Starting in property with absolutely nothing
If you want to begin investing in, or developing property, but you have absolutely nothing, is it possible? The simple answer is yes, regardless of any economic factors, we are living in a country that is literally over-flowing with wealth, there are many people out there with funds to invest and many of them struggle to find viable investments, or maybe don’t have the time to devote to a small investment, but they would be more than happy to invest in the right development, if they are confident that it will yield a favourable return.
Where do you start?
In the first instance, whatever you have in mind, the very first step is to know your market. If you are looking at renovating a property in ‘anytown UK’ you must know everything possible about the market in that town.
- What is the demand?
- What is the average difference between derelict and fully renovated property?
- What is the average time on the market for top-spec property?
- Which projects will yield the greatest return.
- What obstacles have local developers encountered?
Once you have narrowed down the type of property you will be looking for and where you would prefer to buy, then you can begin to look. Initially, I would advise a few trial-runs. That is, finding a candidate for development and basically run through everything as a dress-rehearsal. Arrange a viewing, photograph and video the property in detail, document everything as you go and then speak to builders, developers and anyone who will give you a little time, so that you can build up a collection of professional opinions.
Join a property investment network, such as the Baker Street, property meet. They have meetings once a month and you will learn more than you could possibly imagine. Yes, most of the other members will be several steps ahead of you, but not all of them, some are only just starting and you will slowly get to know people in the industry, who will be happy to share their knowledge with you.
In the meantime, take notes, begin putting together an investment proposal, be honest, do not pretend to be an experienced developer if you are not, investors will see through this and your credibility will be shattered.
What matters here, is that you demonstrate that you have looked in to everything, then you must be able to answer questions about every single aspect of your proposed project. This will take time and meticulous preparation.
You will need to put together a proposal for your project, which will detail every aspect of your project, including environmental factors, costings, time-frame, exit plan, a SWOT analysis and much more. This may well be a lot of work for a proposal that may not come to anything, because there will always be a good chance that the property you have your eyes on will sell before you find an investor, but that doesn’t matter.
If you work through this process with due-diligence, you will learn a lot, that will pay you dividends in the future. Also, when you move on to another property, you will find that preparing the proposal will be easier, as most of the content of your first proposal will apply to that too. However, with every step that you take, you will become more familiar with everything to do with developing, be it, permitted development rights, to the cost of replacing a lead pipe water supply with new piping. This can be a cost and delay that catches many developers out, for example, because it can cost upwards of £1,500 for your local water board to connect you new piping to the mains supply!
If you miss that and a potential investor picks up on it, the chances are that they will assume that you have not covered everything, however if you have factored for this and explained the process, the time-frame and the cost in your proposal, they will invariably be impressed.
At a later date, I will prepare a ‘project investment proposal worksheet’ which will cover everything that you will need to consider, all you have to do is ensure that you have covered everything and your proposal will begin to come together.
Why do I want to do this?
Actually, I strongly support small investors, I am against the 3% SDT surcharge, as it has a greater effect on small developers and even more importantly, there are hundreds of thousands of properties in the UK that are derelict, below par, or have a very low EPC rating, that makes them illegal to rent and very expensive to rent. Larger developers do not bother with these, they prefer developments on a larger scale, so these properties are either sitting around empty and deteriorating, or they are occupied by people who deserve better.
Therefore, there is a real ethical case to offer small developers as much support as possible, because this helps to take property in poor condition and create homes for the future.