Become 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.
Here’s where I see the main benefits of becoming a property developer.
I had a job for over 12 years. I was working as a Graphic Designer earning less than a plumber. My day included getting up at 6am commuting for 2 hours a day and working for people I didn’t respect or like. Once I had developed enough capital to live somewhere and buy a development I quit my job and became a developer full time. I made plenty of scarifies along the way. I was living off of credit cards, I have now furniture or home comforts of my own – it was tough. But it was worth it. I had my freedom. I wasn’t a slave to a salary that in creased by about 2% every year.
I know have a little boy who goes to school and I am there for him at home time everyday. I sometime have to work weekends but I’m free to spend time doing what I love, dealing in property. I always try to go on holiday on the completion of a project; this is something I could never do when I was an employee.
So, for me, freedom is the most important benefit that being a property developer offers. The flexibility to live my life at a pace I see fit. Of course, I still have deadlines to meet, I still have bills to pay; but I’ve done enough developments now to have financial security and manage my cashflow so that my family isn’t impacted by any new development I take on.
Nobody does this for free! I got into property development because I know I couldn’t earn enough as a graphic designer. So to say I wasn’t financially driven would be a lie. Every property I’ve developed I’ve tried to increase the property value by 20%. In some cases I’ve not sold the property and I’ve netted a yield of between 5% and 7%. These are the sort of number I work with. I know there may be developers who can achieve more but I’m happy with these margins.
So what do these margins mean? Went if firsts started developing I was buying flats at £60k, helped by an increasing market I was making on average between £10k and £15k per development. In the early years I’d try to do 3 a year so that’s a pre tax and fee proft of £45k. Not enough to retire but enough for me to quit my lousy paid job!
As the market started to increase in London so did the buying prices. Whithin 5 years I was buying 2 bed terrace houses for £200k, this attracted a 3% stamp duty on my buying price, so profits in real terms where getting smaller.
But property development is all about percentages. I still managed to make my 20% value on turning over property and whilst my costs increase with the increasing tax that I have to pay the profit rewards are bigger between £30k – £35k before costs. So to undertake just 3 a year could provide you with a £90k a year return.
If you don’t like a life of adventure then don;t even consider property development as a career. I’ve always had an itchy foot, which has ment I’ve never felt tied to a place. I love the idea of moving on, finding the next challenge and seeing new places. That’s the great thing about construction, you work long hours but it’s never dull.
As I mentioned before, I worked for a long time in an office, starring at a computer screen for 8 hours a day. It wasn’t for me. I needed something that would involve me physically. I love this type of work where you can muck in and get a job done. I’ve never been a big fan of lycra and gyms but working on a building site, learning new skills is great fun. And you sleep well at night.
Long term security
I’m not just a developer, I’m also a landlord. I once had a property that I just couldn’t sell for the money I needed, so I found some tenants and they’ve been paying off the mortgage. I know have a number of properties that I rent. This income pays for any finance I have on the properties which is reducing every year. So when I come to retiring I’ll know I have an increasing income that will out perform any investment or pension I’ve taken out over the last 20 years.
Being a property developer not only provide you with capital to enjoy a great lifestyle but it also provides you with capital security. And thats a great place to be.