The world of property development is an exciting and attractive one, for several reasons. If done right, it’s financially rewarding – and there’s also something satisfying about turning a bare patch of earth (or an existing, albeit dilapidated, building) and turning it into something remarkable.
Of course, getting a project from start to finish can be complex and often challenging. And when there’s a lot of money on the line, there’s very little room for learning on the job. So what do you really need to know before you get into the property development business?
What is Commercial Property Development?
While there’s some room for creative interpretation here, most commercial property developers are people or organisations who oversee the construction of commercial properties for lease to third parties. These might include everything from office buildings to shopping centres to hotels and apartment blocks.
What does it Entail?
The most important skill for any property developer is the ability to identify the right site. Location is critical to the success or failure of a given venture, and it’s something that can’t be changed further down the line, no matter how creative the renovation process is.
The construction project itself will require the collaboration of a diverse range of professionals. Architects, designers, and building companies will need to be contacted and brought in. If you already have contacts to leverage, you’ll be at an advantage. If you don’t have the skillset to manage the project yourself, then you might hire someone to do it for you. Bear in mind the cost of furnishing the property, too – you’ll be able to charge more, and many of your would-be customers might expect to be able to walk into a property that’s ready to go.
When the project is nearing completion, you’ll need to be able to generate a buzz for it. If you can’t start making a return on your investment quickly, then you stand to lose out.
What to bear in mind
With all of these moving parts, you’ll be exposed to a range of different risks, especially during the earliest phases of your journey. For this reason, it’s important to have an insurance package that’s tailored to your requirements. Real estate insurance is most effective when it’s provided by a team with experience in the industry – that way, you can be sure that you’ll get the support you need should disaster strike.
Ruban Selvanayagam from UK-based quick home sale company Property Solvers: “property development involves a number of unexpected twists and turns which can have a costly effect on your bottom line. We would also suggest having a contingency fund of at least 10% of the estimated gross costs. Related to this, saving a good quantity surveyor to review things early on is also a wise idea.”