How To Start A Property Development Business

Estimated reading time: 2 mins

The UK’s love of bricks and mortar means buying property has always been desirable to those looking to expand their wealth, or even to make it their primary form of income. Brexit and stringent government regulations have undeniably influenced the UK housing market, rendering property development somewhat less appealing than before, it is still seen as a reliable long-term investment avenue that can provide substantial returns if done correctly.

Wondering how to set up and build a portfolio of properties? Read our guide on how to make sure your property development vision does not turn into a nightmare.

Create a business plan

To a certain degree, all business plans are the same–you need to set out in clear terms precisely what you want to do with your business and how you are going to do it. If you are creating a proposal for personal use, then you won’t have to go into as much detail as if you want to start a property development business and pitch to potential investors, but there are still some crucial elements you need to be clear about before you begin investing. 

Some things to think about include:

  • Who is your target market? 
  • What kind of property is likely to be attractive to your target market? 
  • How are you going to get the funding?
  • Are you buying the properties from property auctions or through an agent?
  • What are your expected timeframes and costs for building or renovation?

Buy to let, or buy to sell?

An important decision you need to make is whether you want to work on a buy to let or a buy to sell basis.

With buy-to-let, you’ll buy a property to rent out, use the rent payments to pay off the mortgage on that house – and make a profit at the same time.

It is a great way to provide a long-term revenue stream, but it’s not an easy way to make money –you’re going to have to commit yourself and always remember that the needs of your tenants are paramount You may also need to prepare for an empty period, as it is possible that the building will sometimes sit empty while you’re in the process of selecting a new tenant.

For buy-to-sell (also known as flipping) you buy a house, keep it for a short time, and then sell it again. For this approach to be successful, you will usually need to buy a property that needs work, whether it’s redesigning the inside or transforming the attic into an extra bedroom. You then make the necessary improvements and sell for profit, making sure you factor in the cost of any work. The more work you need to do, the greater the risk, and the higher the potential profit–but it’s a good idea to start with something small to understand the process.

The main thing to remember about property development is that it’s not a quick way to make money. Although analysts are confidently predicting that the market will rebound over the medium term, it’ll be a long time before it returns to the kind of significant gains we’ve seen in the past. Nonetheless, if approached with the right mind, it can be a good source of long-term investment.

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