New Year is a time for big dreams and, for those with a passion for property, one dream always burns bright at this time of year. To give up the day job – or at least go part time – and make a living from property.
It is also a dream which many have chased with considerable success, swapping the “9-5” for house-hunting and hardhats.
There are no fail-safe ways to become a successful developer, just a few principles that you ignore at your peril. For those tempted to make 2018 the “Year of the Developer”, here is our eight-step guide.
1. Write a business plan
Unless you just want to be a hobby landlord, managing one or two buy-to-lets, you need to have a detailed strategy for the medium and long term. Banks will be prepared to lend you more money, and possibly on better terms, if you can satisfy them that you are a serious player.
2. Phone a friend: can I buy you lunch?
Do you know anyone who has been a successful developer in the past? If so, could you meet them for a coffee or lunch to ask for their insights and advice. Use your existing network to minimise the risk before you invest time and capital into your new venture. It might be the best money you have ever spent.
3. Hot property: buy to let or buy to sell?
There is money to be made from both, but some properties offer good long-term rental returns, while others lend themselves to renovation and a faster turnaround. With time and experience, you will be able to spot properties that tick which box, then decide whether you suit buy-to-let or buy-to-sell.
4. Rental yield is key
Talk to your agent about the potential rental yield. A good estate agent will have an indication of what the property has let for in the past as well as void periods. The market constantly changes, but this will give you a steer on the potential rental yield. You may need to rent out the property, so be prepared.
5. Do your research
Remember you are not buying the house or apartment to live in it, but to make money from it. If you pay too much from the outset, you may struggle to recoup your investment later. Ask your agent what similar properties are selling for in the area or along the same street. If you can work out, how much these properties have sold for in the past, then it will help keep you ahead of the game.
6. Narrow your geographical focus
Successful property developers can recite the location, location, location mantra in their sleep. But they also understand the importance of acquiring in-depth knowledge of a given area before investing there. Stick to the areas you know best. Is it Marylebone, Connaught Village, Bayswater or King’s Cross? It is easier to build up a property portfolio within the areas you know are most familiar.
7. Time your moves in the marketplace with care
Many property developers have regretted rushing into a purchase – or delaying over another purchase. Just as you will need to develop a sense of the market value of a property, you will need to get a feel for when it is best to buy, and when to sell.
8. So how does it work?
Successful property developers tend to have one thing in common: a trusted team, from lawyers and estate agents to architects and builders. You will never be able to achieve the success you want single-handed. So, before you embark on this journey, you need to build the right professional contacts to make your venture viable.
Profit margins in property are tight at the moment, so few developers – particularly those new to the market – will make a killing straight away. But for those who are patient, clear-headed and determined, there is no reason to be fearful of the future. In fact, it could be the best career move they have ever made.
• Contact Kay & Co estate agents for details of properties for sale or to rent in Marylebone, Bayswater, Paddington, Notting Hill, Mayfair, Hyde Park, Fitzrovia, Regents Park and The West End (020 7262 2030; Kay & Co).