We’ve put together a list of common questions we get asked by budding property developers. We hope this might help you decide if property development is the right choice for you.
How much money do I need to get into property development?
It’s easy to think that property development is reserved only for those with bucket loads of cash but this is not strictly true. Our development finance provides loans to cover up to 50-60% of your initial purchase price and 100% of the build cost (up to a max of 60% of the final expected property value).
As an example, for a property costing £200k, you would only need £100k of your own cash as a development loan could cover the rest. Build costs can be completely covered by development finance, providing your total loan is less than 60% of the final expected value of the property (e.g. expected sale for £500k means a max loan of 300k). Learn more about how much we loan >
Most of our property developers have started on small projects with small start-up capital and then progressed onto bigger projects with the profit they have made. Property development may be more accessible than you think!
What is the most common mistake we see with first-time developers?
The most common mistake we see is timings. Lack of experience can make it very difficult to accurately estimate the timings of a project and this often leads to things overrunning or causing clashes mid-build. The selling process is also a lot slower than it used to be and this can land developers with unexpected finance costs at the end of their project. We offer exit finance to help developers refinance projects like this.
What is the most common financial mistake made by first-time developers?
First-time property developers often fail to plan for market changes or pricing fluctuations that can occur at any point throughout their build. The political landscape is always moving and therefore so are property prices. The cost of materials fluctuates a lot and so forecasted budgets will usually need reviewing once the project is actually underway.
How much profit can I make from property development?
How much profit you can make from property development depends how much money you can invest in the first place. The industry norm is to aim for 30% profit, after the purchase price, build costs and cost of finance. Realistically, this might fall somewhere between 20-30% especially for novice developers.
What type of project is best for a first-time developer?
We would recommend keeping it as simple as possible. Even if you have a lot of upfront capital, you would be sensible to opt for a smaller, simpler project for your first as this is the project where you’ll likely make the most mistakes.
Top choices would be properties that sell or rent quickly; small detached houses, semi-detached homes, flats. Know your market before you begin and make sure you are developing a property which is in high demand in the area.
Is it hard to get into property development?
You don’t need a university degree or a heap of cash to become a property developer. There are no huge barriers to entry and we consider all prospective developers providing they are very well organised, know the market well and show business acumen. Ultimately, it all comes down to having a well-researched plan, budget and exit strategy!
For more information, we’ve written a range of helpful guides for property developers.
- How to Become a Property Developer
- 5 Key Considerations When Securing Development Finance in the South East
- 5 Common Mistakes Made by First-Time Property Developers
- First-Time Property Developers in Sussex: A Guide to Funding Your Project
- What are the property development regulations in the South Downs and Sussex Conservation Areas?
- Why Southeast England Should Be Your Next Residential Development Project
- How can incorporating green tech and materials into your property development project increase your profitability?
