First Steps to Becoming a Property Developer

Becoming a property developer

If this is your first visit to Property Like a Pro… welcome!

You’ve come to the right place:

Property Like a Pro is the essential resource and online community for all things related to property development in the UK and will provide you with an incredible amount of value and inspiration…

So…

Who is this site for..?

1)  Anyone with aspirations of becoming a property developer

2)  Part time property developers wanting to go to the next level

3)  Full time developers with years of experience

It doesn’t matter what level you are at or how much experience you have with property developments, this site will give you value.

I have setup Property Like a Pro with the main aims of sharing my experience which I have gained throughout the years and to create a community where us developers can learn and better ourselves together.

Property development is such a special industry to be in. I have a firm belief that, although all of us are competitors, we are stronger together.

Sounds strange..?

Ok… let me explain…

We might be competing against each other occasionally on buying sites, and at the end of the process when selling our completed projects, but the beauty of the development game is that there is so much opportunity, there are so many sites needing development and each and every one of our completed projects are different.

Every property is different…

We will all have our sweet spots (both geographically and financially) where we want to operate, but we can all learn from each other whether we are building skyscrapers in cities of smaller refurbishment projects in the countryside (believe me, I’ve done both).

We all have common goals…

So… yes we are competitors… but a different kind of competitor… more in-direct competition…

Make sense..?

With that in mind, what will Property Like a Pro do for you..?

1) Detailed step by step guides

2) Regular blog articles providing ideas, tips and inspiration

3) Exclusive newsletter content

4) Growing a developer-led community

 

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I will talk about value a lot on this site… value can come in many different forms, value add through your development, value through the sale of your project, value through your network of contacts or value through great advice and guidance on your path to becoming a property developer…

and that value starts right now… within this article…

This ‘start here’ article is aimed at the person with the aspirations of becoming a property developer, however, even you with years of experience will gain some insight in this article, even if it is just a reminder of the basics and fundamentals of our industry.

And as a starting here article for Property Like a Pro, I wanted to provide a meaty article providing tons of value to you and real actionable content…

Therefore, I will provide the following in the article:

1) What is Property Development?

2) Dispelling common myths about becoming a property developer

3) The 3 Pillars of Property Development (ESSENTIAL READING)

4) 3 Actions you can do NOW to start becoming a property developer

So lets get started and give you some great value from the outset:

What is Property Development..?

The dictionary defines property development as:

“The process of buying, improving and selling land or buildings.”

Quite a decent definition, but we can do better…

It’s missed the most important element… for profit.

I see property development as the process of adding value to a piece of land or building with the intention to make a profit.

Additionally, property development, as talked about on this site will generally be buy, developer and sell. Property Like a Pro is more focused towards a pure sale as an exit strategy rather than holding and taking an income.

Property traders, rather than property investors.

Pretty straight forward…

Common myths about becoming a property developer

I’m sure you’ve talked to people before about becoming a property developer and i’m sure there have been plenty of people out there who have thrown up barriers. Barriers which are simply not true and ill informed.

I’ve picked 5 of these common myths and given some insight to go with them…

"You need to know how to build a house to be any good at development"

I’ve heard this so many times ‘but I know nothing about how to build a house… how can I therefore be a developer?’.

Simple…

You don’t need to know. Guess who does need to know..? Your builder..!

Your role as a property developer is not to build a house. It’s to organise, manage, fund and lead a team to build a house.

Do not let your inexperience of the building trade put you off starting. I guarantee that once you have a few projects completed, your knowledge about building a house will have increased significantly.

You will be amazed how much you can learn.

I’m still learning and will carry on learning until I stop developing.

If you are thinking about becoming a property developer and you are worried about the lack of knowledge about building houses, then don’t worry at all. You will learn through experience and you will have a good team around you to deal with the complex issues of putting a building together.

Your skill is the manage the project team.

"You need to be rich"

Property development involves a lot of money, especially in the UK.

You will be spending hundreds of thousands or millions on each of your development projects, but do not believe the myth that you need to be rich to do this..!

There are many strategies available to developers where little to no money of your own is used in a project.

It is important to understand how to finance your projects, but do not let money put you off starting.

You do not need to be wealthy to start becoming a property developer.

