My top tips for developing your very own property business

My top tips for developing your very own property business

We’ve all sat in our pyjamas on a rare day off, cup of tea in hand, watching ‘Homes Under the Hammer’ and thinking “You know what? I could do that…” But how many of us actually do it?

If you’re one of the few motivated enough to give property development a go after listening to Dion Dublin discuss the risks of flying freeholds, this blog post is for you.

In it, I’ve distilled my 5 top tips for developing your very own property business. Ready? Let’s get started.

1. Buy-to-let or buy-to-sell – which is best for you?

Perhaps the most important thing for you to consider before launching your property development business is: Do you want to buy-to-let, or buy-to-sell? That is to say, what’s your strategy? Is it short-term gain, or are you aiming for the long-term, supplementing your current income with a view to replacing it altogether?

This is certainly something to keep in mind before you dive in with both feet. There are plenty of buy-to-let mortgages out there, but you need to consider the tax implications of building a property portfolio. HMRC take the view that any income generated from a rental property should be subject to income tax.

On the other hand, buy-to-sell offers you the opportunity the quickly increase capital. It can be risky (you’re at the mercy of the market), but it can provide an instant ROI. However, where there’s profit, the taxman is never too far; any properties you sell will be subject to capital gains tax, with a tax-free allowance of £11,700.

So, long story short, no matter which option you choose, speak with an accountant to cover your tax bases.

2. Location x 3

A well-worn property development mantra and everyone’s favourite Channel 4 show, Location, Location, Locationstill rings true today. And the ability to understand what it truly means is what separates the successful property developers from the wannabes.

Location x 3 isn’t about buying somewhere that’s already popular. It’s about doing your research and spotting the next popular area. You need to keep your ear to the ground and watch for major business developments and growth and gentrification projects, so that you can swoop in and pick up property at a fair price before the market goes a bit crazy.

3. Adapt your properties for the target market

Another common mistake wet-behind-the-ears property developers make is sticking to one particular style when renovating a property. Without the right amount of research into who’s buying (or renting) in the area, you could have a hard time shifting the property once you’re done.

Instead, build up your network and speak with people in the area who ought to know the trends and expectations (other developers, professionals, tradesmen, estate agents, etc.) That way, you can budget appropriately when creating student digs, a family home, or a high-end bachelor pad.

4. Cash is always king

Property development requires cash. And more often than not, it needs a lot of it. This isn’t a business for people who struggle to keep track of budgets; you must be able to account for every last penny. What’s more, before you sell that first property, you need to remember that all of your cash will be tied up in it, and you won’t be able to grow your business until you’ve sold it.

With all of that in mind, it’s vital that you speak with your bank’s property finance people, and strike up a rapport with an accountant you can trust, and one who has a track record in this industry!

5. Fools rush in – but don’t leave it too late

In my mind, the golden rule of property development is: Take your time!

Don’t get carried away by the possibility of a quick profit when you simply do not know the area, or you haven’t inspected the property. We’ve all heard the horror stories of sinking foundations and rotting beams – don’t let that happen to you!

But, as with every rule, there’s an exception. You need to make sure you don’t leave things too late and miss out on a great opportunity. Don’t over analyse the situation. The ability to spot the winning properties will come with experience, and the sooner you can take possession of it, the sooner you can work your magic and flip it for a profit.

Need some help getting started with your property development business? Let’s talk tax and tactics.