How to Get Started as a New Property Developer
The mortgage advisors team often hears from prospective new property developers - and we've all seen the shows where developers make tremendous profits from fast renovations!
However, like every industry, there are right and wrong ways to get started.
This guide runs through the most important things to know before you invest in your first development property to make sure you get started on the right foot.
There isn't any right or wrong way to undertake your first property development - but there are many pitfalls to look out for. It's therefore highly advisable to seek independent advice from a market-leading professional broker such as Revolution!
If you're looking for competitive development finance lending as a new developer, or need support with understanding which lenders are suitable for you, give us a ring on 0330 304 3040 or drop an email to [email protected].
What Sort of Development Finance for First-Time Developers is Available?
The first thing to understand is what sort of financing is out there and what kind of lending is best suited to the type of property you'd like to develop.
Before you make any applications, you'll need to have an idea about what sort of development you're interested in pursuing and the applicable finance products designed to support that project.
Here are the four primary types of property development, to illustrate the diversity within the sector:
- Conversions: this means buying a property and converting it, perhaps from a house into apartments or from commercial office space into residential homes. Conversions can be extremely high profit, and in some cases, you can avoid planning permission if the work falls under the Permitted Development criteria.
- Refurbishments: some investors will purchase a run-down property, refurbish it, and sell it at a profit. This option is a faster form of development, less risky, and easier to manage.
- Flipping properties: the phrase means buying low-cost property and selling it on very quickly. This type of development can be successful if you can purchase properties at low prices, but it usually means needing extensive experience in the market.
- Group up developments: the final type of development means building a brand new property from scratch. The larger development firms with significant construction experience usually carry out this type of work.
Again, there isn't a one-size-fits-all answer here. One client may be better suited to a specific borrowing product because it aligns with their budget and experience as a first-time property developer.
Another might have equity they wish to leverage as a deposit, and therefore have access to a different range of lenders.
Each product in the development finance sector has advantages and disadvantages, so once you're confident in the project you want to work on and which development finance product is best suited, it's then a case of deciding which lender is right for you.