"You need years of experience"

Experience is important and I cannot lie and say that experience will not help you becoming a property developer…

However…

It is not a barrier to development…

Becoming a property developer is all about learning the correct strategies and gaining knowledge about the industry. Resources like this site will help.

Ensuring you have a solid business plan, researched your market and understand your project end goals will create a great platform to becoming a property developer.

I’m also a firm believer that you gain experience by DOING… You will gain experience from every project you complete.

Don’t let lack of experience stop you… see it as an opportunity to gain experience by doing.

"It’s a full time commitment"

Simply not true..!

I ran my development company part-time for a year on the side of my 9-5 (well more like 8-8) day job.

But I was sensible about it.

I only ran 1 project at a time on the side and ensured I wasn’t overstretched where either the day job or side developments were negatively affected. I appointed a project manager who was on site 2 or 3 times a week and made sure everything was running smoothly.

As long as you are sensible about the scale of development you want to do… you can become a part time or full time developer.

"Anyone can make money by becoming a property developer"

I don’t know why, maybe it’s the UK’s love affair with property, maybe it’s the TV shows running during the day, or maybe the house price growth over the last 20-30 years… but for some reason, there is a misconception that making money in property is easy.

It is not..!!

Let’s get this straight now…

And let’s take this further…

It doesn’t matter if you are a lawyer, banker or a postal worker… making money (and lots of it) is not easy.

It takes patience… hard work… dedication… and talent. It takes commitment and self-awareness.

A good property developer will make money in a downturn as well as a boom market. A good developer will not rely on market growth for their profits. A good developer is dedicated to the industry and knows that property development is not a get rich quick scheme…

If you cut corners, expect property development to be easy and don’t want to put in some hard work… then you will fail…

Sorry to be blunt… but it needs to be said…

If this has put you off becoming a property developer… then I suggest you go elsewhere and try to win the lottery (or something similar)…

If this section has inspired you to learn about development… given you the patience to perfect your craft… given you reason to put in some hard work and ultimately take a long term view… then you are taking the best steps towards becoming a property developer… and I welcome and respect you…

Read on my friend…

The 3 Pillars of Profitable Property Development:

The route to becoming a successful property developer is one which will involve interaction with a number of different people and involve a varied range of skills being tested.

Being a property developer is not being pigeon holed or being labelled as a one trick pony.

One day you will be dealing with complex legal agreements and the next day you will be selecting bathroom tiles and paint finishes..!

Becoming a property developer is incredibly varied which is why it’s such a rewarding, fulfilling and awesome industry to be in.

However, there are 3 essential parts which are needed for property development to happen and which I consider are the foundations of good property development.

These are a constant and without these 3 areas in place you will not get far.

They will sound very obvious when you read them, however, to master them may take years of experience and as a property developer, you will constantly need to monitor these.

Study them, learn them… and implement them..!

I like to call these the Property Like a Pro’s 3 pillars of property development.

Lets get stuck in…

Money:

Without money, nothing can happen. Simple…

Becoming a property developer involves a lot of money.

Property is expensive, construction is expensive and often there are a number of potentially expensive consultants involved with any given project.

Additional to this, property development is all money up-front. The majority of your financing will have been allocated before you are even close to bringing in any revenue.

It’s risky..!

But let’s be clear here. I’m not talking about only your money or equity, this is about putting together a finance package for your entire development project.

How will you fund the purchase? Fund the construction? How much equity? How much debt? Mezzanine finance? Etc etc etc…

To be a good developer and something which is fundamental to learn on the route of becoming a property developer is how to finance your project.

You must have a clear strategy on how you will be structuring each project, what budget you have to play with and what returns you are targeting for each project.

This can be taken further…

Money and finance is such a broad topic, but a profitable developer will have control of the financial aspect of the project from the very outset, even before a property or piece of land has been purchased… right through to completion and the final contracts being finished.

Learn finance… learn money and learn how property developments can be financed.

This is the starting point for any project and I cannot stress how important this aspect of becoming a property developer is.

Got it..?

Up next…

Land and/or Property:

Sounds extremely obvious, but without land or property to develop, nothing can happen.

Buying land or property for development is not easy and requires patience. It is a process which anyone thinking of becoming a property developer must master.

