Property Development

Property Development for Beginners:
A Step-by-Step Guide to Success

Table of Contents

Chapter 1: The Property Market, Where to Buy and Who Can Develop
Chapter 2: The Credit Crunch and Its Impact on Property Development
Chapter 3: How to Research Before Investing in Property
Chapter 4: Understanding the Legal Aspects of Property
Chapter 5: Different Types of Property, Including Listed Buildings
Chapter 6: Different Finance Options Available for Property Development
Chapter 7: Plans and Drawings for Your Property Development
Chapter 8: The Importance of Building Regulations and Their Role in
Property Development
Chapter 9: Planning and Property Development
Chapter 10: Property Development and Project Management
Chapter 11: Property Renovation for Profit
Chapter 12: How to Buy at Auction and Bag Yourself a Profitable Property
Chapter 13: The Pros and Cons of Buying a Property Off-plan (i.e., Before
it’s Built)
Chapter 14: How to Market your Property Efficiently

Chapters 15 & 16: Rules & Regulations for Buying Property in Scotland,
Ireland, and Abroad
Chapters 17 & 18: How to start a property business and what type
Chapters 19 & 20: The importance of recruiting and managing staff
effectively

Chapter 1: The property market, Where to buy, and Who can
develop

There’s a lot of property out there – and a lot of people who want to buy a residence.
As far as a market economy is concerned, it sounds ideal. But of course, the property
market is far from simple.

Until recently, it seemed almost impossible for individuals and couples who didn’t
have at least 40 per cent of a property’s asking price (or equity in their current home)
to get a mortgage. The situation has eased slightly and thanks to government
schemes to help first-time buyers in particular, lenders are beginning to offer more
mortgages and demand smaller deposits. This means t h a t the market is picking
up, which makes it a very good time to become a property developer.

What is a property developer? Well, simply, a property developer is someone who
buys property to renovate, then sell on at a profit. Alternatively, they may keep the
property and rent it out, thereby covering their mortgage and making a small profit.
The rental market is buoyant right now – and will be for some years to come. It will
take a long time for the British public to recover from the recent recession and for
banks to lend to the same extent in which they did years ago when the property
market was at its peak. Hundreds of homes were being bought and sold daily and
house values were going through the roof (pardon the pun!).

Who can become a property developer?

You’ll be pleased to know that almost anyone can become a property developer –
provided they have the money to buy a property in the first place. It’s not essential to
be a skilled plumber, electrician, designer or architect to succeed in this business.

Indeed, many individuals have a full-time job and develop property in their spare
time, using the money they make at their ‘day job’ to finance their fledging property
development venture.

If you’re not good at DIY, for instance, you can hire a painter, carpenter or other
skilled tradesman to do the work you require on the property. You just have to have a
good idea of what needs to be done and then make sure that it gets done within a
certain time frame. In that respect, being able to plan and organize is a key skill in
property development.

You also have to be a good researcher to the extent t h at you know what sector of
the market is selling [for instance, whether one bedroom or family homes are selling
best, the type of décor your future buyers or renters would want (estate agents
advise ‘neutral’ walls)], what type of amenities and public transport systems are
nearby, etc.

There are no qualifications required in order to become a developer and you don’t
need a certificate to trade either. In fact, anyone can call themselves a property
developer from the minute they make money on selling their first property and start
looking to buy another. Or, when they rent out the property they’ve bought and
renovated and where the monthly rent accumulates enough to pay off the mortgage
or they have enough equity in it to allow them to put down money on another
property.

What type of property makes a good investment?

Property which is in a dilapidated state to the extent it is under-valued is often a good
type of property to invest in (this is ideally where you renovate and sell on at an
impressive profit). So too is a home which has been repossessed and appears at
auction for a quick sale. The latter is also known as a Below Market Value (BMV)
investment.

Another way of achieving a bargain is to buy when you’re aware that the owner
requires a quick sale due to a move abroad, divorce settlement or some other
financial necessity – since this gives you considerable bargaining power (providing
there are not too many others interested in the sale too).

You’ll find that modern apartments tend to sell and rent out better than older period
properties, simply because one and two bedroom homes are more popular among
today’s smaller families. Then, there is the fact t h a t newer properties tend to have
fewer structural and repair issues.

The type of property you end up investing in is probably not the type you would live
in yourself – and that’s fine. In fact, it’s even better because you certainly don’t want
to become emotionally involved in a property when you plan to sell it or rent it out.
It’s important to always remember that you are buying the house as part of a
business and the ultimate aim is to sell it on – or rent it out – at a considerable profit
(many property developers when renting out property aim to cover their mortgage
and make a further 25 per cent profit on the monthly rental value).

You should also not become personally involved with those who are renting or
buying your property. This is purely a business deal and not about friendship.

Where to Buy Property to Sell or Rent

Location is extremely important when it comes to property development -
probably more important than the property itself in many ways.

For instance, you could make a huge profit if you were to buy in a regeneration
area. These are run down areas which the local council are pumping huge amounts
of money into to make them a more desirable location to live. As a result, thanks to
increased amenities, the value of the housing in these areas can only increase.
The secret is to get in while the property values are still low. You can do this by
keeping your ear to the ground in terms of planning.

Areas where there is a lot of employers (or one big employer, such as a hospital or
shopping mall) tend to be a good investment location-wise too. A university or
college is obviously good if you’re looking for students as tenants.

Good public transport, links like a regular bus route or a local train station,
are important to many people, especially young families who perhaps can’t afford a
car.

Amenities, such as good local shops, restaurants, a cinema, a park and good local
schools are all important in terms of quality of life, and your tenants or buyers will be
looking for these too. As we all know, families have moved to a particular area just to
get their children into a top-performing local school.

Cities tend to be more popular than the country simply because there are more
amenities in a city. Indeed, the highest rental yields (profits) for years now in the UK
have been in its biggest city – London, which continues to outperform every other
city several times over.

When it comes to location, TV property guru Phil Spencer of Location, Location,
Location advises you buy in a location you know. If you know the area, you’re bound
to make a much more informed decision.

Chapter 2: The Credit Crunch and Its Impact on Property
Development

Around the summer of 2007 and for years afterwards, the amount of money available
worldwide for individuals, businesses, and banks to borrow plummeted drastically.

The credit crunch (which is referred to as a ‘severe shortage of money or credit)
didn’t just affect the UK of course, but had a global impact, upsetting the economies
of many European states, as well as North America and Canada. Even today,
countries such as Spain and Greece are still reeling from its effects.

Its roots are believed to lie in property and the sub-prime market, in America in
particular. From the beginning of the new millennium, American banks and other
lending institutions had handed out trillions of dollars in mortgage financing
to individuals and families who had no hope of ever being able to pay back the cost
of their properties (remember in Britain around the same time when it was possible
to get a mortgage five times the amount of your salary?).

The culpability here lies in the fact that the banks and other lending institutions
handing out the mortgages were aware t h a t the money wouldn’t be repaid since
the individuals they were lending to had such poor credit ratings, were on low incomes
or didn’t even have a job in the first place. The situation became very serious when
the mortgage interest rates in the States rose from 1% to just over 5% over a period
of two years (2004 and 2006, respectively).

In the end, millions of homes were repossessed and then resold. Panic set in and
businesses started to suffer, because people either couldn’t afford to buy their goods
or services, or were hanging onto their savings fearing that they too might lose their
home. As a result, many businesses couldn’t afford to repay their debts and went
under. The Stock Market too began to suffer and suddenly no-one had any money to
invest. At the same time, the banks began to demand the money back that they had
lent to one another.

The situation was bad news for America, in particular, since the majority of their
economy was funded by loans from banks. When they stopped lending to one
another, the rot set in.

How the credit crunch unravelled in the UK

The giant Lehman’s bank in America was the first global lending institution to go
under. The first inkling o f anything being wrong in the money markets in the UK
came when mortgage lender Northern Rock (who famously gave 90 per cent and even
100 per cent mortgages to lenders who had minimum or even no deposit) begged
the Bank of England for emergency funding. Remember the queues when thousands
of people turned up at Northern Rock banks to withdraw their savings fearing that
they would lose them?

The reason w h y Northern Rock desperately required emergency funding was
because they had previously borrowed from other banks that, like the US banks and
financial institutions, were now closing their doors. Six months later, the
government took control of Northern Rock and nationalised it.

Next, Landsbanki in Iceland collapsed; meanwhile, Lloyds stepped in and took
over HBOS while Bradford and Bingley became part of Spain’s national bank
Santander.

