how motivated the seller is. If the response is favourable (i.e. a quick sale is required because of imminent bank repossession, divorce or probate) you know you can make below asking price based on your ability to move fast as you have nothing to sell. I know as I write this it sound mercenary but it is the reality of property development. The only way to success is to buy below market value and you can only do this with a motivated vendor.

Being the deal maker
I used to think that to be a good negotiator you had to be arrogant and a bit of a bully but experience has taught me that these people don’t get that far. The best negotiators and deal makers are the guys who know the market the best. Knowledge really is power. The best investment you can make right now is to understand the marketplace you’re about to buy into better that anyone else. This way when it comes to negotiating the best deal you’ll come out on top. Research pasts sold prices understand the letting market, what are the up and coming roads, where are the skips? Are there any big infrastructure or facilities in planning (e.g. new schools, big employers etc) that could affect the local community? Knowing this will enable you to gain the respect of those you’re buying from and take your offers seriously even if it’s below that of an estate agents original valuation.

Developing for profit
Once you’ve secured your first deal it’s time to get developing. If it’s your first development  you’ll probably want to start small like a 1 or 2 bed flat or house. Do your research well look at the street you’ve brought in, are there any loft conversions? Have you neighbors extended? who lives in the street, families, professional couples? Once you’ve got a clear idea about who you’re developing for and what you can go with your development it’s time to get planning. Your development may require planning so you’ll need the advice of your architect on this.

However planning laws have changed recently and many extensions do not require a planning application under ‘permitted development’, again check with your architect or local planning authority on your plans to confirm. Once your plans are in place it’s time to get building. Finding the right builder is worth researching.

I’ve worked with the same team of builders and tradespeople for the last 10 years but it took me ages to find them. I’ve had the guy’s that don’t turn up and the one’s that couldn’t care less about their work. So spend a bit of time getting to know them, ask for references go and see their last job and they don’t want you to do this they’re probably not right. If it’s your first project you’ll probably need to project manage it yourself. This means getting on site with your builders and subcontractors at 7am and leaving at 7pm. It also means making sure they have all the right tools and plant for each job as well as the right materials. This can be stressful on your first build but it gets easier as the project moves forward.

Sell or let
once your project is completed you’ll need to make a decision – should I rent or sell? This will all depend on your marketplace at the time. If your market has seen significant growth you might be tempted to sell and realise the profit of a growing market and the value you’ve added to the property. However if you’ve not seen a rise but the rental market offers a good return you could be tempted to find a tenant that will start paying off your debts.

Financing your project
I’ve not mentioned financing your project here and this is clearly a major factor in developing property. For those of you who don’t sleep knowing you owe a lot of money then property development is probably not for you. However for those of you that can borrow and are happy to do so the reward can be very great. There are numerous ways to borrow. From traditional mortgages from high street lenders to private investors to private financing from familiy and friends. I think it fair to say that borrowing has become a lot tougher in recent years. Whilst there are still some lenders able to offer 100% mortgages, they tend to come with some serious strings attached. If you’re not in the fortunate position of being able to borrow from friends or family I would also recommend the services of a mortgage broker. You just do not have time to look at lenders products each and every day, so it just makes sense to work with someone who know the lending market well.

Repeat
Once you’ve sold your property on you’ll probably want a rest. The sad part is you need to be looking for your next project well before your current project sells. If you want to be a property developer you need to ensure you have a constant stream of deals on your table no matter how involved your current project. So, whilst it might be tempting to focus on one project at a time you have to keep looking and putting in offers, even if you don’t have a deposit! There is always a way to finance a good deal. Good luck.