When you read other articles about becoming a property developer, you will often hear people saying that you make your profit when you buy, not sell. Anything you can save on your purchase cost will go directly onto the bottom line of your appraisal.

Anyone can go out and buy a house to develop, or buy a piece of land to build on, but the skill for anyone becoming a property developer to learn are the strategies to buy property well, and not to overpay.

Buying well is a core skill of a property developer and is a fundamental part of the industry.

Research your market, understand the channels in which property or land can be purchased and execute your learnings by buying well.

Take your time and make sure you are in control of the buying process.

Planning Permission:

So I’m jumping ahead here slightly and making the assumption that your development project needs planning permission.

If it doesn’t because you have a refurbishment project, the site already has planning permission or you can develop the property through permitted development, then fantastic… but still read this section carefully, as you will undoubtedly need planning permission at some point on one of your projects in the future.

Securing planning permission is a key milestone in any project.

It’s the point where a project is significantly de-risked and a point where you have a few different paths you can go down and explore.

Value is generated through the securing of planning permissions and there are a lot of companies out there who specialise is securing planning permissions and flipping the site as ‘oven ready’. However, we are developers and our main game is to build out our projects.

Without planning permission, you do not have a development project.

Becoming a property developer will involve you learning and understanding the UK planning system. It’s a system which is continually evolving and can provide immense frustration at times.

It goes without saying that the profit of a project can be severely damaged during the planning stage. It’s important to understand that this damage can be caused in two ways:

1. Not securing planning for the scheme you originally assumed. I.e. the quantum of develop you have secured is reduced from your initial assumptions.

2. Time delays..! Schemes can be stuck in planning for a long time. I know this from bitter personal experience and I look back at a scheme I worked which took 8 years to get planning permission..!! That’s a whole different story though…

Learn the planning system…

A successful property developer will know or be able to make assumptions based on experience of the planning system to what level or quantum of development can be secured on a site and what assumptions to use for the acquisition appraisal.

Getting this wrong can severely affect the profitability of your project and don’t make the mistake of relying on your planning consultant… You are in charge of your project and it’s your development profit which is at risk…

 

So…

There you have it…

My 3 Pillars of Property Development…!!

Pretty simple when you break it down…

The success of becoming a property developer will largely revolve around these 3 pillars and concepts. They are (arguably) the most difficult areas to get right for any project…

But for any project to be successful, these 3 items must happen and must happen well.

For anyone aspiring to become a property developer, the key takeaway from this section of the article is simply to go and learn as much as you can about the 3 areas. Have a plan in place for all 3 areas and make sure you implement your plan correctly.

Bookmark this page and go back to the 3 pillars, as either a reminder or for you to benchmark yourself..

The success of your project and development career will depend on this section.

 

But also do this… IMPLEMENT

Its no good just learning all this stuff… I’m a firm believer that the single best way to learn to do anything in life is to go through the process of doing it and gain the experience first hand.

Learn from your mistakes… learn from every one of your projects and go out there and IMPLEMENT your strategy…

3 Actions you can do NOW to start becoming a property developer:

If you are reading this article as a virgin property developer or someone who has a bit of experience in development but wants to get serious about making property development their career, then I have 3 excellent and actionable tips for you to start with now..!

Remember what I said in the previous section… IMPLEMENT… don’t just read the tips and then do nothing… take what you need from the article and start taking the steps towards becoming a property developer…
But…

Also remember what I mentioned in the section about myths…

Making money in life (whatever you do) is hard work… its tough…

I can’t sell anything positive here… I’m selling hard work..!! it’s not sexy, in fashion or what you want to hear… but the rewards are fantastic. Just keep this in mind when.

Write your Business Plan:

If you want to become a property developer, your business plan is the foundation of your company.

It is the place where you set your goals, targets and ambitions for the business.

The process of writing the property development business plan is as important as the final document itself. It will generate a lot of fundamental questions which are important to know and answer before you even think about buying your first project.

Your business plan is one of many documents you will use to secure funding and investors.

It’s the document that shows you are real about this.

So what should be included?

