Category Archives: 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 Development Insurance

BuildersIf you’re a regular visitor to this blog you would know by now that Property development is not a quick way to make guaranteed profits from your time and investment. The property developers path is full of risks. It’s why so many developers get insurance cover for any construction work they undertake. Now there’s a few specific Insurance areas of cover I’d like to outline below:

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Property Development Finance

cashI’ve heard a lot of complaining from my close Property Developer friends about a lack of mortgage products in the market for developers. Borrowing money on assets that are worth less than the market rate isn’t something banks like to do, so there’s nothing new here. However if you are struggling to get the finance you need and you’ve tried independent advice to no avail then you could try these sources. Just keep in mind I’m not offering financial advise here, just some good sources of info for your own due diligence.

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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.
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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?
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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.
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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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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.
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How to make money from property

Property DevelopmentSo here is the big question, “how to make money from property”!

I’m not going to gloss over this or give you some easy to follow formula that will guarantee unbelievable wealth. Every Property developer I’ve ever met has had more than their share of stress. But, making money from property is possible if you know what to look for and how to manage a project. I’ve been developing for over 20 years now and I’ve made more than my fair share of mistakes. I’ve brought too high and I’ve sold too low. I’ve spent too much and I’ve also not spent enough! Over those 20 years I’ve always learn from my mistakes. So whilst this formular might not work for everyone, if I was to go back to 1993 and give myself some advice, this would be it.

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