Category Archives: How to be a property developer

Introduction to Property Developing

Property developing

Property developing can provide you financial freedom – but be prepared to bolster your knowledge.

Like most things in life, you only get out of property developing what you’re able to put in. To this end, you’re only ever going to be able to succeed in property if you have a natural love of all things property.

Now I’m not suggesting you need to be a builder or surveyor or have a trade but a basic knowledge of how things are put together can really help you to make better buying decisions. One of the best ways to gain this knowledge is to ‘ jump in’ and try and develop a property yourself. This is what I did (I had no building expereince at all , just a collins DIY manual!). There’s pro’s and cons to this. The pro’s being you get to learn quickly and the cons being ‘if you make a mistake, you have to do it again and this cost money’.

If you’re serious about property developing you should consider taking a basis course in construction. This will give you a clear understanding of how a property is constructed.

Secondly, I would recommend reading a few books on freehold/ leasehold law and conveyancing. A bit of background knowledge can help you identify a bargain and a red herring.

Property developing requires some key skills that you can learn or acquire through experience.

Basic knowledge of construction – You need to know how things are put together. Tell the difference between a stud partition and a load bearing wall. When plaster is ‘Live’, Basic plumbing and electrics. Signs of subsidence. A basic knowledge will protect you and enable you to cost modernisation costs.

An idea of tradesmen rates - You need to know what things cost and how long they take. I’ve seen plenty of bored housewives get ripped off by tradesmen charging £300 per day. For great people I always pay more but basic labour in London it’s around £80 – £120 per day. Know your costs.

Do your maths - I am no Mathematician, but I know what things cost. And here’s the key word “Everything”. Any property developer needs to take into account all their coasts including professional fees, Stamp duty on completion and sale, agent fee’s, Personal tax as well as any development costs and finance cost over the period of the development. I also add in my own time as a cost ( I hate working for free in the hope I’ll get some reward at the end). Do your maths accurately before you even consider making an offer.

Find motivated sellers - Property developing is all about profit. That means buying at below the market rate and selling above. You do this by finding tired property and developing it to a standard that will get people spending more. Just because a property requires work doesn’t mean you can buy it cheap. Find motivated sellers, always ask the question ” what is the vendors position”, “why are they selling”,”do they want a quick sell”????. Only take the motivated sellers seriously.

Sort your finance out – I know this sounds obvious but property developing doesn’t happen without finance. At any time there are 1000′s of finance products on the market, so before you go shopping it’s important to know how you are going to finance your deal and whether you can get the financing in place. I alway use the internet sites to get a general idea of what rates and fess are on offer. But I always buy through a broker, they are able to calculate the overall cost and compare wholesale product not available via retails services like moneysupermarket. Most lenders will want to see your income as a way of guarenteeing any finance. If your self employed then this may make finanicing a little more difficult but not impossible. Talk to your broker after understanding what rates and fee’s would be competitive. I wrote more on this subject a while ago.

Understand the law - Over the course of my 25 years in property development I’ve read a number of books on conveyancing and I’ve read even more deed titles and leaseholds. But I am not an expert. My basic knowledge gives me enough power to ask my conveyancer questions that any normal buyer would not identify with. There are so many potential restrictions in the deeds of a freehold and potentially even more in a leasehold so I would always recommend using the services of an expereinced conveyancer, especially if you intend to make a purchase at auction, where many lots carry some potentially difficult leaseholds such as short lease, new lease, restrictions on lease (e.g. no sub letting restricting letting potential).

Never take your legal representatives word for it, always read any legal documentation associated with your purchase. Title deeds are available at the land registry and can be downloaded for £4. Read them before handing over to your conveyancer with any questions you have. This will demostrate you are focused on the details and they need to be too and it should reduce your fee.

Act Quick - Property developing is not about taking your time. If you want to see a profit you need to act with speed and accurate judgement. This means doing your research early and planning ahead so your development can be done to plan.

