Writing for Business Advice, Yaakov Smith, a founder at property software specialists Logican Solutions, considers the essential starting points for anyone looking to become a property developer.
Speculation that the UK property market might come crashing down after the Brexit vote turned out to be about as accurate as the polls that claimed the Remain camp would win and Britain would stay in the European Union.
Since the referendum, there has been plenty of positive news for property investors, including those from overseas, looking to get a piece of the high-return action (made all the more attractive with a declining pound).
So yes – property and land are just about as safe as houses when it comes to investing your money and looking for sizeable, ongoing returns. It is the old reliable of investment – weathering any economic storm and coming out smiling at the other end.
But how do you get your feet on those first steps of the investment ladder and become a property developer? How do you go about reaping all of those marvellous returns you’re after? Here, we are going to lay bare the essential steps you need to consider before forging ahead.
Doing the investment groundwork
Before you do anything, it is essential to bear in mind that investing in property is like investing in just about anything else. There is always the possibility everything can go sour and you can lose your money.
You may be buying a building, but if nobody lives inside, where is your revenue going to come from? There are plenty of examples of people becoming bankrupt because of the property game, so proceed with caution.
To try and offset the risk, it is crucial to do some investigative footwork from the outset.
Whether you’re eyeing up houses, apartments for buy-to-let, or are considering the returns of commercial properties such as office buildings, among the most important aspects is location.
Snapping up a cheap deal (at an auction, for example) for a seemingly great property in an undesirable area is not likely to do you much good in the long term.
Find out what the employment levels are in the areas you’re interested in. Check ahead and see if there are any major events or big projects (like HS2 and the Heathrow expansion) upcoming or in the works that would have an impact.
You can even just drive around and observe the number of “for sale/let” signs on properties, to give you an idea of supply and demand.
In fact, it’s that meandering around town and its outskirts that provides the starting point for many a successful property developer. See an old, run-down house that you could renovate and make a killing? Be bold and go right up to the door and knock on it. Talk to the owner about buying it there and then (this is also a great way to avoid hefty estate agent fees).
Making your property investments work for you
Locating and purchasing property is one thing, but as with any business, operating each of them is something else. It’s easy to become totally overwhelmed when trying to manage buildings, tenants, rent, taxation and just about everything else involved in the running of a property.
To become a property developer, the best advice here is to make life easy for yourself by using assistance and technology, such as property portfolio software.
Opting for the latest in property portfolio software at the beginning will go a long way towards taking the headache and stress out of building up your investments. It will help you keep on top of payments, communicate with everyone involved, automatically generate notices for arrears and advise on rent increases, so you get maximum revenue.
Many of us have a dream to become a property developer of great success, using a small pot of cash and turning it into a sizeable chunk of money through various property dealings. However, the truth is it’s just not that easy – there are many ups and downs in the property business.
Those who do successfully become a property developer don’t rush in, but do the necessary preparation at the beginning. They get the very best prices possible and view what they’re doing not as getting rich quick, but a long-term investment strategy that will pay off over time.
After all, property is about slowly building up, one brick at a time.
Yaakov Smith is a founder of software provider Logican Solutions.
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