Property development ensures that by making more of a property, that theoretically you'll make money. We've all seen the TV programmes where you can make an extra £20,000 or so by re modelling and adding a room or developing a kitchen.
It sounds easy enough but there are practical issues like, are you going to live in the property whilst it's being done up? Who's going to do the work, have you done this before, do you need planning permission, who's going to do the drawings if needed, will you need a surveyor or an architect, how are you going to finance this and what IS the state of the property market when it comes to the time to sell?
There are two real reasons why people develop a home. First to make more space and second to make some money when it comes time to sell. Here's a great assessment tool
to see if you'll make money BEFORE you start your project.
These are the questions that you will have to ask yourself. It's quite daunting if you don't know what you're doing. However with experience,
you'll find that this gets easier. You'll find that having done one project that you'll then be able to get a better perspective in terms of what is needed for the next project.
For the more adventurous developers, where you're not looking to develop within your own home but where the opportunity is to buy a property, develop it and then sell it, this is the sort of developing that has different tax ramifications and also where the project has to be completed within a definite timeframe as money management is a big part of the intellectual effort behind any development.
So how do you find one of these jewels ripe for development? Well, truthfully, that's something that an
should advise on. But here's something that has been suggested in the past:
1. Go through a local paper and look for property development opportunities. The sort of thing that has been suggested in the past are predictable: building a bedroom over a garage; do a loft development; do a basement, or rebuild internally adding extra rooms / functionality.
2. The idea is to increase the square footage, enhance the design so that you can get more into a smaller space, or to reuse the existing space and remodel so that there is improved function and layout in the property. An aspect that has yet to be developed is through the HIPs packs and measuring energy efficiency - how eco friendly is your property?: modern properties will be expected to use as little energy as possible whilst any planning applications for development will have to include energy efficiency savings.
3. Other concepts are obvious: buying a large property and demolishing it and building new units over it; infill which means building a new property in a large back garden or being able to gain planning permission on land that has yet to have approval. All these will require the services of professionals and will cost beforehand. You'll be getting into the realm of needing
deep pockets for these type of developments and everyone needs to start somewhere!
When managing the money what's needed should include not only the total cost of the project but also the cost of the money. It's best to ask your lender for a moritorium (ie interest only payments, or no payments, on capital used) on any capital payments until the project has completed. Capitalisation of the project is then possible and then the property can be sold.
In combining property development and buying offplan, there are many more opportunities to make profit.
Return from Property Development to Building Wealth