Tips For Becoming A Property Developer

property developer

Thanks to the TV shows we see, it can seem like becoming a property developer is a quick and easy way to make money. However, there is more to buying a property, renovating it and selling it at a higher price.

There are several factors that good property developers will take into consideration in order to build their portfolio and maximise their profits.

Buy-to-Let Vs Buy-to-Sell

You have two main options when operating as a property developer. The buy-to-let refers to owning a property and then generating income by renting it out to tenants, allowing you to earn residual income. Buy-to-let mortgages are quite accessible providing that you have a 25% deposit to put down.

The buy-to-sell option relates to the quick in-and-out approach of purchasing a property, fixing it up and selling it once complete for a higher amount. This can provide you with some large returns in the short-term but your profits can be easily wiped out due to unexpected problems along the way or a fall in the housing market. So understanding the property demands and trends of the area will be key here.

Understanding Your Profit Margins

Property developers should aim to work around the 30% profit margin and also have around 30% in terms of a contingency plan if things go wrong. It is important to have good control over your finances because there are several additional costs involved with property development.

Not only do you have to account for things like stamp duty, buildings insurance, contractors, materials, solicitor fees and management fees. You are required to pay tax on buy-to-let properties and if this falls into the higher tax bracket, it will be as high as 40%. For a buy-to-sold property, you will incur capital gains tax of 18% to 28% to understanding your margins and what you can afford is essential.

Selecting The Right Property

Something a lot of beginners do not know is that the true value of a good property is actually when you buy it, not when you sell it. Provided that you can start off with purchasing a property that is considered very good value, you will be on track to earn your estimated 30% profit.

Finding a property or building with good value is down to researching the area and the best time to buy. There are other options like purchasing at an auction or probate which can sometimes allow you to grab a discount of up to 20%, but the condition of the property may be compromised.

Finding The Best Location

Following on from the point above, it may be more profitable to select a property in an area that is unknown or up and coming. You hope to take advantage of the area being regenerated in the future and the chance of big businesses, stadiums or landmarks being constructed. Examples of areas like this include Wembley, Highbury, Tottenham and Shoreditch. (Source: Long and Waterson)

The Fittings

Part of maintaining your costs is spending the right amount on your fittings. Appliances like fridges and other white goods are essential but you need to tailor the fittings to the asking price and the audience. For example, there is no point spending on a luxury kitchen and en-suite bathrooms if it is student accommodation, but then you would expect these features in a high-end property development.

Bright colours may be more attractive to student markets, but something with a more sophisticated form of architecture will be more appealing to high-end buyers. Making sure you have kerb appeal is essential and this means making sure the property looks good from the outside such as good lighting on arrival, flower beds and even good signage. (Source: KSR Architects)

You Might Like

  • Buy A House At Auction

    Considered whether to buy at house auction as a way to get a bargain property? Increasingly popular, what are the pitfalls - read our simple consumer guides
  • Buying A Commercial Property

    Looking to buy commercial property? Commercial property can be a great investment; either for your business or to rent out. Check our guide.
  • Buying Property In Scotland

    Want to check our quick and simple guide to buying in scotland? It is different from England, so what do you need to know and when do you need to completing and following up?
  • Buying Property at Auction

    Looking to buy a new house? Why not consider buying a property at an auction house ?
  • Considerations When BuyingA Property

    If you're ready to take the plunge, check these considerations for buying a property to ensure you've covered everything.

Useful Websites

Add Your Site Here
  • Stride Commercial Insurance
    Property owners insurance and business insurance from Stride Limited. From online quotes for let property, to flats insurance, landlord insurance and more.
  • Move To
    MoveTo provides details of properties to rent or buy across central and south England, and overseas. Keep up-to-date with all the latest housing news.Find properties for sale and rent in the UK and ov
  • Polaris World
    Polaris World resorts in Spain. Own your own luxury home in Spain from £60,000. Enjoy a luxury fully paid visit to the Polaris World resorts and decide if this is the lifestyle for you.
  • Simple Landlord Insurance
    Simple Landlord Insurance is one of the first complete online services for landlords insurance. Buy-to-let property insurance cover is available for all sorts of tenants.
  • Marbella Property Agents
    Real Estate Agents Marbella Cost del sol Spain, Propery for sale & rent in and around Marbella
  • Bridging Finance from Wellesley
    Specialist property finance solutions from the experts at Wellesley.
  • Add Your Website Here