You may have sat watching Homes under the Hammer and thought wistfully about entering the world of property development, but how do you actually go about it? Well, it’s easier than you might think and a lot of normal working people are building property portfolios as a sideline business or even as their pension.
Of course, you need to have a sizeable deposit, especially if you’re looking at buy-to-let, but property development can be a rewarding and exciting career path, if you get it right and make savvy investments.
Here are some of our tips:
- Location, location, location
If you can find a rundown bargain in the best part of town then go for it, but the chances are location doesn’t actually mean what you think it does. Look at the town planning, look for major developments that will change the landscape of the town or city, and look for government investment in a rundown area.
The London Olympics pumped huge money into Stratford’s transport links and property prices jumped as a result. This is the kind of thing you need to look for as a property developer, an area that is on the cusp of becoming more desirable. So don’t go looking in the best part of town if you’re a fledgling developer, think smarter.
- Do not overpay
No matter how much you love a property, do not overpay or you’ll be left with a lot of work and no real profit margin. You make your money when you buy, so buy smart and look for a real bargain as those unexpected bills will soon mount up and you’ll find yourself in a world of trouble before you know it. Too many fledgling developers have written the whole future off as a dream after overpaying on their first property, don’t be one of them.
- Learn the auction
Auctions are great places to pick up a bargain property, but go to several before you even put in a bid – do dry runs. Find the property you want, do your rudimentary maths and then watch the whole thing play out. Do not bid. You’ll learn things that will prove invaluable when you really come to buy. Also, you might spot a property that does not reach the reserve in the meantime; this is a fantastic way to snag a bargain as you can potentially negotiate with the seller behind closed doors and get the right price.
Motivated sellers can be even better than auctions for finding the right property at the right price. If you can offer cash then you could even generate your own leads by advertising locally.
- Do proper research
You have to research your property before you put down the money; find the final fees, do the relevant searches, and find out if the lease on a leasehold property is coming to an end. You have to know these things or your profit and a lot more could be wiped out with the stroke of a pen. If in doubt, get expert advice.
- Always add value
Property prices were on an upward trajectory for so long that many people think you just buy one, sell it on and it’s money in the bank. This just isn’t true. Find a property that you can add value to. That can mean renovating, a simple makeover or even converting them into flats. Make sure you see where you can make a major difference to the property, this is where the money will come from. You don’t have to go all Grand Designs about it, just make sure you can make a tangible difference.