The domino effect of the banking crisis

Although it originated in the banking and financial sector, the credit crunch wasn’t
restricted to those group of companies and conglomerates, of course. Just like all
those US businesses, retail especially began to suffer in the UK. Much-loved stores
which had been around for decades and indeed most of us had grown up with, such
as Woolworths, Virgin, and MFI, later became casualties. So too did many small
businesses since they could no longer receive funding from their banks. As a result,
people began to lose their jobs and high street spending dropped drastically.

Bank rates plummeted, which meant mortgage rates fell, but then so too did interest
rates on savings accounts. Government economists began to panic that people
weren’t spending enough money, so they reduced t h e Value Added Tax (VAT) by two
percent between 2008 and 2010 (it’s now more than 20 per cent). Exports from the
UK also dropped due to the fact that the impact on business meant that we weren’t
producing as much as in previous years.

In April 2008, more than 20 per cent of all mortgage products in the UK were
withdrawn within a period of seven days. By the end of the month, it was impossible
to get a 100 per cent mortgage.

House builders began to suffer since the majority of the British public could no longer
get a mortgage (they couldn’t afford the 40 per cent deposits banks and lending
institutions were demanding). Either that or they were sitting tight in their current
home with the risk of job losses hanging over the heads. At the same time, banks
were no longer offering house builders the same generous loan terms as in previous
years.

Towards the end of that fateful month for the property industry (April 2008),
Persimmons announced sales that year had fallen by a quarter. Job losses in the
industry, they said, were inevitable.

On January 23, 2009, the UK officially went into recession (the US government had
announced their recession just eight weeks earlier). Meanwhile, interest rates for the
Bank of England fell to just 1%.

How the credit crunch has opened new doors for property investors

One of the biggest ways in which property investors benefitted from the credit crunch
was, of course, with the drop in value of house prices. Suddenly, houses were going
for thousands less than they had been the previous month and tens of thousands
less than the previous year. Values are still low and for investors with money to put
down as deposit funds, the pickings can be very rich indeed.

Right now in the UK, it is a buyer’s market, which means that there is plenty of
bargaining power for investors. Because people are still finding it difficult to obtain
mortgages and finance, the rental market is larger than it’s been in years. As a
result, rental yields tend to be high right now. There’s actually a shortage of property
to rent at the current moment, so investors who buy to let don’t have to worry about
having their property sitting empty without tenants for long periods.

Low interest rates also means more money in the bank for investing in property (in
other words, for many property investors, their cash flow situation is better than it has
been in years thanks to low repayments for mortgages).

Chapter 3: How to Research Before Investing in Property

Before handing over tens of thousands of pounds for a property (or at least taking a
mortgage loan out to that value), you’ll want to know exactly what you’re buying and
if it’s worth it in the first place. As a result, it makes sense to spend a lot of time doing
your research.

• Get to know the property’s history. By that, we mean what kind
of alterations or upgrades (if any) have been done to it over the decades? Has
it been rewired? When was the last time the roof was patched?

• Take a look at the neighbourhood. Have there been bad press reports about
burglaries or vandalism in the area recently? Or maybe the area is about to
be regenerated? If so, you’ll definitely want to consider buying there, because
it means the council will be spending money in the area and creating further
amenities so that it becomes a location where people want to live. The way to
find this out is to ring the council and speak to the planning department. You
can ask planning officials about the area, and for more specific
information, look up planning agendas and minutes (these will be listed on
the council’s website).

• How much is the typical rental property in the area? Ring round estate
agents and find out. Is the asking price typical too? If you plan to rent the flat
out then it’ll only be worth progressing with the sale if you’ll get enough to pay
the mortgage and around 25 per cent extra for profit and ongoing
maintenance.

• If you’re planning to renovate, find out exactly the type of renovations needed
by getting a survey carried out. Next, ring round tradesmen to find out how
much they would charge for the renovations (get at least three tenders for
every job). If the renovations are much more than the property is worth on the
current market, then consider whether it’s really worth investing in (although
you will usually be able to negotiate quite a bit of money off a property that’s
badly in need of repair). A good rule of thumb when it comes to selling your
renovated property is to get what you paid for the property, plus the cost of the
renovations, plus a profit of 20 per cent.

• What’s the job market like there? In other words, are there any large
employers in the area that would encourage people to move locally? If so
there’s a chance you could let out or sell the property not just to employees but
the business itself as a company let for visiting out-of-town staff {this happens
more than people realise}. Meanwhile, if you’re looking at a House of

Multiple Occupancy (HMO) and hoping to attract students, then you’ll
obviously want to buy in an area with a university or large college nearby.

• Are there good public transport links? Ring the bus and train companies (or
check the web site) to find out how regularly they run and how far a bus stop or
the station is from the property.

• Are there good schools in the area? Families will always be interested in this.
You can find out by contacting the council’s education department and
checking the Ofsted reports.

• Find out as much as you can about the sellers for instance why are they
selling? Is it because they’re getting divorced or moving away for a new job? If
either of these is the reason, then there is a chance t h a t they are looking
for a quick sale and you may be able to negotiate a lower price.

• Ring found banks and lending institutions to find out where you can get the
best mortgage. Also, try various price comparison sites on the internet
or contact a broker.

By August, Nationwide announced house prices had fallen 10 per cent compared to
the same period year on year. The property market was beginning to feel the
devastating effects of the credit crunch.

Chapter 4: Understanding the Legal Aspects of Property

Property and the Law

It may not be as exciting as actually buying a property and getting in tenants or
renovating it and making a nice tidy profit, but legal and tax matters are important
and it’s something all property developers must understand if they want to succeed
in this business.

• Make a will
Chances are you’re going to make quite a bit of money during your property
development career and if anything happens to you, what’s going to happen to
that money? For this reason, it’s important to make a will. That way, you can be
sure your family will benefit from all your hard work.

• Think about creating a company
If there’s more than one of you involved (whether it’s a spouse or a business
partner), then you might actually save money by becoming a limited company.
That’s because taxes for small companies are around 50 per cent lower than
income tax rates. It’s worth getting advice about this matter from an
accountant.

• Different ways to invest in property
Basically there are two main ways to invest in property – directly or indirectly. A
direct property investment is where you purchase the property (or at least some
of it) and either rent it out or live there. An indirect property investment would
be where you don’t actually own the property but do receive a profit share (this
is where you invest in a property fund).

• Stamp Duty
When buying a property stamp duty is a legal requirement (although
sometimes the government lifts this on properties valued under a certain
amount). At the moment though everyone is expected to pay stamp duty on a
property (as a percentage of its overall value).

Tax on letting
Renting out your property means you will have to pay tax on income above a
certain threshold. However it’s worth remembering that there are many
allowable expenses you can deduct such as council tax, buildings insurance,

factors fees, estate agency fees, and wear and tear (if the property is
furnished).

How to sell your Property

When it comes to selling your rental property, you’ll have to pay capital gains tax on
any profits you make after a certain threshold. For the previous year (2012-13) the
threshold was £10,600 on income. The tax would then be paid on any income from
property above this. The rate is usually around 18 per cent for an individual. You
don’t have to pay capital gains tax if you’ve been living in the property as you could
then claim Private Residence Relief.

Chapter 5: Different Types of Property, Including Listed Buildings

Before you embark on a career in property development , it’s best to decide who
your target market is and what type of property would suit them best. Then, decide
on whether you want to go for a full-scale renovation project or opt for an easy to
let modern apartment.

Renovation Property

Great bargains can be had from a run-down property that needs renovating to make
it into a fabulous family home or cosy couple’s nest. The trick is to find out exactly
how much renovation is profitable and what kind of renovation will end up draining
your finances. The amount of renovation that takes months can be bad news if it
means the property is empty for that length of time and you are having to pay a
monthly mortgage fee for.

Try to avoid properties with structural problems as these tend to erode any potential
profit. Subsidence should certainly be avoided, correction work is an unknown cost
until the builders start the remedial work.

House of multiple occupation

Some property developers specifically aim for having an HMO property. The
abbreviation stands for House of Multiple Occupation and it tends to apply to student
households or bedsits (although any household which has three more tenants who
are not related can be classed as an HMO). These are often the most profitable type of
buy to let available, because instead of collecting rent from one individual or couple
every month, the developer will collect from four or five individuals.

HMO’s do, however, require a lot of input in terms of management. There are also
specific licensing terms by councils and strict health and safety rules, particularly
with regard to fire safety (ie no bars on windows and regular testing of fire alarms).
They are also subject to inspections by the Housing Health and Safety Rating
System (HHSRS) in England and Wales. Licences have to be renewed after several
years.