No one business plan will be the same, but some of the key questions and areas which could be covered within the business plan are as follows:

– The structure of your company.
– General overview of the development strategy
    – How many sites to target
– How many projects to run at once
– Roles and responsibilities of key personnel
– Acquisition strategies
– Buying criteria:
    – Location
– Land or buildings
– Sites with or without planning
– Entry price range
– Expected sales values
– Ideal Project timescales
– Funding requirements or strategy for funding projects
– Financial targets and returns
– Exit strategies
– SWOT analysis
– Reporting structure
– Construction strategy
– Sales and marketing strategy
– Company start up and running costs

As I mentioned above, all business plans are different, and there are a number of topics which can be included to expand the list above, and similarly, not everything above needs to be covered.

It should be tailored to you and how you want to run the business.

And again, as I said above… the process of writing the business plan, especially for someone taking the steps to becoming a property developer is as important as the business plan document itself.

Writing the business plan will make you think about the whole development process and will allow you to become aware of the area of property development in which you need to focus on.

Development Appraisals:

The general public sometimes see property development as a glamorous business to be in, but I can tell you now… it is not.

When I was working for the big developers in London, I spent about 60% of my time sitting at a desk running financial models and development appraisals.

Why..?

Because it’s the fundamental basis of property development.

The development appraisal is the key tool for deciding on, managing and controlling any project.

Those guys who say ‘it’s all gut feeling’ are wrong and incredibly naive. There is no gut feeling in property development.

All good and profitable property developers make decisions based on financial modelling and testing.

So if you are becoming a property developer… learn how to prepare, understand and act on development appraisals.

In very basic terms, the development appraisal formulae is as follows:

 

SALES REVENUE – (COST OF SALES + BUILD COSTS + FINANCE COST + DEVELOPERS PROFIT)

= LAND VALUE

 

The concept is extremely simple, however, the accuracy of the development appraisals relies solely on the quality of the inputs and assumptions used.

This is something you can go out and learn now. The beauty of the internet is that there is so much knowledge at our finger tips. Youtube, blogs, articles, ebooks and podcasts are just some ways of gaining knowledge.

Learn how to prepare development appraisals and start using them on a daily basis.

The best thing you can do here is to sign up to the mailing list and get a FREE copy of my development appraisal excel model. This is perfect to start learning how to value land and determine whether a development opportunity is profitable.

Research, research and more research…

The last tip for something actionable you can do now towards becoming a property developer is simply to research.

Research and start gaining knowledge.

But to give this some more value, I’m going to be specific about what you should actually do.

Firstly… start researching the 3 pillars of property development which I discussed above.

Secondly… do this:

You will in your mind have an idea of the geographic region where you want to start property developing. It might be your city, local Borough, town or county. It doesn’t really matter where, but pick an area which we will call your target location.

Now you should find out everything about your target location which relates to property. Start by researching rightmove or zoopla. What are the asking price ranges for apartments, houses, town houses etc. What are the price caps for 1/2/3 bedroom apartments?

Then move on to land registry data. What are the actual achieved prices in the area?

Then focus on new build developments. Are there any in your target location? How big are they, who is developing and what is their product? What is their specification?

I would suggest that you might want to use a spreadsheet to document all your research. You will also want to setup google and rightmove alerts so that you are emailed when new properties come on the market.

By doing this research you are learning about the location you want to develop in. You will be building a picture of the area and what its characteristics are. You will quickly be able to learn what is selling well, what types of property achieve premiums and what other developers are doing.

By learning the target location, you are making yourself an expert which is fundamental for becoming a property developer. You will now be in a position to know in a bit more detail what opportunities to target, what micro-areas with the target location to aim for and you will be able to quickly know if opportunities are overpriced or under-priced.

Final Thoughts…

Hopefully you’ve found this start here article interesting, useful and given you some real actionable value towards becoming a property developer.

If you are new to all this, then there are some great actions for you to start implementing now..!

Start your journey today..!

If you have read this article with some previous development experience, then I hope there are some valuable takeaways and some re-enforcement of the fundamentals of property development.

I’d love to hear your take on the concepts and ideas I’ve written about in this article.

And finally… I hope this article has inspired you to get involved with Property Like a Pro and to take your property development to the next level.

Remember… sign up to the mailing list, read the blog and comment on articles. Get in contact and let me know what projects you are working on…

All the best,

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