How to invest in property development

This page has been archived and is no longer updated. Find how to invest in property development more about page archiving. Also think carefully about the type of property you want to invest in and your target market.

Research the marketA good starting point is to make contacts with local estate agents and talk to them to acquire some of the knowledge you’ll need. Due to an increased divorce rate and an ageing population, the number of single people wanting homes is rising rapidly. Consider the supply and demand factors. The UK planning system has failed to deliver the amount of homes that people seem to want. This is arguably the main, long-term factor behind price increases in housing in the UK. Low interest rates and low unemployment have exacerbated this trend.

Get figures from your local authority planning department for the number of new houses built as a percentage of existing stock. Growth in business sectors is a good indicator of an up-and-coming area. Stick to the areas you know and research them thoroughly. Ask yourself, does your idea really fit the market? Does it fit into the locality you have chosen? More importantly, does it fit the basic ways in which people aspire to live in that locality?

Look at what your customer wants. Young professionals and affluent older couples without children or dependants seem to like stylish, city centre apartments near the places they want to spend their money. Look at current fashions and consider the type of accommodation that will maintain its value because of its quality and location. Families need successful neighbourhoods, where there are good schools, good transport, safe environments and sufficient parking. Look for properties that, with the right approach, can be resold for a profit. Buy well and you limit your risk. A general decorative overhaul can push up the value of a property, without involving planners, architects and a big investment.

At its most simple you might take a house and turn it into flats, but this still involves complex budgeting and financing. A professional developer would avoid using their own money to fund a major conversion and this is worth remembering if you’re considering investing all your own funds. There’s often a large gap between the value of a house and what it might fetch converted to flats – but there are also a lot of costs involved, and often a lot of pitfalls. The conversion of a building from one of business use into housing is a more complex proposition.