If you are looking for a profitable new venture, developing property in the UK may be the way to go.
The UK has faced a persistent housing shortage, which in turn has created a high demand for housing, particularly in big cities but also in surrounding towns and what were once quieter places. As a result, it can be highly profitable project.
Not sure where to begin? In this article, discover the essential first steps for aspiring developers in the UK.
Understand the basics of property development
Before making an offer on any single development property, you must first understand the ins and outs of property development. The basics should come first.
This includes understanding the difference between refurbishment, conversion, and new builds: Refurbishment involves improving a property, conversions refer to changing the use of a building (for example, a single property to several flats/apartments), and new builds are brand-new properties.
Anyone going into property development should also have plenty of knowledge about budgeting, planning, and building regulations.
That being said, here are the steps to getting into developing property in the UK.
Research the market
Right now, you have a world (or at least a country) of opportunity before you. Where should you buy development properties?
Location is everything. You need a development strategy that involves a specific target market, which will differ depending on whether you’re getting into residential new builds, affordable housing, student accommodation, or luxury apartments.
Looking into current trends is essential. Performing thorough market research involves getting up to speed with market trends, and it could help you find lesser-known areas that are about to become popular (and in demand).
It helps to look at local planning applications and council development plans, as this will show you upcoming and potentially profitable opportunities.
Secure the right finance
Most individuals getting into UK property development need some kind of finance. There are several options here, such as:
Bridging loans: If you are not building from the ground-up, and are instead buying a run down property to do up and sell for a profit (often called “flipping property) a bridging loan is the right finance option. Bridging loans are for short term borrowing, secured on the property and can be secured against uninhabitable property. You pay back the loan with the proceeds of the sale (for those looking to keep property to let it out, you can also pay off a bridging loan with a mortgage). Flipping property can be provide a softer entry into property development, allowing you to gain experience via renovations rather than a full ground-up build.
Development finance: This solution is specifically for building a brand new property from the foundations to the roof. Lenders will want to see that you have experience in doing this work, or that the contractors you are working with have. Funds are released in stages as the project progresses. The finance is repaid from the proceeds of the sale (or again, if your straetgy is to retain the property and let it out, you can pay it back with a mortgage).
Navigating the world of financing can be hard, which is why expert mortgage advisors UK can be helpful.
Not only will a specialist broker help you secure tailored funding solutions, but it also means you make better finance-seeking decisions. They will understand the interest rates, loan-to-value ratios, and exit strategies.
Build a reliable team
You cannot develop property on your own. You’ll need the help of a team, each member holding their own set of skills. Your team should include:
- Architect
- Builders
- Project manager
- Solicitor
It is important to perform due diligence when hiring, as you want to be certain each member of the team is capable of their job.
You should also build strong communication lines as this will ensure smoother collaboration. For example, use appropriate communication tools and schedule regular meetings.
Plan for risks and regulations
Developing property is complex, things can go wrong and often do. However, you can minimise risk by always seeking planning permission, looking into the building regulations, and contingency planning (preparing for unforeseen events) including having a buffer of money to pay for unexpected costs.
Delays are quite common, but you can deal with them with a few methods, such as injecting more resources into the project (such as increased labour), exploring alternative suppliers for material shortages, and re-negotiating terms with contractors/suppliers to control the higher costs associated with the delays.
Developing property in the UK: final thoughts
You need a strong understanding of property development and a good team behind you before you can start earning a profit. Be sure to do proper research before getting into property development in the UK. It is always best to seek professional advice before starting, so you start with a leg-up.
