It has been estimated that there are over 2.5 million property investors in the United Kingdom alone. It’s easy to understand why when we look at the type of returns we’ve been seeing over the last 20 years.
Some may decide to go for traditional property investing, while the more adventurous may be looking at development. Development does have its share of benefits, like the ability to maximise space by building multi-story units. London is a fiercely competitive market for developers, however, but it isn’t stopping savvy developers from succeeding. Let’s take a look at what it takes to get into the property development business in London.
Have a Solid Plan in Place
Everything starts with a sound business plan. You have to first decide on which business model you’re going to choose. You also have to weigh the pros and cons of each and see which ones would actually be accessible to you depending on your objectives and capital. There are tons of different strategies that you could consider, and you can look for one that fits your investment style the best.
Different Development Models
One option would be to buy units that you’ll be able to renovate. One of the benefits of this approach is how fast you can turn a profit. Just doing something like working on an old building could be enough to allow you to resell it for profit or rent it. However, like anything else, you’ll need to understand real costs, and how they’ll affect your bottom line.
This is why you should start looking up building materials right now. A concrete calculator UK like mixit.co.uk is a great place to start. Whether you need a concrete mix calculator or a screed calculator, simply put your measurements in here and the site will allow you to check prices based on a specific mix. You can also use this concrete calculator to make calculations based on the cubic amount of concrete that you need. They also have a referral service that will connect you with experts that can give you advice on the best mix for you.
Another option that a lot of new developers are considering right now is buying commercial property and transforming it into residential developments. While this approach is much riskier, the rewards can be much bigger as well. You could find ways to turn under-utilised commercial properties and turn them into apartment buildings. However, you have to make sure that you understand planning laws in the area, as developing brownfield sites, for example, can be tricky.
Alternatively, you could decide to add commercial property to a residential unit or vice versa. You could do this on a lot you already own and rent the units as you expand. Or you could buy a residential property, rent it out, then build the addition. The biggest benefit of going that route is that you can start earning revenue while you develop the area.
Building on Empty Land
Building from the ground up is considered the best option by many, and it does have its fair share of benefits. For one, you get to build whatever you want on the land, as long as it respects local planning requirements. It’s also usually much less expensive than taking an old building and tearing it down for something new. The biggest challenge, however, is finding a plot of land in a good enough location to command a premium.
It’s also essential that you do your due diligence and don’t end up with a property you won’t be able to build on. Though some people will buy the rights and hope to get planning permission, and it is a low-cost strategy you could take if you’re not risk-averse. You could also sell the rights for a profit the minute you get planning permission.
Do Your Research
Like anything else, it’s important that you do your research when looking for any property. But it’s especially important if you’re looking for land to build a property on. There are tons of things that you’ll have to consider, like access to water lines, land surveying, orientation, and more. But it all starts with where the land is actually located.
Is it near a major road? Is it an isolated lot, or one that is part of a larger residential or commercial development? How close is it to amenities? What about nearby school districts? You also have to consider demographic movements and how safe the area is. This will give you an idea of what type of property you should and should not be building, and the lot’s value as well.
One of the most important things to consider when buying land is water access. Is the property connected to mains water? Having to build water lines could end up being costly at best to almost impossible at worst. You also have to take things such as rainwater harvesting restrictions into consideration.
One of the things that many developers overlook is orientation. A plot that will allow you to build a north-facing property will allow you to get the benefit of sunlight in the winter without having to deal with overheating in the summer and the greenhouse effect. This is something you’ll be able to highlight to future sellers and will make properties more attractive.
Get Financing
The next step is securing financing. Only a minority of developers start with their own money and have the funds necessary to buy lots, transform property or build from scratch and sell units. So, chances are you’ll have to secure financing to do so.
In this case, a solid business plan and sound budget will make a big difference. But the assets you already own will be your biggest advantage. This is the perfect time to start tapping into your home equity if you have any. Whatever you do, do not start any project until you have secured the funds to complete the entire project.
Get to Work
Now that you have found a potentially profitable piece of property and got the financing, it’s time to go to work. This means assembling a team of contractors to start the work. You should also consider how much you can do on your own if you want to keep costs low.
Call in electricians, plumbers, and other skilled labourers. Make sure you keep a close eye on progress and avoid scope creep at all costs. One example would be deciding to switch to costlier materials because another contractor advised it.
If you don’t like the pace at which things are going or are suspicious about a contractor’s work, make sure that you replace them immediately. If you don’t, you’re the one who’s going to have to deal with debt payments for extra months because they couldn’t follow through. Act and act quickly if you want to reduce costs and get the property on the market as soon as possible.
Conclusion
Property development can be a great and lucrative business model, even in a fiercely competitive market like London. However, it requires that you are on the ball and plan properly if you want it to be a success.