Unlike in other rental agreements, the HMO landlord must pay the property’s
council tax and it should therefore be included in the rent.

Period Family Home

As an investment, these are best if you’re hoping for a family as tenants. In the long
run they do tend to hold their value better than modern apartments however they do
require plenty of maintenance and upkeep so be prepared to put money aside for
this.

Modern apartment

Modern apartments tend to appeal more to individuals and young couples.
Apartments in cities are particularly popular. With more people living alone these
days, an apartment would seem like a sensible option to invest in – and certainly for
the purposes of buy to let. In terms of buying to sell on and make a profit, there isn’t
the same scope for renovation since the modern apartment is probably already
liveable and fixed to a high standard.

New builds also tend to be much more secure than period properties and there’s
usually more facilities and amenities such as swimming pools, shops and restaurants
nearby.

Listed building

A building which is listed means that it has historical or architectural significance and
has been deemed as such by English Heritage (England and Wales) and Historic
Scotland (north of the border). This means that were you to renovate it you would
have to seek permission first from your local planning department and if granted, that
renovation must be sympathetic to the overall character of the existing building. So,
for instance, if the building is Georgian, then any renovation work must be in keeping
with the Georgian style. This can, of course, prove costly.

The actual listings scheme was introduced as far back as 1947 in a bid to protect the
UK’s architectural heritage. They come with three separate classifications. A Grade I
listed building for instance is regarded as ‘exceptional’ while Grade II (or B and C in
Scotland and Northern Ireland) is of ‘special’ interest.

On a similar vein, a property may be in a conservation area (such as a national
park). Again, permission will need to be sought from the relevant authorities before
you consider going about any renovation exercise.

Chapter 6: Different Finance Options Available for Property
Development

Very few of us can actually go ahead and buy a property in cash. If you’re someone
who can, then – lucky you - skip this section! Most of you, though, will want to read
on and understand the various types of mortgage finance available for property
development.

How much can you borrow?

A calculation for the amount of money available for you to borrow is based on the
amount of money you have available to put down as a deposit. This varies
depending on the economic situation. For instance, prior to the credit crunch some
companies were asking for as little as 10 per cent. In the aftermath of the crunch, it
soared to 40 per cent, nowadays the average deposit is around 25 per cent. Your
income also comes into this equation. Lending institutions differ in what they’ll offer
but the average is around three times your salary).

Which mortgage to choose?

You’re not going to decide this overnight. In fact, it’ll probably take you weeks of
dipping in and out of mortgage deals and comparison sites to come up with
something you’re completely happy with and that satisfies all your criteria. A very
good site to check out is financial whiz kid Martin Lewis’s
www.moneysavingexpert.com or www.moneysupermarket.com.

Getting an independent financial adviser or mortgage broker would be a good idea,
as they’ll do all the research for you or deal with the lengthy administration process.
They’ll also point out the hidden clauses (like repayment or redemption terms or
even a bullet point that insists buildings insurance must be through the lender). Then
there are the fees for taking out the mortgage in the first place, such as valuations,
arrangement and legal fees.

You can also share the financial burden with a business partner or spouse. That’s
because joint mortgages are available for up to four individuals. That doesn’t mean
four salaries will come into the equation however – on the contrary, usually only two
are taken in to account. There are specialist buy to let mortgages available which
are at a slightly higher interest than your typical mortgage and for individuals who
already have an existing mortgage.

Another way of including another is via a guarantor mortgage where a family
member or friend is willing to guarantee the loan. Their income will then be assessed
by the lender and they are jointly liable if you fall back on your regular mortgage
payments).

Specialist mortgages are also available for particular building projects such as an
eco-house, a period restoration, large conversion or simply a major renovation
project. In the case of the restoration project it’s because typically high street finance
lenders won’t provide mortgages for properties which are currently uninhabitable.

Once you’ve decided on the particular type of mortgage you’re happy to go with, it’s
then a case of how repay it. Here are some of the various options you could go with:

Fixed rate. You’ll pay the same amount for a ‘fixed’ period of time ie two, three
or five years.

Flexible rate (also known as a Tracker). What you pay back depends on the Bank of
England base rate figure. If it goes up or down, your mortgage payments do so
accordingly.

Interest Only. Pay the interest on the loan and settle up a lump sum at the end.

Repayment. Unlike the above interest only mortgage, with a repayment you’ll
pay both the interest and the loan.

Capped rate. This is very similar to the fixed rate mortgage (above) with the
additional clause that if the Bank of England rate goes below the capped rate then
you only need pay the lower rate.

Discounted rate. This is when the bank or finance institution agrees to give
a discount at the start of the mortgage term for a fixed period, typically one to
two years. After that, it jumps to a higher standard rate.

Self Certification. Freelance workers (of which there are more and more these
days) can get a mortgage by showing three to five years of accounts so that the
lender can see their annual income is consistent and stable.

Retention Mortgages for Restoration projects

Often lenders won’t provide the full mortgage upfront, but a percentage of it until
the necessary repairs to a habitable restoration project have been completed
eg rewiring, roof repairs etc. This involves a period of re-inspection.

For non-habitable restoration projects, Self Build mortgages are available, but again,
like the retention, money is available in stages. As a result for major renovation
projects savings, credit upfront from suppliers and other loans can all make up the
funding. The good news is that at the end of a renovation project the property can
usually be remortgaged to a much more manageable rate.

Funding your deposit

You’re usually looking for a deposit of around 30 per cent (since most lenders will
only fund two thirds of a renovation mortgage). If you’re lucky enough to have
savings go right ahead but remember you’ll also have survey fees as well as having to
pay upfront for a lot of materials. Other ways to accumulate enough cash for the
deposit are to:

Re-mortgage an existing property. This is by far the best way to borrow money
but check for charges if you reduce the loan early.

Bridging Loan: This is relatively easy to arrange but it’s more expensive than
re-mortgaging.

Accelerator Mortgage: This means being able to borrow staged payments to fund
renovation work which has not yet begun. These often come with a high
arrangement fee.

Personal Loan: The most expensive way to borrow, a personal loan should only be
an option if you’ve no other assets. Credit cards are another method but come with
excruciatingly high interest rates.

Getting Finance for Auctions

Properties at auction typically come on only four to six weeks beforehand so it
means finding a mortgage lender super-quick. Not only that, but it also means filling
out a mortgage application before an offer has been accepted (since you’ve not even
bid for the property yet). There are specialist companies who are prepared to offer
specific auction finance – but it won’t come cheap.

Tips for Borrowing Money for Property Development

• Money first. First things first - don’t even think about looking around for
a property or renovation project until you have finance in place. That’s because
this can typically take weeks and you want to be able to act quickly when you
spot a bargain.

• Be choosy. Don’t just jump at the first lender who agrees to come up with the
finance. Find the one who is willing to give you the best multiples against your
salary and has the lowest interest rates and reasonable arrangement fees.

• Put down as much money as possible. Make sure you’ve enough for the
actual renovation work too. That’s because staged payments are both
expensive and time-consuming.

• Get trade cards. This can result in free credit upfront and allowing you
to make payments for goods in arrears. This type of help is essential to
your cash flow situation when renovating.

• Tax issues: If you’re spending money on renovating, check with
your accountant. There may be some VAT relief somewhere down the
line and every little helps

Chapter 7: Plans and Drawings for Your Property Development

There is no getting round the fact that if you’re planning on renovating an existing
property, adding an extension or even building a garage then you’ll need planning
permission. And the only way to get that is by producing a detailed drawing of your
proposed work to planning officials at your local council. Indeed the drawing is the
most important part of the whole planning application. As such it must be completed
to a professional and extremely high standard – which is why it’s often necessary to
use experts like architects or building surveyors. A drawing which does not contain
the necessary details will delay your obtaining planning approval as it will have to be
redrawn.

Architectural drawings tend to be done to scale so the measurements are
proportionate to the building work. This doesn’t just help you envisage the whole
project better, but also allows planning officials to check that the measurements of
the proposed building are permitted and that the building itself is in keeping with
its surrounds.

Most architects these days use Computer Aided Design (CAD) software to produce
drawings as this tends to be more precise than pen and paper versions.

You may find too that even if the architect’s drawing pleases council officials it may
not be quite detailed enough for the builders you’ve employed, so it may have to be
altered yet again prior to work beginning.

