How to Get Started as a New Property Developer

The Revolution Brokers team often hears from prospective new property developers - and we've all seen the shows where developers make tremendous profits from fast renovations!

However, like every industry, there are right and wrong ways to get started.

This guide runs through the most important things to know before you invest in your first development property to make sure you get started on the right foot.

There isn't any right or wrong way to undertake your first property development - but there are many pitfalls to look out for. It's therefore highly advisable to seek independent advice from a market-leading professional broker such as Revolution!

If you're looking for competitive development finance lending as a new developer, or need support with understanding which lenders are suitable for you, give us a ring on 0330 304 3040 or drop an email to info@revolutionbrokers.co.uk.

The following topics are covered below:

What Sort of Development Finance for First-Time Developers is Available?

What Sort of Project Should I Start With in Property Developer Finance?

How Can I Find the Right Property to Develop?

How Can I Make Sure I Buy a Development Property at the Right Price?

How Can I Research the Local Property Market as a New Developer to Get Good Development Finance Interest Rates?

How Do I Choose the Right Contractors to Work With?

What Sort of Development Finance for First-Time Developers is Available?

The first thing to understand is what sort of financing is out there and what kind of lending is best suited to the type of property you'd like to develop.

Before you make any applications, you'll need to have an idea about what sort of development you're interested in pursuing and the applicable finance products designed to support that project.

Here are the four primary types of property development, to illustrate the diversity within the sector:

Conversions: this means buying a property and converting it, perhaps from a house into apartments or from commercial office space into residential homes. Conversions can be extremely high profit, and in some cases, you can avoid planning permission if the work falls under the Permitted Development criteria.
Refurbishments: some investors will purchase a run-down property, refurbish it, and sell it at a profit. This option is a faster form of development, less risky, and easier to manage.
Flipping properties: the phrase means buying low-cost property and selling it on very quickly. This type of development can be successful if you can purchase properties at low prices, but it usually means needing extensive experience in the market.
Group up developments: the final type of development means building a brand new property from scratch. The larger development firms with significant construction experience usually carry out this type of work.

Again, there isn't a one-size-fits-all answer here. One client may be better suited to a specific borrowing product because it aligns with their budget and experience as a first-time property developer.

Another might have equity they wish to leverage as a deposit, and therefore have access to a different range of lenders.

Each product in the development finance sector has advantages and disadvantages, so once you're confident in the project you want to work on and which development finance product is best suited, it's then a case of deciding which lender is right for you.

What Sort of Project Should I Start With in Property Developer Finance?

Our advice would always be to start with smaller-scale refurbishments and expand into more complex and challenging projects as your experience grows.

There are often delays and unexpected costs in developing properties, and so you are much better able to deal with them if you have been there before in lower-risk scenarios.

While there isn't always a prerequisite number of years of development experience, many lenders will be reluctant to lend against a substantial development for a first-time applicant.

However, once you have some experience under your belt, you can scale up your projects and demonstrate to lenders that you have completed successful developments in the past - therefore making it more likely that you'll be approved.

How Can I Find the Right Property to Develop?

It is critical to invest in the right property to guarantee that your development will be profitable. There are lots of ways you can research the market, such as consulting:

Property sales websites
Local agents
Visiting auctions
Talking to property sourcing agents

The best way to explore the sort of development opportunities available is to get to know experienced developers or agents in the industry.

When deciding what property to invest in, consider:

What sort of scope there is to build or convert the property
Your budget, and the maximum you can invest
How much the building work is going to cost
What the market is like, and whether similar properties have sold for a reasonable price
Who you would expect to sell the finished development to
The stability and any critical issues with the existing structure
Whether groundworks are required, and therefore if there are drains or cables on the property
If there are any other developments in the area that you'd be competing with

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How Can I Make Sure I Buy a Development Property at the Right Price?

Bidding wars are common - agents might have a property that they know is prime for development, and send the details to all local developers to start a bidding war.

It is never wise to enter such a bidding contest, as you can quickly pay far more than your budget, and reduce the potential profit.

You must be sure that you can sell the finished property for more than it cost to buy, develop and finance.

Work through detailed budgets, build in a contingency, and spend time researching the local market to make sure your figures stack up.

How Can I Research the Local Property Market as a New Developer to Get Good Development Finance Interest Rates?

To get a good idea of what you could sell your property for, it's essential to know how the local property market is performing.

You can look at what properties have recently sold for a similar size and quality and whether other developments are underway - or have submitted planning applications - that might impact the sale value of demand for your development.

Consider high-demand areas, such as prestigious postcodes, regions with outstanding schools, and how quickly a specific property stays on the market before selling.

How Do I Choose the Right Contractors to Work With?

Your team is vital, and as a new developer, it is critical to use professionals who have the right experience, credentials, and reputation for ensuring your development goes smoothly.

Ensure that all quotes are in writing and you've gone through the plans in great detail before agreeing to any work beginning.

Check the accreditations of your team members, and seek out reviews of their previous work to ensure they have the right experience and have produced positive results for other developers.

As the developer, the responsibility is yours, so keeping a diligent oversight of every aspect of the project is vital.

Having details of qualified professionals is vital for a first-time development finance application!

Lenders will see this as an assurance that you will have competent contractors working with you, increasing the likelihood of a development that finishes on time, to budget, and with the proper standards.

If you need any support with compiling your development finance application and showcasing the professional guidance you have on your team, please give the Revolution Brokers office a call on 0330 304 3040, or email our friendly consultants at info@revolutionbrokers.co.uk to arrange a good time to talk.