How to become a UK Property Developer - First Time Buyer

If you’re passionate about property, you may be thinking about becoming a property developer in the UK. From investing in buy-to-let properties, to lovingly restoring period homes, there is certainly money to be made in the UK property market.

For a new buyer, investing in your first home can be tricky and you’ll need to do your homework first.

To help secure your first property, we’ve put together a handy guide on how to become a UK property developer as a first time buyer. We've highlighted the pros, cons and pitfalls to be aware of, while navigating this highly competitive bricks and mortar world. So, let’s begin!

Can a First Time Buyer Become a Property Developer?

You can do anything if you put your mind to it. But, with property development, a steady flow of cash is going to help massively along the way. Property is still considered a sound investment in the UK, but like any investment opportunity, there may be unforeseen hurdles along the way. Having cash behind you, gives you a financial security net should anything require emergency funds.

Get the Cash to Invest in UK Property

To start investing in property, you’ll need money. The average cost of a house in the UK is £230,332. Don’t panic if you’ve not got the funds in place to buy a home outright just yet. There are several ways to finance your first house. You can find out how much you can borrow using our easy to use online mortgage calculator.

Residential mortgage - This is the standard mortgage you can apply for if you’re going to live in the property while renovating or developing the house. This is also ideal if you want to increase the value of a property and sell it within the next 6 - 12 months. In some cases, you can take out a residential mortgage initially and switch this later if you want to become a landlord.

Buy-to-let mortgage - For first time landlords, you’ll need to take out a buy-to-let mortgage. Often more expensive, this will allow you to develop a property and then rent it out once the project is complete. Be aware the deposit on the property may be more than a standard mortgage.

Commercial mortgage - Great for the renovation of buildings or commercial properties, this mortgage is for owners looking to develop a property to use as a business premises.

Personal loan - If you secure a mortgage but you still need additional funds to restore or develop the house, you could also take out a personal loan. This will give you more cash to complete necessary renovation and development work to increase the property value.

Ready to buy your first investment? Let’s do this!

Find Your First Buy to Let Investment

Now we’ve talked you through your finance options, it’s time to find your first investment opportunity. The question most first time property developers have is, how do you find a good property development opportunity?

Here are our top tips for securing your first property:

● Estate agents: Make good working relationships with local estate agents. Successfully getting to know estate agents, could give you the advantage in this competitive world. Estate agents make commission when they sell a property and if they know you’re looking for a new development project, you could ask them to call you first, should anything interesting come up.

● Local auctions: The playground of the modern property developer, local auctions can reveal hidden gems. Be cautious though. Property auctions can also prey on new developers and if you’re not careful you risk investing in a money pit.

● Local Knowledge: Research up and coming areas with affordable properties that require renovation work. This is a great idea for a buy-to-let project as over time the property value is likely to increase.

Knowledge is power when it comes to the UK property market. It’s vital to be able to spot potential structural damage to a property. Be on the lookout for issues of subsidence and damp, as well as bad neighbourhoods. Location is king in the property industry so it’s always good to think of the location first and the property second. Bricks and mortar can always be knocked down, rebuilt and renovated but you can’t change the location once you’ve invested.

New Build Properties

For an easy buy-to-let investment, first time buyers can buy a new-build house. With minimal maintenance and development required, a new build property can get you off to a good start and firmly on the property ladder. New build properties are popular among young professionals and new families looking to rent a modern house.

However, new build houses are often criticised for being too small. Built to accommodate a small family, new build houses have all the modern amenities needed for a first home, but they often have small boxy rooms and low ceilings. This restricts your ability to renovate and develop. Plus, new build properties are often built within a new build development. This means there is very little space between houses. You will struggle to expand a house or extend it. The property value may also drop after the first 5 years.

Property Renovation Projects

On the other hand, older properties in the UK offer serious character, charm and space to expand. Yes, they may require more restoration work, development and budget, but there is a lot more opportunity to be had. If you’re looking to buy, develop and sell for a profit, older properties in need of restoration are a good way to start.

One thing to bear in mind though, is that you’ll need to have enough budget to complete the necessary development work. Older houses will usually need to be re-wired and re-plastered. You may also need to replace the boiler and radiators. This type of property development can be risky. You never know what an older house might be hiding. It’s always good to have around £10,000 for a new property development project.

Add Value Through Property Development & Expansion

Older properties with character such as open beams, antique fireplaces and original stonework are desirable. You are more likely to attract a wide range of potential buyers after an older house has been beautifully restored, than you would with a new-build.

In addition you can often add value to an older house by expanding it. To add more rooms and increase the asking price of the property you could:

● Convert a cellar - £750 - £1,400 per square metre

● Extend the kitchen - £1,260 - £1,680 per square metre

● Create en-suite bedrooms - £2,750 - £6,500

● Convert the loft into a guest bedroom or office - £21,000 - £44,000

● Convert a barn into another apartment or granny flat - £1,500 per square metre

Loft conversions can add up to 30% onto the property value. Extending a kitchen or adding a second bedroom can also add around 15% to the value of a house. A new bathroom can add up to 5% and transforming a house into a modern open plan living space can add at least 3-5%. This is where you can increase your profit.

Live by these simple property development rules:

1. Buy a house in a good area with space to convert and expand

2. Buy it at a lower asking price and under the current value of the property

3. Add value by renovating and developing the house

4. Sell at a higher value which covers your expenses and makes you a profit of at least 20%

Once you’ve restored a property, you can make profit from it by selling it on for a higher price. This can often leave you with a significant chunk of money to use towards your next investment. Plus, you now can show lenders your success and start your own property portfolio.

Ready For Your Next Property Development Project?

It can take up to 12 months to complete a house renovation project, but if you get it right, you can make a lot of money! After you’ve successfully renovated and sold your first home, you can begin searching for your next investment. At this point, you will have hopefully made money from developing the house. A 20% profit is a good start.

For your next project you can harbour the power of a bridging loan. This loan allows you to buy a new property while you’re waiting for funds to clear. This is incredibly useful if you’ve just sold your property but the money hasn’t come through just yet. If you’re eager to start a new project or you’ve found an incredible investment opportunity that you can’t afford to lose out on, this loan is for you!

Developing property in the UK can be lucrative and exciting. You’ll need to work hard, do your research, plan and put in the effort. When property development pays off, it’ll all be worth it!