Category Archives: London Property Development

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.

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Finding Empty Homes to Develop

Empty HomesLet’s be honest, an empty home is simply a waste and I’ve never got my head around why they exist. We live on a tiny island where planning laws ensure that property price remain amoungst the highest in the world. According to Recent council tax statistics there are 710,000 empty homes in the UK. Nearly 70,000 of these are in London. A place where house prices and rental prices make most people winse.

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Raising finance for your Development Project

Property Development FinanceBeing a property developer carries considerable risk that normal employees know nothing about. The greatest of these risks is the need to borrow in order to finance your project. If you are uncomfortable with borrowing large amounts then property development probably isn’t for you.

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Is property development right for me?

Property DevelopmentProperty development for me was never just about making money. In my 20′s I commuted for 2 hours a day, I worked doing something I didn’t belive in, working for someone I hated. I was renting and most of my income went on rent, commuting and post work socialise. I had very little savings and the future worried me a bit.

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A Day in the Life of a Property Developer

Property DeveloperI’m often asked what I do. The easiest way to answer this is to provide you with an insight into my day.

This is a pretty usual day for me I wake up fairly early and get to a site I’ve been working on for the last few weeks. I’m coverting a detached 1960′s house to include a loft space. Under new planning laws it’s easy to convert loft’s under the new ‘permitted development laws’ that allow any devleopment to take place as long as it’s under the maximum of 30% of the overall property foot print but I am not a planning expert so always see your local authority planners to discuss your ideas first. They’ll be able to tell you if you need to nmake a plannign application or not.

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What Qualities are Best to Have as a Developer

Property DeveloperNot everyone is cut out to be a developer. Developing property can at times be duanting and highly pressured when things go wrong ( and they do). You’ll need to be fairly robust and not mind the odd hardship when cash flow is tight. This means being able to focus on the problems that need your attention when a wall is missing or a tradesman hasn’t turned up.

Being organised and posessing the ability to deligate to the right people are the best qualities in any developer.

In fact you’ll need a pretty cool and focused attitude to the whole process. In my experience it’s those that can plan well that avois the stomach ulcers. If you’re a good planner and list writter, chances are you’ll make a great Developer. Being able to consume tasks from early in the morning until late at night can only be done if you’ve got a schedule , plans and you keep to it!

I’ve seen teenagers buy at auction and I’ve seen pensioners get into developing.

The truth is you don’t need to be a construction expert (although a basic knowledge would help), nor do you have to be a financial Whizz. You just need to see beyond the building site and see the vision and have the tenancity to see it through.

 

 

Become a property developer

Property DeveloperI’m often asked why I chose to become a developer. The truth is I did not make a conscious decision to become one it just seemed to happen. I was in my 20′s living and working in London, life was pretty good. I would work hard but I’d also play hard too – it was enjoying myself. I then became 25 and things went a bit serious. I was spending everyting that I was earning and most of it was going on rent. I needed to get on the property ladder.

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