4 tips for anyone starting a new property development business

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The British have an ongoing love of property with the phrase ‘an Englishman’s home is his castle’ still resonating.

There is a continuous flow of TV shows too that feed our knowledge and inspiration with ‘Grand Designs’, ‘Selling Houses’, ‘Old House, New Home’, ‘Location, location, location’, and so on.

As well as inspiring the next generation of homeowners to make the most out of their investment, there is also a growing breed of entrepreneurs with a desire to make it their day job.

But is being a property developer that easy?  Like most things in life, if it were easy then everyone would be doing it, and so our top 4 tops for anyone starting a new property development business may help.

Have a Plan

All businesses need a clear strategy that will help focus on the key income generating issues as well as the things that might go wrong.  There are plenty of online resources that will help in creating a business plan, but the key elements will include:

  • Business objectives – where you are going to invest, types of property, size of project, etc
  • Your mission statement and ethos – what is going to make your business stand out?
  • Your team – which professionals do you need to recruit to support your skills?
  • Your methodology – what are your day to day activities to keep the business moving?
  • SWOT analysis – your business Strengths, Weaknesses, Opportunities and Threats
  • Financial projections – plan your long-term financial expectations for up to 24 months

Location, Location, Location

We all know these are the three most important elements of successful property investment.  Naturally, this doesn’t mean that you will only be successful buying in expensive and sought-after areas. However, you need to buy in the best location for your target market.  For example, if you are targeting family homes then your location needs to be close to good schools, close to shops and amenities, perhaps be near a park or leisure centre, and so on.

Do Your Research!

Property investment and property development can be a route to riches, but the risks can be high too!  Consequently, doing your detailed analysis of your potential site is crucial. Go through all the property portal data for where you are going to do your property development project and check what is selling and for how much.

Checking the sale price per square foot is a great general guide but it is not the be-all and end-all. Use it as a guide and check why some achieve better returns. Prices may vary within the same district because of traffic noise, outlook or accessibility.

Check, check and check again. Then set your budgets and do not be tempted to go over them. Remember, don’t let your heart rule your head, this is a business and profit margins can soon disappear. Cost or time overruns can be expensive!

Assess Your Funding Carefully

The lifeblood of any property development business is a strong source of funding.  There are many ways to fund a development company and the jargon may confuse some less experienced developers.  Do you know your senior development loan from your stretch facility or whether you need mezzanine funding or a bridge loan?

For those that understand this business then you can simply compare property development loans online.  If you need some independent guidance on finding the best loans then a property development finance broker will be a great source of the best options.  An independent broker will also be able to help you model the numbers involved and advise you on how potentially profitable the deal is.

Property development and investment can be an exciting and rewarding business, but our key message is that you should plan carefully.  Do your detailed investigations and get a good team and the right professional advice.

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