The key to becoming a successful property developer…
There are several key points to be aware of when considering property development.
Firstly, watching and being aware of the market you are buying into. Consider the location, this being the most important factor in any house development endeavour. Researching the local market in the area and investigating the area thoroughly before any potential purchase.
Good access to green spaces, access to transport and schools is a must, though being in the most aesthetic area is not, some of the most successful developers in fact nearly always buy in areas deemed to be the worst location.
Driving around the local area looking for derelict or unused properties is a useful way to find the ideal location for your redevelopment.
Buying a cheaper property at auction saving on the initial cost of the property will yield a higher turn around for your profit margin. Though you must set a carefully worked out limit to the purchase cost and not exceed this. In addition to this it is important to not pay over the odds for a property thinking you will get it back later. Any costs initially outlaid on the purchase of your property will eat into the profit and will be at the mercy of the market. If the area you have purchased in suddenly drops you may be out of pocket drastically.
Developing a rapport with a construction company and architectural designer (like Detailed Planning!) will create a consistency in your development projects and allow you to build a good client relationship. This way you can be assured of the quality of the work and that the time frames will be adhered to. You can opt for the designer to oversee the development process so that everything can run smoother.
Beware before entering into your project that you are at the whim of the market. To start the build you must be financially stable and note that you may not always sell the property immediately. If you have not bought the property outright this may leave you in the position of paying a mortgage on 2 properties for a prolonged period of time. This is a pitfall that many first time developers fall into, especially if elements of the market change during the period of your build.
When selling a property that has been redeveloped for resell purposes, the seller will be charged 28% capital gains tax on the sale of the property for those in the 40% tax earner bracket. A way to negate this tax would be to if possible to live in the property for a period of 6 months. If the property is sold as a one off business transaction the seller would be liable for income tax, rather than the capital gains tax, which could potentially leave you the seller paying less tax on the sale of your newly developed property. Though it would be of use to find a good accountant to assist you throughout the development phase through to the sale of your project.