The actual drawing

As well as being done to scale, council officials like to see the ‘before’ and ‘after’
versions of the property side by side to allow them to make a quick comparison.

Drawings should also contain the address of the property and the intended proposal,
for instance, single story extension, as well as the date. Revisions to the drawing
should be clearly marked.

The location of the property should also be indicated on a separate sheet of paper,
referred to as the site location map and showing the property as it relates to
neighbouring buildings and roads, if any. This should be based on an Ordnance
Survey Base and details such as house numbers and the name of the road should
also be supplied. The property itself should be highlighted.

In addition, the drawing an application should also have a covering letter explaining
what the site is, where it is and any relevant background information, as well as why
you want to renovate or build. There should also be a ‘contents’ page with the
numbers of the drawings and a sentence or two describing what they are. Two
copies of each drawing should be handed in.

There are different types of plans available. These include:

Block plan. This gives a detailed layout of the entire property and land as well as its
relationship to neighbouring premises, roads etc. The proposed works should be
shaded. The plan itself should contain details of nearby flora and fauna eg species
and quantity (and highlight any which will have to be cut down to make way for the
proposal). Details of the boundary of the property should contain wall or fence
heights, if any and show any paths or parking spaces.

Elevations. An Elevation drawing is an external plan of the building and should
include two versions – a ‘before’ and ‘after.’ It should show every single elevation of
the proposed building and mention the direction in which it’s facing ie north, south
etc. The new building should be shown alongside the existing building to
demonstrate how the whole will look when complete. Again, the boundary and
existing properties should also be mapped. Details should include the colour and
type of materials to be used and whether or not they match the existing building.

Floor plans. These demonstrate the property’s layout. Again, there should be a
‘before’ and ‘after.’ All levels of the proposed building should be shown (even the
roof). Rooms should be named (i.e., bedroom, bathroom, kitchen, etc.) and details
about the position of walls, windows and doors mentioned. Again, boundaries and
adjoining properties must be shown.

Street Scene (context plan). These are often necessary to produce if the work will
be visible from the road or near a neighbouring building. Another reason for
producing a Street Scene is if the proposed building differs markedly in height from
the surrounding premises. There should be measurements of the gaps between
buildings and the height of neighbouring dwellings, as well as the size of windows
and doors.

Roof plans. These are necessary when the proposed building will change the shape
and look of the existing roof for instance when dormer windows are being added. All
features, such as chimneys should be mentioned. So too should any trees which
could possibly be affected by the works. Again, details of the tree should be
mentioned as well as any other trees if landscaping work is intended.

Chapter 8: The Importance of Building Regulations and their
Role in Property Development

Every property developer will encounter building regulations at some point in their
property venture. Essentially, these are government rules when it comes to property
restoration, renovation and general building and planning which must be complied
with. Failure to do so can result in financial penalties or, in the worst case scenario,
the property having to be demolished (and yes, it has happened on many
occasions). The council simply issues an Enforcement Order if they don’t like the
way the work is progressing. This is a legal order which you must adhere to
otherwise the building work is unlawful and court proceedings could ensue.

Meanwhile, it’s important to note that these are not the same as planning permission
– although both originate from the same department in your local council. An easy
way to differentiate between the two is that Planning Regulations concern what you
can build while Building Regulations and about how you build it.

Why are there building regulations?

The point of building regulations – which focuses on the construction and the design
of property - is to ensure there are minimum health and safety standards in all
buildings – whether new or restored so that people can safely walk around and
work/shop/live in them without fear of injury. This includes disabled access in retail
and other leisure premises and commercial premises.

In recent years, those regulations have been extended to also cover energy efficiency
(all landlords must provide Energy Performance Certificates (EPCs) for their tenants,
or when they come to see the house on. These show how efficient the property is in
terms of utilities use, how much it costs to run, how environmentally friendly it is and
how much carbon dioxide is released into the environment. It’s worth remembering
that building regulations are updated on an annual basis, so always make sure the
regulations you’re looking at are the most current.

The regulations cover such issues as materials used, the way the building has been
constructed and size of rooms, height of ceilings, proximity to neighbouring buildings
etc. All construction work must be passed by the local council who will perform a site
inspection to ensure it complies with the regulations.

How to apply for Building Regulations Approval

When planning renovation work on a building or developing a new property from
scratch, then you have to apply to your local council for Building Regulations
Approval. You’ll do this by submitting detailed plans of your proposed renovation or
building.

The architect who originally drew up your plans, the surveyor, and the builder actually
constructing your property or undertaking your renovation should all be well aware of
the need for building regulations compliance and the official insistence on routine
inspections.

Chapter 9: Planning and Property Development

Planning is at the heart of property development in the UK. When we talk about
planning, we don’t mean scheduling, but rather getting authority approval from
the local council or - in the case of a listed building - English Heritage or its
equivalent north of the Border and in Northern Ireland. The planning process
differs slightly between England and Wales, Scotland and Northern Ireland so for
the purposes of this section we’re going to look at the English/Welsh system.

You will need planning permission in the following scenarios:

Changing the use of a property. This could cover changing a shop into a
family home.

Converting a property. For instance, taking a large house and converting it
into flats.

In the above two instances, often the sale will be subject to planning permission. The
planning process involves a number of different steps. These include:

Outline Planning Permission

Before embarking on a project it’s essential to see whether your plan could become a
reality in the eyes of planning officials. This is where outline planning permission
comes in. It covers such matters as architecture, design and landscaping. It lasts for
three years but can go as far as five (on condition you have approval for Reserved
Matters). You can’t start building, however, until detailed planning permission
is granted. And actually you can bypass outline planning permission and go straight
to detailed planning permission, but it requires very detailed plans (see below).

Approval of Reserved Matters

This is the next step after receiving outline planning permission and covers
‘conditions’ that planning officials put in on your initial outline planning
permission application. This Reserved Matters application will cover such areas as
access and location as well as taking into detailed account the design and
landscaping of the property. This must be approved within three years of getting
approval for the Outline Planning Permission.

Full (or Detailed) Planning Permission

Often developers who have been in the property game for a long time don’t bother
with outline planning permission and instead skip to detailed planning permission.
This is fine, provided you supply every last detail to the extent there is no possible
question left unanswered for planning officials.

Section 106 Agreements

Section 106 of the Town and Country Planning Act 1990, is used when a council
agrees to a developer’s plans provided they contribute something towards, for
example, infrastructure of the area or give money to the town/village itself for other
improvements. It usually applies to large scale property developments on land that
was originally for use by residents.

Permitted Development Rights

If the changes you are making to the property are relatively minor alternations, are
internal and don’t alter the exterior of the property, or the extension you’re planning
is single storey and small then you may not need to apply for planning permission for
these would be covered under Permitted Development Rights. These rights are
issued by Parliament (not your local council) and tend to apply to houses rather than
apartments and any restrictions refer to size, shape and materials used. They can be
found under parliamentary legislation The Town and Country Planning (General
Permitted Development) Order 1995.

Homes in conservation area will have stricter permitted development rights imposed
on them and in some circumstances the rights can actually be withdrawn. This is
when your council’s planning office issues what is termed an Article 4 direction.

It’s interesting to note that the government has recently relaxed the restrictions
around permitted development rights (in May 2013). Single storey rear extensions
can now be as high as 8 metres for a detached house and 6 metres for a semi-
detached or terraced property. These measurements are double what they
previously were and the move is believed to have been sparked by the high number
of homeowners looking to extend their existing properties rather than move up the
property market. The rules will be looked at again in May 2016.

They also bring another clause where neighbours must be notified of the intention to
renovate and can object within 21 days of receiving a letter from the council outlining
the proposed extension. An objections will be considered by the council officers, who
will have the final say in arbitration.

Chapter 10: Property Development and Project Management

It’s nice to believe that everything will go smoothly with your renovation or new build.
But unfortunately that’s rarely the case: materials which fail to appear, poor weather
or ill tradesman setting back the schedule – these are all pretty regular scenarios
with any big build development or renovation. And that’s why you need a project
manager – whether it’s yourself or a professional you’ve hired - someone needs to
take charge of what’s happening and ensure the entire project remains on budget.

Project manager’s role

Don’t expect an easy time if you are project managing a property development,
regardless of how small. Finding and organising tradesmen, ensuring work complies
with building regulations, sourcing and paying for materials and skills, on-site safety,
sorting out any problems with contractors – this is all your responsibility. In fact you’ll
be in charge of all the daily planning and development as well as the management.

