If you’re interested in entering the world of property, then you’re making a shrewd move. The value of the UK’s property sector is high, and it’s estimated that the housing sector alone in Britain is valued at over £7tn. From high-rise developments in urban centres and student cities to out-of-town housing estates and booming commercial lets, there are a whole host of opportunities for a budding real estate developer.
However, it’s not always a smooth road, and simply finding an opportunity isn’t enough. In order to secure a successful real estate deal, it’s important to think about everything from locating a decent funding stream to doing substantial market research in your chosen areas. This article will guide a budding real estate developer through all of these stages, and share some top tips on how to become successful in this field.
Choose a location wisely
When it comes to buying a property for development purposes, it’s worth thinking very carefully about the location. Sometimes, it can seem like a hard balance to strike: you obviously want to choose a site in an area where there’s demand, but these also tend to be the pricey places. Owning land and holding planning permission for a block of flats in London, for example, is smart in the sense that you probably won’t struggle to get tenants once the property is developed as there’s a lot of demand. However, it’s not so smart in that land in London costs a lot of money – and this could mean that it takes even longer for you to make back your initial investment and start profiting.
It’s best, then, to instead attempt to locate somewhere that has both relatively lower prices and higher demand. In Britain, this can often be found in the Northern cities. The dominance of London means that property prices outside of the South East are often in the more affordable category, but the presence of rental demand (often from students attending the many universities, such as Leeds, Manchester and Newcastle) and properties for first-time buyers make these places attractive sweet spots.
Secure your funding streams
Broadly speaking, your next step before finalising your real estate deal is to think carefully about how you plan to fund the development. In some rare cases, you may be able to pay for the development in cash. However, for most upcoming property developers, it’s more common to take out some form of commercial debt in order to pay for the project.
Mortgages are one option: if you’re simply looking to buy a property or two, redevelop them, and then let them out, then a buy-to-let mortgage could work. If you’re looking to build an empire and run a property development company, however, then you may be better off going for a business loan, which allows you to make large land or property purchases at scale. Borrowing cash also makes sense if you plan to employ people, such as builders or other contractors, as you’ll need access to ready money for salaries.
Model yourself on others
The property industry is a relatively public-facing one, given that housing is often all over the news. For a new investor, this is a distinct advantage as it means that there are a lot of experienced property professionals ready to share their advice. Ali Seytanpir is one such developer, and he has shared a range of insights over the years, including everything from how to choose a location to the impact of the economy on a property developer’s fortunes.
Case studies like these can be found all over the internet, but it may in some cases be worth thinking about finding a mentor in your professional network or local area who can help you with some personalised advice. The advantage of doing this is that you can get a bespoke second opinion on everything from finding appropriate funding streams to choosing locations, so it’s worth doing.
Real estate is an attractive investment for many people, given the potential returns that a place can bring either when rented out or sold on. There’s arguably some decent levels of stability in this industry as property prices tend on the whole to rise. However, as with any potentially lucrative business, there’s always more to it than meets the eye – and in property’s case, it’s all about research. You need to make sure that you have the right funding streams in place before becoming a developer, for example, while you also need to ensure that your location has been judiciously selected.