Taking the plunge as a first-time
property developer can be exhilarating and daunting in equal measures. The UK
is renowned for the robustness and resilience of its property finance market when it comes to generating reliable
But which are the most viable entry
points to the market for newcomers, who may lack experience and expertise?
For anyone looking to make their mark
on the UK’s property development sector for the first time, each of the
following comes equally highly recommended:
1. Buying a residential property to
renovate and sell/rent
The most popular option for newcomers
to the sector is to purchase a property in a questionable state of repair,
conduct the necessary renovations and sell it or rent it out. Profit margins on
a good fix and flip project can be as high as 20%, and it is possible to
complete such a project in its entirety within a few months.
2. Buying a commercial property to
convert to residential
This has the potential to be a
profitable venture for the simple reason that available inventory on the
residential property market is in dangerously short supply. Demand for homes is
higher than demand for commercial properties in most parts of the country,
paving the way for healthy profits for those who know how to conduct
residential conversion. To put things into perspective, a derelict factory was
recently purchased for £1.25 million and converted into 10 residential flats
valued in excess of £300,000 each.
3. Building a second home on your
If there is sufficient land around
your current home to do so, you could consider building an additional property
from the ground up. Assuming it is land you already own, you could save as much
as £100,000 on the costs of a conventional ground-up construction project, in
order to maximise your profits. Just be sure to establish any potential
limitations or restrictions regarding planning permission, before getting
started on a project like this.
4. Buying land and building from the
A slightly more ambitious project,
buying land for a ground-up development project is nonetheless a viable option.
Even including the purchase of the land, it can be significantly more
cost-effective to build a property from scratch than to buy an existing home.
Depending on the type of property you build and its location, it could be worth
exponentially more than its total development costs the very moment the project
5. Buying land, get planning
permission and sell it on to a developer
First-time investors and developers
willing to take a high level of risk could consider buying and selling land for
profit. The logistics are fairly straightforward - you buy a plot of land in a
prime location, you obtain the planning permission needed to build on it, and
you sell it on to a developer at an elevated price. But as it can take months
to obtain the planning permission you need, it is not always a business model
you can count on for rapid returns.