A project manager is really a co-ordinator who ties the various parts of the project
together and ensures it runs smoothly. They will usually be in at the start of the
drawings with the architect and will present the drawing to the tradesmen once
they’ve been sourced and hired. Then the scheduling begins. You can expect the
project manager to be a go-between for the architect and tradesmen in the sense
they can check work with the architect or ask the architect questions on behalf of the
builders.

Project Manager’s role summarised -

• Outlining exactly what the project will consist of to ensure everyone
understands the project.

• Planning the contractor’s schedule and the funding allocations.
• Choosing contractors.
• Coming up with a linear plan (time scale) for the project which can be shared

amongst all contractors.
• Making sure costings (for materials and contractors) stay on target.
• Ensuring the site abides by health and safety regulations.
• Providing feedback to you, the developer, on a regular basis.

How to find a professional project manager

It’s often better to get in a professional project manager. This will cost (probably
around 10 per cent of the total cost of the project or up to £200 an hour) but for your
own peace of mind and the successful running of the project, it’s often well worth it.

You could split the role though and save yourself some money. Do this by getting the
project manager to oversee the build work (which is the messy and tough part) then
complete the cosmetic work like the decorating by yourself.

Ask for recommendations from friends and neighbours before going on line to find a
project manager (you should already have been doing this for good tradesmen).

Make sure you find someone who has handled a similar project and who already
knows of reliable and skilled tradesmen.

Alternatively your architect may be able to point you in the right direction. There are
currently two professional bodies you could consult – The Association for Project
Management and The Project Management Institute. Both are accredited and have a
list of members in the UK who have at least an SVQ/NVQ level 4 in Project
Management. There are also Project Management degree courses available these
days.

Project management and communication

Good communication between the project manager and contractor is essential. By
‘good’ we mean ‘clear’ ( i.e., leave no doubt as to what you’re asking the builder,
plumber or carpenter to do). In fact, get it down on paper explaining clearly with
diagrams if necessary exactly what you’re looking for. There’s no good complaining
after the job has been done. That will just result in wasted hours and materials.

And talking of paper, you’re going to be seeing rather a lot of it, so get yourself a
concertina folder and file everything away neatly – receipts, planning applications,
wage slips etc. Your accountant at least will appreciate this.

How to keep project managing on an even keel level

• Don’t be afraid to speak your mind if you don’t feel something is being done to
your satisfaction.

• Don’t be secretive about what’s happening at every stage with the project. Be
very open about the development right from the start.

• Do take time off. Project management can become all-consuming and a
seven day a week job, so it’s important to take a break now and then – for your
mental health, if nothing else.

Chapter 11: Property Renovation for Profit

Some property developers relish the idea of buying an older property in disrepair and
doing it up before selling it on to make a handsome profit. On the surface, it sounds a
lot more difficult than simply buying a new apartment off-plan and flipping it, and
it probably is.

But there is huge profit potential and for the DIY enthusiast it can be good fun at the
same time. Sounds like a win-win to us! But hold on there. It can all go wrong too
and we’ll come to that later in this section. In the meantime, here’s how to go about
finding an older property and renovating it to make a profit:

Research

You’ll be a bit tired of this word by now but it’s essential, regardless of the type of
property you’re thinking of buying. This time you’ll want to know exactly how long it’s
been on the market for. That’s because the longer it’s been on, the more desperate
the owners will be to sell and the better you can negotiate. You can find these
properties yourself by driving around; looking online or befriending a few estate
agents and letting them know what you’re looking for well in advance of something
coming on the market.

Revisit

A one-off visit isn’t going to suffice with an older rather derelict property in need of
vast repair. You need to know exactly what that building is all about – and what it has
to hide. For instance, how strong are the structural walls? (Note: take a surveyor with
you). Are there any dry rot or hidden dampness? Will it need to be completely
rewired? How’s the plumbing? No-one’s expecting you to be able to answer all these
questions yourself of course and that’s where it pays to bring an expert along like a
qualified electrician, plumber, roofer etc. And it does pay – quite literally – for if there
is any damage to structural walls or the roof, then you can negotiate for money off
the asking price.

Plan

Plan the property around your potential buyer. For instance, if it’s a house near a
school and a park it’s going to appeal to families so put in a big family kitchen rather
than a high-tech music and theatre sound-system.

Duration

Work out exactly how long you want to spend renovating the new property. If you
only have a few months and the place is pretty dilapidated then walk away (unless
you’re going to hire someone else to fix and project manage it – which, incidentally,
would take a huge chunk out of your profits).

Money

Exactly how much can you afford to spend doing up the property? Never go over
your budget but do give yourself a 15 to 20 per cent leeway. Put each job out to
tender to three different sources to get the best price and ask around for
recommendations on who provides quality service. Do this early, because getting all
the quotes well in advance helps you calculate your overall budget better. Draw up a
legal contract for the hiring of tradesmen so you’re not left out of pocket if something
goes wrong. Remember to budget for costs such as skip hire and renting scaffolding.

Also, never make any structural changes to the property that is going to leave you
out of pocket in the long run. In other words, the changes have to add value to the
property and make you a profit when it comes time to sell.

Builders

These are the really important boys when it comes to renovating your property so
take your time and choose wisely. There are cowboy builders out there and these
are the ones you desperately have to avoid. In order to do so never choose a builder
with a ridiculously low quote or one who can start work “immediately.” Again, try and
get recommendations and go along to look at work they’ve done previously.

Planning permission

This is extremely important (and, in fact, we’ve devoted a whole section to this on its
own). Planning permission is all about getting the green light from the council’s
building control officer to go ahead and make your renovations. It’s absolutely
essential you get this before you start any work. If planning permission isn’t granted
for instance, you can’t go ahead and if you already have then painful though it may
be – it’ll all have to be torn down again (if the councils decide to issue an
Enforcement Notice). It’s also a good idea at this point to check the deeds of the
property so you know exactly where the boundaries of the land lie in case you are
thinking of adding an extension at some point in the future.

There is retrospective planning permission ie applying for approval after the
extension has been built or renovation done – but this is far too much of a gamble
and it’s rarely successful.

It’s also good manners (and a way of ensuing decent future relations) to go and
introduce yourself to any neighbours and let them know potentially disruptive work
will be starting.

Idealise

Make plans of exactly how you want the house to look to keep you on track and stop
you getting sidelined. It’ll also let you know exactly how much work you are in for.

Project management

Are you going to do this all yourself? You’ll save cash that way of course but it’s
probably an idea to get in an architect and builder at the start for advice and to have
them on speed dial (just in case – especially if it comes to any big structural
changes). Schedule the work well ie what needs to be done first? Obviously the
plasterer will need to be called in before the painter! Try and visit the property
regularly to check what work is being done and if you have long-term contractors
give them weekly feedback to let them know you’re on the ball.

Fixtures

Think carefully about your market. If showers are more popular than baths then put
in the former if you can’t afford both. When it comes to renovating the kitchen go for
classic or modern – both with appeal to families and young couples. Meanwhile, try
not to get carried away by fancy taps or shower heads, because you have a bit of
money left over in the budget. It’s not the way to make a profit and spending too
much at this stage will eventually affect your cash flow.

Chapter 12: How to buy a profitable development property at
auction

Auctions are a great means of picking up a Below Market Value (BMV) property. In
fact, you should be able to save anything up to 30 per cent on a property’s market
value, depending on the extent of the competition. That’s because the house has
probably been repossessed by the bank or building society and these lending
institutions are looking for a quick sale so they can move on.

According to the Council of Mortgage Lenders (CML) a total of 35,000 homes were
repossessed in 2013 – that’s an additional 1100 compared to the previous year.
Often of course, there is a story behind an auction sale – and it’s usually not a
pleasant one. We’re all human and find these things sad. However, as a property
developer emotions really shouldn’t come into it and must be set aside. Remember
it’s a business you’re running and you should instead be focusing on the profits you
stand to make from the property either through resale or buy to let (ie as a rental
opportunity).

When you buy a property at auction, it will be yours to do with as you like within
28 days of the hammer falling on your bid. Pretty amazing when you consider it
can take months to secure a property in the ‘traditional’ manner ie via an estate
agent or private sale.

The type of property that comes up at auction isn’t typical to ‘high street’ sales either.
You’ll find they’re usually houses and apartments that need a lot of work or are ex-
council and housing association properties.

How to find a property auction

You’ll find auctions advertised in property magazines, your local newspapers and
perhaps even your local estate agents. Websites such as propertyauctions.com also
contain information about upcoming sales throughout the UK. Don’t be surprised to
turn up at the auction room and find it’s full of property developers, estate agents and
dealers. Very rarely will the typical ‘man on the street’ be found purchasing their
home in this fashion.