For further reading check out these other posts

 

Property developer Style Negotiation

Property DeveloperI’m often writing about how being a property developer is not a “Get rich quick” route, but in this post I’d like to point out how some good negociation techniques can help deliver you a life changing porperty deal that could set you up for life.

Let me explain. 5 years ago I was developing flats in South West London. I was given the opportunity to by a detached 3 bed house. It was a munter. It had been on the market for over 12 months and every agent in the area couldn’t shift it. I had just sold a flat and was looking for another to develop. The house had caught my eye in the local paper some 10 months ago so I was surprised to see it again online. I called the agent to understand what was going on. They told me that there had been a number of buyer fall through and the seller was now desperate to move on. The asking price was well in excess of what I could afford, but the economic climate was against everyone in 2008, so I thought I’d put in a really low offer to see what reaction I got.

I thought the agent would call me back with an out right “No” but to my surprise he tried to negotiate with me. Now here’s my first tip in the art of negotiation. When you have nothing to loose (i.e. nothing to sell) you are in the winning position and you have to use it. Stand your ground whenever an agent tries to necotiate the price up. Remember there is always more development opportunities around the corner, don’t get blinded by this one opportunity, their will be others.

Back to my story. When I refused to move from my original offer price (30% below the asking) I was expecting things to go silent. 2 days later I got a call…

“Are you sitting down” said the agent. “my client would like to accept your offer”.

I had managed to buy a 3 bed detached house for the price of the 2 bed flat. This was a life changing deal and it was all because I knew the vendors position and how long the property had been on the market. Proof that sometimes you need to stand your ground when you know you are in a winning position. Proof that you should always make a note of propoerty that struggle to sell and deliver highly motivated sellers. Proof that you can make life changing deals even when the property market is in the toilet.

Most of the time being a property developer is pretty hard work. Finding development, raising finance, construction, and then the same again but every now and again you get given (by chance mostly) a life changing opportunity that can truely change things around.

London Property Developers

London Property DeveloperLondon stands alone as a property market in the UK. A transient Place where people from all over the world come to work, study and live. This gives the London Property Market a unique status as one of the world most expensive places to live. An average house prices is nearly £500k and a 1 bed flat is close to £200k, compare that to the national average house price of £240k and you can see why London can be an expensive place to live.

Continue reading

Find Property for Development

Find Property DevelopmentLooking for property for development? Dont know where to start? New to property development? You’ve probably been tempted by a few companies promissing to offer a list of reprossession and pre auction properties for a ‘small fee’ from a Google search. I know, I was in the same boat. Some years ago I didn’t know where to start. The estate agents all seemed to want so much and I understood it was their job to get the best price they possibly could for the properties they wanted to sell.

I needed a way of buying property cheap.
Continue reading

Top Property Development Lessons

Property DevelopmentI was never much of a reader when I started to develop property back in my 20′s but I did read a couple of books to help me figure things out. If I was to take a walk back in time, to say 1993 there’s probably a few thing’s I’d like to say to my younger self.
Continue reading

What to look for in a Development Property

Property DevelopmentMost people looking to buy a property will want to visit it first. Many will have done some research before their initial viewing – typically, resent sold prices, google street view etc. But what should you look for when you’re at your first viewing?
Continue reading

Four Reasons why you should become a Property Developer

Property DeveloperBecome a property developer and your life instantly fills up with stress and strain. So why do so many people take the plunge and become a property developer? Here I try to list the four main reasons why developing property can be the best move you can make. But be warned property development isn’t for the fait hearted. Borrowing large sums of capital can be risky and in some cases people can become bankrupt owing money back for the rest of their life. But if you understand the risks and you’re prepared to see hardship and the stresses and strains that being a property developer can bring you  an amazing lifestyle, if you’re prepared to knuckle down and deliver.
Continue reading

Avoid Property Developer Mistakes

Property DeveloperMaking mistakes as a property developer can be devastating and can leave you bankrupt and broke for life. We all think we can make money from property when our houses have risen in value but wait. If you are serious about making profit from property there are some important lessons to learn.
Continue reading