How to start a property development business
A step-by-step small business guide to becoming a successful property developer
Few industries have seen as much uncertainty during the recession as property development. After years of heady growth, house prices have finally begun to fall; a report issued by the Halifax building society in September 2011 found that house prices fell by 2.6% over the previous year, and 1.2% during the preceding month.
However, there is plenty of good news for people wanting to set up a property development company. It seems young professionals are finally getting their feet on the housing ladder; according to figures from unbiased.co.uk, first-time buyer enquiries now constitute the single biggest source of activity in the housing market. International investors continue to invest in UK property, particularly in London, mortgage approvals hit a 15-month high in August 2011, and new planning rules will make it easier for developers to build houses and estates across the country.
So there’s still plenty of encouragement for anyone thinking of starting a property development business, and there are still countless reasons for doing so.
For those who are keen on DIY, or want to escape their day job, renovating a house can help provide an outlet for creative urges, pent up after sitting in an office all day. And it is not as if the sector requires any particular training or qualifications and neither is there a strict template for success.
Rather than having to struggle through any bureaucracy to obtain licences, or cram hard to try and pass an exam, you are officially a property developer from the day you sell your first house for profit.
Another factor it has in its favour is the lack of any necessary overheads. Birmingham resident Mark Smith set up a property company, Always Home Ltd, at the tender age of 29. He told us that, “initially, overheads were very low and therefore running costs were easily covered by the capital injected by the directors,” he says. “As most of the work is ‘on site’ at different projects, and not customer facing, we didn’t need an office either.”
Although Smith gave up his job for his new business, it is possible to become a property developer while still working. Rather than having to jump in feet first, you can support your fledgling business with your existing job, thereby minimising the risk.
By working evenings and weekends it is perfectly possible to find a house, renovate it, and then sell it on within a six-month time frame. However, the quicker you want to turn a profit, the more time you will need to dedicate to it.
Neil Lewis, co-author of ebook Property Development Secrets, told us: “You can become a successful property developer alongside your existing job. However being flexible about when you’re able to view a property is crucial to getting the best deals. That’s why City bankers tend to stick to Buy to Let investments because it’s more hands off.”