How to bid at auction

Always do your research prior to turning up at auction. That’s because if you like a
property from the auction catalogue, you want to have the opportunity to go away
and mull it over. Sales are instant so if there’s something you have your eye on you
want to find out as much as possible about it beforehand. Go and visit it if possible,
take a look at the neighbourhood, find out its history and always take a surveyor with
you (this will cost you around £500 but the alternative is to find an unpleasant
surprise once you start to pull up the floorboards).

It’s also an idea to let a solicitor run through the conditions of sale documents (which
should be available with the catalogue) – again to prevent any nasty surprises. You
should typically have two weeks in which get all of the above completed from when
the auction catalogue comes out to the date of the actual auction itself.

Money matters at auction

Make sure you take enough cash with you to the auction to be able to hand over 10
per cent of the property’s sale value on the day (you usually have the option also to
pay by cheque or bankers draft). There will be an admin fee too for the auction
house (anything up to £300). You’ll then be expected to pay the remaining 90 per
cent of the property value within the remaining 28 days (as a result it’s essential to
ensure you have mortgage finance available prior to putting in a bid).

In the event your planned financing of the property falls through, then you’ll lose your
deposit. You’ll also have to pay for the cost of it being resold at auction and there will
be interest charges too (from the completion date until it’s sold again).

The auction process

On entering the auction, you’ll be asked to note your name, address, telephone
number and produce two forms of identification (a driver’s licence or passport and a
utilities bill should suffice). You’ll then be issued with a bidding number.

At this point, you can go over any details of the property/lots you are interested in
to see if anything has changed (it’s not unusual to find last minute changes to items).
These will be listed on an addendum sheet which you should be handed as you
enter the auction. Each individual property will be listed as a separate ‘lot.’
Incidentally, be reassured if you see a logo for the National Association of Estate
Agents (NAEA) on the auction house literature as this means their conduct has been
approved by the Association.

The reserve price for the property is announced by the auctioneer (this is the
minimum value the seller is willing to settle for). If it’s not reached the property will
be withdrawn. However, it doesn’t mean it’s gone forever as there is still the chance
of negotiating a deal after the auction has finished.

Prior to bidding you should already have a ‘fixed’ price in your head ie the amount
you are prepared to pay for the property. You should have calculated based on any
work that needs done, mortgage repayments and the amount of profit you plan to
make. Don’t go above this figure and don’t be intimidated by other bidders.

If you can’t make it to the actual auction it’s still possible to bid via the telephone
although obviously this isn’t as informative as being there in person.

Chapter 13: Buying a Property Off-plan (before it’s built)

Investing in an off-plan property means agreeing to purchase a house or apartment
based on the developer’s projected 3-D drawings, virtual tours and overall vision.
The apartment may be half built or it may still be a gleam in a chief architect’s eye. It
sounds a little risky and anyway, why invest in a property which doesn’t even exist
yet?

Well, the answer is because, if you get there fast enough, you can often buy an
apartment cheaper off-plan. That’s because the house developers want to sell a few to
get the ball rolling as it were. They will also want to be able to advertise the
apartments from a less expensive starting price ie from £190,000 (when in reality,
most of the apartments will be selling for £230,000). Remember too that assuming
inflation goes up, you’ll also be buying the property at ‘today’s’ prices and it will be
worth more in a year’s time or so when complete.

How to ‘flip’ property
And indeed, once the apartment is ready, the marketing people have done their job
properly and demand for the development is growing, you can then sell it on at a
nice tidy profit (20 per cent wasn’t uncommon at the height of the property boom).
If you’re lucky enough you may even manage to sell on the apartment before it’s
completed. This is known as ‘flipping.’

Usually, the earlier you buy the apartment, the greater the discount on a new
apartment and therefore the larger your profit when it comes to selling it on or renting
it out. Another plus when it comes to buying off-plan is that payments are usually
staged throughout the construction process so that the investor usually has up to 12
months to come up with all the money for the property.

There is also the added bonus that new build apartments tend to be one or two
bedrooms (which are more popular than family homes these days thanks to a rising
number of single-households according to the last census) and they require far less
maintenance that a post-WW2 villa for instance. They’ll have a modern and new
fitted kitchen and bathroom which will definitely appeal to potential tenants who
just want to move in without the hassle of having to do any time-consuming DIY
or painting.

Off-plan apartments, because they’re new, also tend to be very energy efficient
which again ticks more boxes for potential renters. If the new build is registered with
the National House Building Council (NHBC), then it will also come with a reassuring
10 year guarantee against materials and construction.

Easier to get a mortgage

In terms of finance, banks and other lending institutions are also more likely to agree
to a mortgage for a new build than an older property that needs a lot of restoration.

The downside to buying off-plan is that new builds don’t appreciate the same way
older period home do to the extent you could actually lose money though
depreciation over time. New builds also tend to be smaller than villas and semi-
detached homes and may put some renters off.

The best way to buy an off-plan property

Often companies behind the development will invite prospective investors and estate
agents along to a launch party. Through the agent, you’ll be able to go along and take
a look at the show house and gain the necessary brochure and other materials
pertaining to the development.

Research

Just as if you were buying a property at auction or from an estate agent, research on a
new build is crucial. For instance, who are the building company and the
developers behind the scheme? Do they have a good reputation? What’s their
previous apartments been like ie were they finished off to a high specification? (it’s a
good idea to go along and look at previous buildings if possible). You’ll also want to
know when the development is expected to be completed – in its entirety as it’ll be
difficult to sell or rent an apartment if half of the development remains a building site.

Other issues to consider:

Location. Is it the type of area families want to move to or individuals and young
professional couples rent in ie what’s it like in terms of amenities such as
restaurants, bars, parks, schools, and transport links into town? Think about the
location of the apartment itself within the development.

Can you secure a flat with a corner window for instance, or one with a patch of grass
outside the window? To know which plots are the prime sites visit the council’s
planning offices and ask to see a layout as the developer will have had to have
submitted plans prior to his application being approved. While you’re there, you might
want to find out if there’s any developments planned alongside the apartments ie is
there going to be another phase?

Price. Do the apartments seem over-priced for the location? Find out what similar
properties (for instance one or two bedroom homes) sell or rent for in the area. Also,
make sure there isn’t another new build apartment block going up just round the
corner or planned further down the road because, as in the general retail trade,
supply definitely decreases demand.

Additional charges. Will there be factors fees such as cleaning and maintenance?
If so, this will have to be added to the rent or taken into account when it comes to
selling on the property.

Finance. Just as with auction, make sure you’ve organised finance prior to putting
down a reservation fee (this can be anything up to £1000). After you’ve put in an
offer, get a survey done to ensure the property meets your financer’s demands (and
your own). Once the deposit has been paid and you have a move-in date, do a
snagging survey around 10 days before moving in to ensure you catch any last-
minute defects (often the builder will give you a fortnight after you move in to report
anything of this nature).

Chapter 14: How to Market your Property Efficiently

With the easy access and low cost of property websites on the internet, such as
rightmove.co.uk and zoopla.co.uk, it’s becoming far easier to sell bricks and mortar
privately rather than having to pay thousands of pounds (or roughly 2 to 3%) in
commission to an estate agent. It’s also extremely empowering to realise you can
handle this area yourself and, let’s face it, you’re going to be the property’s best
agent anyhow as you have by far the most to gain.

Setting an asking price

Consult the Land Registry to find out how much similar properties in the area have
sold for. Alternatively, look up recent sale prices on sites, such as
nethouseprices.com. When it comes to it, though go for a lower rather than higher
price as it’ll attract more attention and if you’ve one or more interested parties in the
property their bidding will hopefully push the price up anyway.

Selling via an estate agent

If you don’t mind paying substantial commission then this is the way to go since the
estate agent will take care of viewings and follow up calls. They’ll also talk to lawyers
and do credit checks on potential buyers. You may be able to get an estate agent’s
commission fees down, it’s certainly worth negotiating. You could also offer to pay
them on a sliding scale depending on how close to the asking price they sell your
property for.

Private house sale sites

Some private house sale websites are free while others will charge a small amount.
They allow you to upload photos and a description of your house. They include
propertybroker.co.uk, PropertySell and thehousesale.co.uk.

