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It may be tempting to dive into property development, especially if you feel you have a good deal but it’s really important to work out your budget for your property development to be successful. If you go over budget, you could get a quick house sale but then risk making a loss and putting all that work to waste. In order to gain an accurate budget, you need to find out the cost of everything you are going to need and prioritise everything. You will need to consider things such as fees, building work, materials, furnishings and much more. And don’t forget to plan a contingency in case you encounter any problems along the way.
It’s important to get advice from an Independent Financial Advisor or Mortgage Advisor who is regulated by the Financial Services Authority. They can go through your business plan with you and details for your property development in order to find the best kind of mortgage for you. Don’t be tempted to go with the first mortgage offered, rather do some research yourself and then get a second opinion and think carefully before committing fully to anything.
In order to work out the potential profit on the property, have a look at what similar properties have sold for in the local area and also consider speaking to a few different estate agents to gain separate valuations. It’s also worth asking their advice on whether the local market is right for the kind of development you have in mind, as you don’t want to be increasing bedrooms if it isn’t a family orientated area. This information is valuable and could save you thousands of pounds and help you sell your home quickly.
You will also need to set a contingency fund aside of around 10% of the overall budget you have. This will cover any delays, particularly for building regulations approval or unforeseen repairs. You may also choose to employ a project manager to oversee the entire project. There are pros and cons to this, as it could prove costly, but if your budget allows it could prove more efficient as they can deal with many aspects of the development from planning and approval to dealing with tradesmen. They will tend to have lots of experience which could prove useful as it is likely to speed the project up somewhat ensuring you find a quick buyer for your house, and they may be able to make savings in areas you can’t.
As well as a project manager, you will also need to budget for labour costs such as builders, trade services and suppliers. Ensure you get lots of quotes for builders and tradesmen and do your research before committing to anything. You can gain lots of information and find a reputable builder at the Federation of Master Builders, but personal recommendations are a brilliant way to find good tradesmen. Providing you do your research, and stick to your budget, you could potentially make a good return on a property development project.
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