Are you an average or successful property developer? Learn what defines a successful property developer, the skills you need and how to fund success...
Most people have seen hoardings advertising development land for sale, or disused buildings one day swarmed with scaffolding and high-vis jackets, but exactly what is property development?
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What is property development?
Well, the products of property development surround us, from our homes and offices to the restaurants we visit. The process of creating these spaces through buying land and constructing new buildings, improving existing buildings or repurposing properties to a different function than its original (Battersea Power Station is now a mall) is the fundamental property development meaning.
The core element of almost all building development though is to raise the value of the buildings or land and generate a profit when selling on the newly developed site.
Location and local community determine how the site will be used to maximise profit, be it commercial, residential, or residential with commercial units integrated. There is also industrial building development (think hydro plant), but this is less common. Residential property development can be anything from converting old farms into exclusive homesteads, to large estates with various proportioned houses, or city-centre apartment blocks that utilise the small land footprint.
Commercial development can include warehouses, gyms, hotels and offices (although with many employees working remotely in Covid’s aftermath, planning applications to turn offices into residential buildings has increased).
Whatever the intended purpose, the property development process cannot begin without imagination and a good dose of courage. And it’s the property developers, whether an individual or company, who are the visionaries that take something from initial idea, through planning and onto completion.
What does a property developer do?
So, what is involved in property developing and what does a property developer do to convert ideas to real property? Firstly, developers search for that diamond in the rough, the bare land, land with pre-approved planning, or existing buildings that will make a profitable development site. Local knowledge is key - without knowing market values or what an area lacks in terms of housing or premises, it’s impossible to identify opportunities. Developers then run in-depth appraisals on potential sites, costing everything from labour, materials, marketing and borrowing costs, and compare it with the projected sale price, or gross development value. It’s a challenging process, which is why Brickflow created Smart Development Appraisal™, a comprehensive tool that helps developers manage the number crunching. Once a site is acquired, some property development companies might simply use their experience in submitting planning applications to gain building approval. They can then resell the site, now significantly more valuable, to builders who can begin work immediately with no risk of rejected planning.
Otherwise, property developers will compile a team, either people they have worked with before or reputable companies with worthy portfolios, and secure development finance. Most sites require, to name a few, architects, structural engineers, quantity surveyors, interior designers, landscapers and a building contractor, and the developer has ultimate responsibility for managing each of these elements. Therefore, the short answer to ‘what does a property developer do’ is locate a workable site, oversee the entire build process and ensure appropriate marketing strategies are implemented to achieve final sales.
What does a property developer need to know?
Property developing can often seem like an esoteric enterprise reserved for a few insiders, but really, what does a property developer need to know? Most crucial, as mentioned, is comprehensive local area knowledge, including understanding supply and demand ratios, community needs and openness to new developments.
A property developer should also be familiar with building regulations, so time isn’t wasted on plans that would never pass, such as abstract residential blocks in a conservation hamlet of thatched-roof cottages. The Town and Country Planning Acts are the foundations for any property development UK wide. Local knowledge includes awareness of property values so developers can calculate realistic sale prices. Even if it’s a single house developer, understanding market value avoids overspend.
As with any business, developers need to know detailed financials, factoring in contingency for delays or problems. Equally, they must know their team’s credentials - that list of professionals and contractors mentioned earlier will only successfully complete if their capabilities and experience are known beforehand. These working relationships progress with each build so developers will know when they have the right people on the right project. Also, as developers’ portfolios increase, so does knowledge of industry advances and how best to implement these.
Whilst most counterparts a developer works with require formal education and governing bodies, like the Royal Institute for Chartered Surveyors, property developers require no equivalent. So, for anyone who has wondered ‘what does a property developer need to know?’ the answer is nothing officially, but plenty in the real world. Which leads on to the all-important question of who can become a property developer?
Who can become a property developer?
With no accredited education or qualifications required, who can become a property developer is straightforward – anyone. First-time buyers often stumble into becoming a property developer when budget constraints mean they opt for a ‘fixer-upper’ property. Naturally, as they replace bathrooms and kitchens, tackle overgrown gardens and remove woodchip wallpaper they increase the property’s value, though it isn’t their primary motivation.
For most though, becoming a property developer is a business enterprise and anyone with an interest in property alongside creativity can delve into the industry. Getting started may seem daunting since developers inevitably take the most risk, including agreeing to personal (monetary) guarantees to satisfy lender criteria - extensive research and scrutinising figures can somewhat mitigate risks. During this R&D stage, understanding the various development finance options is vital, and at Brickflow we believe that every developer should be able to see (and scrutinise) all the funding options available for their build.
More experienced developers will, expectedly, have more options when choosing a lender. However, if the novice developer can present a meticulous plan, with an appropriately appointed team (usually with an experienced project manager) then securing funding can be straightforward. Our team comprises of developers who have completed several multi-million pound sites, to small-scale renovations of hovels to hygge homes, so we know that lack of experience doesn’t mean lack of ability to complete. The brokers we work with are expert at finding lending options for new developers who present their project through our Smart Development Appraisal™. So, for aspiring developers with a project seed, exploring property development finance options with Brickflow is the first step to making the idea a reality.