Online estate agents

Online estate agents tend not to charge as much as your high street agent. These
include sites such as eMoov and housesimple.co.uk. They’ll take pictures, produce
floor plans and give you a valuation. They’re a good idea if you don’t have the time to
market and sell the property yourself.

Selling privately AND using an estate agents

Sometimes people like to hedge their bets and use an estate agents as well as trying to
sell privately. Just make sure that you have the clause ‘sole agency’ in your
contract with the estate agents. This means that if you find a buyer the agency can’t
claim any commission. They could if you agree to ‘sole selling rights’ though.

Leafleting houses

This can have surprisingly good results if your leaflet looks professional and shows
the property off well. Make it eye-catching and colourful to ensure it gets picked up in
the first place. Leaflet houses near the property and a bit further afield but not
outside the town or village.

Local newspapers/notice boards

Using the Classified Ads section of your local newspaper can be a great way of
marketing your property since they’re read by people in the community where you’re
trying to sell. Put a notice up on your local supermarket billboard too and in a few
nearby newsagents. Remember to get a For Sale sign for the garden too to attract
passersby.

Be safe

Ask for the name, contact number and address of viewers to your home and make
sure there is someone there with you at the time.

Chapter 15: Rules and Regulations for Buying Property in
Scotland, Ireland, and Abroad

The rules for buying property differ depending on which country you’re considering.
In Scotland, for instance, properties go on the market at an ‘offers over’ value and
buyers are expected to provide a percentage over the asking value. In England, it’s
usually under the value.

In Ireland, you’re expected to pay a deposit to secure a property prior to even putting
in bid, while in some foreign countries - such as Turkey – you need to ensure the
property isn’t in a restricted zone.

Buying Property in Scotland

In Scotland, a solicitor has a bigger role in the property buying process than in
England and Wales, where the estate agent plays more of an active role

In Scotland, property is sold within an ‘offers over’ system. Once you’ve found a
property you like and consider a good deal, contact a lender to see how much finance
they’re prepared to give you. Next, your solicitor contacts the seller’s solicitors or the
estate agent to ‘Note Interest’ in the property. This means that whenever anyone
else puts in a bid you have to be notified, allowing you the chance to make an offer
too. The seller is free to accept any offer, but if there’s several bids, then chances are
it will go to a closing date with a sealed bid i.e., no-one (apart from the seller) knows
what the other parties have bid. Unlike in England and Wales, there is no gazumping.
The highest bid wins.

The Offers Over system in Scotland means that the seller is expecting more than the
figure the house is selling for (unlike in England where potential buyers usually offer
lower). The bid in Scotland is usually a percentage and can go as high as 40 per
cent in a buoyant market. Fixed Price is nice and simple and is when the seller wants
a particular price. Usually, the first person to offer this who isn’t part of a complicated
chain will get the property.

After deciding you like the flat, you can either arrange to have a survey carried out
then make an offer, or to go ahead and make the offer subject to survey. Under
property law, the seller must provide a Home Report on his or her property which
contains a survey, but if the latter isn’t detailed enough, the finance lender may insist
on a further survey being done.

If everything is still straightforward at this stage it’s a case of ‘concluding the
missives’, i.e., like the English version of exchanging contracts. The missives states
when you want access to the property and any furniture or fixtures that will be left in
the property. One big difference between the Scottish property buying
system and that of England, Wales and Northern Ireland is that missives are usually
handed over early on and the price isn’t paid until ‘settlement.’

Buying Property in Ireland

In Ireland, once you’ve spotted a property you like it’s a case of getting approval from
a lender in principle, then contacting a solicitor to begin the purchasing process. At
this point, a booking deposit to the estate agent has to be paid upfront (usually
around 3% of the purchase price). The sale details (cost of the house, closing date,
any conditions of the sale and the names of the seller) are then given to the potential
buyer and seller’s solicitor. The latter will issue the Contracts together with the Title
Deeds to your solicitor.

The next step is to get the loan. Your lender will issue a Letter of Offer while your
solicitor receives a loan pack and the Mortgage Documentation. Once papers have
been signed, it’s a case of the loan going through and property Contracts being
signed. The Contract Deposit is then handed over (10% of the purchase price minus
the deposit). An exchange of Contracts then takes place.

A document called Requisitions on Title is then sent to the seller’s solicitor along with
a draft Purchase Deed. Now, a closing date is set for the money to be transferred.
The purchase is finally formally completed at the office of the seller’s solicitor by your
own solicitor. All that’s left to do now is sign the Purchase Deed.

Buying Property Abroad

Buying property overseas is made more complicated by the fact there is a language
barrier and often subtle cultural differences which you may not be aware of yet. As
such, it’s a good idea to have someone who speaks the language and understands
the legal process with regards to property (and especially property being bought by
foreign citizens) to represent your interests ie an independent lawyer. He or she can
be found at the Law Society website or the Association of International Property
Professionals site.

In Europe, notaries are available to check on property transactions (ie a government
official who’ll look over the title deeds etc). There should also, however, be a
translated copy of these in English for you to check over.

Going for an off-plan property abroad

Buying a property which hasn’t even been built yet can be quite risky (as you can
imagine) and that’s why it’s essential to have protection in the form of a staged
contract. For instance, you pay 5% to reserve the property, 30% once the foundations
are finished, etc. until you’re actually in receipt of the keys when the final amount
is handed over. The contract should also guarantee the development will be completed
even if the current builders run into financial difficulties and have to abandon the
project.

Getting a mortgage for a property abroad

There are mortgage brokers who specialize in overseas mortgages. As in the UK
,you’ll have to supply your proof of income and any equity on your existing home. The
broker will then approach a bank in the country you’re considering moving to.

Finding a property abroad

Find an estate agent in the country you’re interested in, preferably one who speaks
English so they can explain how that country’s customs and culture differs from your
own. They’ll also be able to explain about any customs matters, local transport, tax
matters and that country’s unique property buying methods (in Turkey, for instance,
foreign citizens require military clearance for a property before they can be
considered a buyer). It’s also a government stipulation that all property owners must
take out Earthquake Insurance. Most estate agents have their own websites these
days and some also have offices in the UK.

Chapter 16: How to Start a Property Business and Different
Types of Businesses

All industries and commercial sectors were hit badly by the credit crunch but the
property market in particular took a big hit. Property investors who only years
previously had been making millions began to panic as house prices plummeted
and mortgage finance became increasingly scarce. Many lost fortunes, others
buried their heads in the sand and waited until the worst of the crisis was over. It
lasted several years.

Now though, at the end of 2018, there are definite signs of its resurgence. More
mortgages are being given and house prices are starting to rise, albeit it very
tentatively. Property development is once again beginning to look like a viable
business idea.

Is property development a good idea?

For many individuals property development can seem like a dream job –
especially if they are keen on DIY and want a job they can become totally
immersed in. The fact they won’t be sitting in an office all day also helps.

The beauty about property development is that you don’t need any professional
qualifications or training to start up a business. Obviously, it makes sense to read
up on the sector and find out where others have benefitted and others come
unstuck, but on the whole, you don’t need a licence to trade in property. In fact, the
minute you do make your first profit you’re well on your way to becoming a bona
fide and successful property developer.

You don’t need a lot of money to start up either (apart from buying the property in
the first place and being afford to buy materials and labour hours). That’s
because you can work from home and there are no physical overheads such as
office space or utility bills. You can also do the job ‘on the side’ (i.e., in your spare
time while still bringing home a salary from your ‘day’ job).

Buy to let

This is by far the easiest form of property development to be involved in while
working at a ‘day job.’ It’s where you buy a property (whether new or a renovation
project) and rent it out to tenants as a means of paying back the mortgage. Most
buy to let property developers look to cover the cost of the mortgage and 25 per
cent profit over and above that to cover any maintenance, marketing costs, etc.
and make a small profit at the same time. There’s also the fact that the property
itself is accumulating money as time goes on.

Buying to sell

Thousands of property developers made their money by buying property, renovating
it to a higher standard and selling it on, making themselves a tidy profit in the
process. That’s when the market was booming. Then, the credit crunch struck and
negative equity became commonplace. Just like other industries and sectors
property is vulnerable to market fluctuations. However, things are beginning to look
up and certainly with restrictions on mortgages the rental market is particularly
buoyant. House values are still low at the moment so it doesn’t make sense to sell
property on anyhow but to hold onto it until the market improves.

On the whole, it’s a good idea to buy a property which you can both sell and rent out.
Location is important, so too are transport links and an up and coming area which is
in the process of regeneration is always a good bet.

It’s important not to rush into buying though. Do your research, which will involve
talking to estate agents, people who live near the properties you’re interested in and
council planning officials. If a good property comes up in an area you’ve already
researched, then you’ll feel more confident about bidding.

The secret with successful property renovation is to stick to your original budget and
to get it completed and rented out or sold as quickly as possible.

Help with finance starting your business

Various start-up government grants are available for individuals, couples and groups
starting up a business. You can access these via your local council, quangoes or on a
national basis. Sometimes, you can also get consultancy advice for free. Many
council initiatives will also provide physical resources for small businesses who don’t
yet have the means to buy such assets themselves. On a similar note, it’s also
possible to share research and development costs with other small firms. Your local
Business Advice Office should be able to assist on this.

A direct grant, for instance, is a cash award which is given if your company is taking
on employees, training or investing in capital projects. Repayable grants are just
that – an initial start-up sum which must be paid back at some time in the future.
A soft loan is a generous form of a repayable grant.

Equity finance is where the provider puts in a sum of money to the business
and takes a share of the profits. Eventually, the investor’s sum is paid back to him or
her.

Types of companies

When starting up a property development, you have to decide what form you’d like
that business to take. For instance, are you going to be a sole trader, a limited
company or go into partnership? The reason you have to decide is

because depending on which route you go down you’ll pay taxes differently, the
paperwork will be different and it’ll affect your profit share and personal
responsibilities were the business to make a loss.

Sole trader. This is when an individual runs their own business, either on their own
or with staff. Once the tax is paid you take the profits. You’re also responsible for
paying bills, keeping tax records and any losses and must registering with HM
Revenue & Customs as soon as you start trading. Tax is via self-assessment and
you’ll pay both income tax and national insurance. You don’t have to pay VAT unless
you make around £80,000 a year.

Limited company. Your personal finances and business finances are strictly
separate under a limited company. It is run by directors, owned by shareholders and
must pay corporation tax. Any profits are divided between members of the company.
Shareholders are responsible for any losses. A limited company must register with
Companies House and HM Revenue & Customs. Annual statutory accounts are
necessary as well as an annual return to Companies House and a company tax
return to HMRC. Again, if takings are around £80,000, then the company
must register for VAT. Directors must send a self assessment tax return on an
annual basis and pay both tax and national insurance.

Partnership. In a partnership, both you and your partner/s share responsibility
for any losses and recoup profits with each paying tax on the profits they receive.
A limited partnership will exonerate individuals from personal losses. One individual
is responsible for the accounts of the business for tax purposes and must register the
partnership with HM Revenue & Customs. They will also need to hand in a self
assessment as will the other partners meaning they have to pay income tax and
national insurance on any profits made. Again, the £80,000 VAT stipulation applies.

Creating a business plan

Why write a business plan? Well, one of the main reasons is that it’s a document you
can continually refer back to in order to keep yourself – and your property
development business – on track. You’ll be able to identify the bits that are working
and the parts that definitely need more looking in to. You’ll also need a business plan
if you’re looking to get a loan from a financial organisation or a government grant.
Basically it shows you are seriously and you’ve really thought through your business
idea rather than just jumping in with both feet.

Your business plan should consist of several different headings. For instance, your
Executive Summary is a summary describing your business, how it operates, and
how you’re going to benefit the market (i.e., buy properties to renovate then rent out
to tenants). Say why you think it’s a good idea and why you in particular are ideal
to embark on this type of business.

Through in a few industry statistics ( i.e., how many people rented last year, what
the cost of the average rent is in particular areas of the country and figures
showing) although the mortgage situation is improving, millions of people are still
being denied home finance.

Mention too how you aim to go about marketing your new property development
business (or at least your properties once they’re ready to rent), i.e., through an online
estate agent, privately, etc.

The next thing is to get together a mission statement. This should outline what you
aim to achieve ( in other words, make a certain amount of profit within your first
year, provide homes for two families, etc).

An accompanying company statement will give background to the business such
as where you are located (working from home or an office, and why), whether you
are targeting a particular sector of the market (families or singles) and why, and if
there is a particular location of type of property you’ll be aiming for. Mention the
competition and why you believe you have a superior product/service.

Your marketing strategy should detail how you aim to attract your ideal tenants
in terms of advertising and bringing the properties to their notice. Mention if there’s
any incentives you will be offering and whether it’ll mostly be online, via print or
word of mouth.

Following on from your marketing strategy is your client persona, giving your
target markets ages, occupations, family set up, average income, leisure activities, etc.

It’s a good idea to include a category called market trends to show you’re keeping
your finger on the ball of your industry. Throw in as many statistics as possible here
(i.e., population increases, more people moving into towns, an increase in people
renting rather than buying homes, etc.)

Chapter 17: The Importance of Recruiting and Managing Staff
Effectively

Recruiting staff

There are many ways to recruit staff, or rather many different types of positions.
For instance, do you want to pay someone full-time or is it best to go for part-
time until you feel you’re making more of a profit? Maybe you’re just looking
for someone to come in on a temporary basis at the moment? Perhaps you can
really only afford to use a freelancer? Really give this some thought before
you even think about advertising for someone to join you.

The recruitment cycle

Write up a job description and person specification, terms and
conditions (which should include the hours, days and salary), and decide on the
best place and means to advertise (i.e., word of mouth, card in a newsagents,
situations vacant in the local or regional newspaper, in a trades journal
(depending on the position) or/and in the local job centre).

Once you’ve received applications, select who you’d like to interview based on
how well they fit your person specification and job description criteria.
Remember to note why you’ve rejected particular individuals as they may ask.

Interview your chosen candidates and take up references for the one most
suitable for the post. Also, undertake criminal checks, etc. Issue a contract
of employment which should include a probationary period of around three
months.

Once your member of staff is working with you and preferably within the first
couple of days, give them an induction pack which outlines health and safety
procedures and company background/rules etc.

Before the probationary period is up, you should confirm the job,
extend the probationary period or terminate the position. If the job is ongoing,
it’s a good idea to give quarterly appraisals to ensure you’re both aware of any
issues in relation to the employees work such as any training or mentoring
that may be necessary.

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If you want to make any contract changes to the employee, these should be
agreed with the member of staff and confirmed in writing.

The job description

This should contain both essential and desirable qualities and any
necessary educational qualifications, trade certificates or skills. It’s a good idea
to look at the government’s website on UK employment law to make sure
you don’t break any employment laws in terms of opportunity and diversity
when writing a job description.

Advertising a vacancy

Your advert should include an equal opportunities statement and state it is
open to both sexes. In addition to the outlets we mentioned above you could
always use a recruitment agency or advertise on your own website if you have
one. Think about using other forms of media too such as radio.

Your advert should consist of the title of the role, the type of business you are,
the key responsibilities, an ideal candidate outline, any qualifications, salary, a
deadline for the application and ways in which to apply for the position.

Once you’ve received applications, its good practice to let clients know when
you’ll be short listing and advise them if they haven’t heard within that time
then you won’t be taking their application further.

Interviewing

At least two people should sit in on an interview and alternative taking notes
and noting the client’s response. Decide beforehand any specific questions you
want to ask and decide who will ask what. At the start of the interview, offer the
interviewee a drink.

You can’t ask questions related to marital arrangements, family or age but
rather questions related specifically to the job only should be asked. The
first question should be non-specific i.e., asking about their current post or their
last job and the last should be to ask the interviewee if they’d like to ask
anything about the role or organisation.

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Selection
Choose the candidate with the best knowledge and skills to suit the role
and consider how they’d fit it with your own ethos and working style. After the
interviews rate each client on how they answered individual questions; the one
with the most points is the best fit on paper. They should be contacted by phone
initially and once they accept the job sent an offer of employment. Everyone
who attended for interview should be notified of the result and offered feedback.
If there’s no-one you believe is suitable, don’t just offer the job to ‘the best of
a bad bunch.’ Have another look through the applications you received or re-
advertise the job.
Training
There’s many ways employees can receive training and develop in the
workplace. These include one to one mentoring where they ‘shadow’ a
more experienced member of staff and receiving coaching at the same time.
There are e-learning courses and media, such as publications, trade journals
and watching DVDs or other media such as podcasts and webinars.
Training and development is important because it stimulates staff, keeps
them interested in the job and should add to their overall enthusiasm for
the role and which can only be good for your business!

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A Final Word

You have now completed our Property Development G u i d e . We trust you
have found the course guide useful and thought provoking. We wish you every
success in your property developing, whether that be full time or as an extra
income. Good luck!!

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